After the Close - The stock market spent most of the session in negative territory, although the major averages did manage to close off their lows, and even make some selective progress. Notably, the broader S&P 500 Index was up almost one point; while the Dow Jones Industrial Average finished off 18 points; and the technology-heavy NASDAQ was lower by nine points. Market breadth was mildly positive, as advancing issues slightly outnumbered decliners on the NYSE. Roughly half of the market sectors managed to advance. There was some leadership in the healthcare area, with gains across most of the group. The industrials also performed well, helped by the building-related names. Transportation stocks also made progress. Nonetheless, there was notable weakness in the technology sector, due to sharp losses in the Internet issues. The basic materials group also declined, with weakness in the metals names, most notably in the steels.
Technically, the S&P 500 Index managed to contain its losses, and even muster a slight gain by the close, which was encouraging. Over the past year, or so, the bulls have regularly moved in to support stocks on weakness, so it makes some sense to give them the benefit of the doubt, at least for now. Also, traders may have been reluctant to enter the market today in advance of the key employment report due out tomorrow morning. That may explain the lack of decisiveness seen today. Further, the VIX ended essentially unchanged, at just under 13, suggesting no major shift in sentiment.
Meanwhile, following a good private-sector jobs report from Automatic Data Processing (ADP) yesterday, the weekly jobless claims released this morning showed further progress. Specifically, initial claims for the week ended January 4th dipped to 330,000 from the 345,000 figure logged in the prior week. This week’s showing was also a bit better than many had expected. The news likely has some traders speculating that the employment figures for December, set to be released tomorrow, will show notable improvement. While we should really be encouraged, Wall Street may be concerned that the Fed will taper its asset purchases more rapidly, and that a stronger economy will bring higher interest rates, and even the possibility of some inflation.
In the corporate arena, a few retail companies issued reports recently. Specifically, Bed Bath & Beyond (BBBY) shares were off after that company put out a weak quarterly report and lowered its outlook. Family Dollar (FDO) saw its stock decline after a poor release, too. But, things went a bit better for Macy’s (M). That stock was up, after the company issued decent guidance, and outlined a plan to close some stores and reduce its workforce. After the close today, the fourth-quarter earnings season officially begins, when aluminum giant, and erstwhile aluminum giant, Alcoa (AA) reports its fourth-quarter figures. - Adam Rosner
At the time of this article’s writing, the author had positions in Alcoa (AA).
12:15 PM EST - Stocks are trading moderately to the downside today ahead of tomorrow’s big government employment report. Right around noontime on the East Coast, the Dow Jones Industrial Average is off 53 points and the NASDAQ is down 15. Market breadth confirms the negative tone of the major averages, with decliners outpacing the number of advancing issues on the New York Stock Exchange.
The morning started off with reasonably good figures on initial unemployment claims although the underlying data are viewed as somewhat skewed, coming off the recent holidays.
One bit of a drag on markets overseas, particularly in Asia, were further signs that China’s economy is cooling. China’s CPI fell in December from November, and prices at the factory level eased. These are broad indicators that consumer demand is weakening somewhat in the world’s second largest economy.
There are some bright spots among individual stocks, though. One is the shares of Acuity Brands (AYI), which jumped on word that the light fixture maker’s first fiscal quarter earnings jumped 70% on broad sales improvement across its category lines.
Another winner is Ford Motor (F) stock, which is up on heavy volume after the auto maker reported a 25% increase in its quarterly dividend. Ford is among the most active stocks in trading on the Big Board. Macy’s (M) shares are also trading nicely to the upside after the retailer announced a restructuring that would include a 2,500 reduction in head count and the closure of five underperforming stores. It may seem odd that Wall Street is cheering what isn’t normally considered good news, but the thinking is apparently that, by becoming more efficient, the company will boost its profitability.
On the down side, shares of specialty retailer Bed Bath & Beyond (BBBY) are sharply lower following the release late Wednesday of lower-than-expected earnings. The company also reduced its guidance for full-year profits.
Also trading notably lower is the stock of Family Dollar Stores (FDO), another victim of poor sentiment, as the discounter failed to match earnings expectations and warned of falling same-store sales in the current three-month period.
Overall, investors seem to be still getting their bearings in the new year after last year’s eye-catching stock-market performance. Some light profit-taking, partly on concerns that interest rates are headed higher, is taking place again as we head into the afternoon session, although stocks are off of their lows. - Robert Mitkowski
At the time this article was written, the author did not have a position in any of the companies mentioned.
Stocks to Watch from The Survey – Retailers are in the spotlight this morning. Indeed, discount retailer Family Dollar (FDO) and home goods seller Bed Bath & Beyond (BBBY) have both reported November-period financials. Investors were not pleased with either report, and both stocks are trading notably lower in the premarket, as a result. On the bright side, Macy’s (M) stock is indicating a nicely higher opening this morning, after the department store operator released solid holiday sales figures, issued upbeat guidance, and announced a cost-cutting plan. Other retailers have released same-store sales figures for the month of December, as well, with mixed results. Wall Street took issue with updates from Victoria’s Secret parent L Brands (LB), home-décor retailer Pier 1 Imports (PIR), and Zumiez (ZUMZ), which sells action-sports related clothing, equipment, and accessories. All three stocks are down ahead of the bell, in response, with ZUMZ and PIR showing considerable weakness. Warehouse club Costco’s (COST) sales garnered a warmer reception, causing that stock to move slightly higher in pre-market trading. – Matthew E. Spencer
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before The Bell - The stock market, trying to post a cumulative gain for the first five trading sessions of the new year, came up short yesterday. Still, the tech-laden NASDAQ, aided by selective strength in the technology group, did manage to press modestly higher, but that gain was not enough to help it erase its modest deficit for the aforementioned stretch. There are some market historians who hold that the market's cumulative action over the first five trading days of a new year can be predictive for the full 12 months. We think such a prediction, on this very limited sampling, is not all that reliable.
Overall, yesterday, concerns about the pace and breadth of the expected further monetary tapering by the Federal Reserve proved too much for the recently less-enabled bulls, and the Dow Jones Industrial Average led the aggregate market a little lower on the day. On point, the Dow, which started the session in the red and never managed to overcome its losses, despite some half-hearted intra-session attempts, wound up the day off by 68 points, led lower by some broad, but comparatively modest, declines. Rotation out of some 2013 winners also played a role in the soft showing. Such uneven action has been a staple of the stock market so far in the new year. The Standard and Poor's 500 Index, in and out of positive territory throughout the day, closed essentially unchanged, while the NASDAQ, which was higher throughout the session, managed a 12-point gain. Clearly, there was not a lot of conviction.
As to the Fed, it was again front and center, as the next FOMC meeting, which is set for the end of this month, draws near. As if to remind investors of this pending get together, the Federal Open Market Committee released the minutes of its last meeting, which took place last December 17th and December 18th, and which led to the first move to slow down the bond-buying process since its inception. Essentially, the minutes held that "economic activity was expanding at a moderate pace.'' Such a view was consistent with earlier descriptions, and the minutes did little to move the market, which remained in the minus column after its issuance at 2PM (EST). What the report did do was nudge Treasury yields up a bit, with the yield on the 10-year Treasury note climbing to 2.99%.
Also in the news yesterday was the release of data showing a strong report on private-sector job creation. That key metric, issued yesterday morning by ADP (ADP) at 8:15 (EST), showed that 238,000 new jobs had been added in December. This report was the opening salvo in what should be a busy week on the employment front, with data out tomorrow morning on non-farm payrolls and the jobless rate for December. Expectations are that 190,000 positions were added last month and the jobless rate held steady at 7.0%. That report has the potential to affect investors should there be a noteworthy deviation from expectations. At the very least, trading could be a little frenetic later on today in anticipation of that pending survey release. Of note, tomorrow's report will be the first since the start of the Fed's tapering program last month.
As to other markets, in addition to the slight move up in bond yields, we saw further losses in gold, which again took the battered metals stocks a bit lower, while a drop in oil prices to a six-week low was dour news for the energy group, which led the Dow lower on the day. Two major oil issues are domiciled on that blue-chip composite.
Now, looking ahead to a new day, equity and fixed-income investors will again be focused on the economy, in particular the employment outlook, given yesterday's release, this morning's just-issued data on jobless claims, and tomorrow's headline report on non-farm payrolls and the unemployment rate. That being the case, we would not expect big moves in either direction to be forthcoming on our shores. As to the situation overseas, stocks were mixed in Asia overnight, while they are a little higher in Europe so far this morning. Over here, the markets appear to be setting up for a better opening, given the upbeat action in the futures, which show a three-point gain in the Standard and Poor's 500 futures and a 10 point advance in the NASDAQ futures. - Harvey S. Katz
At the time of this article's writing, the author did not have positions in any of the companies mentioned.