After The Close - It was a directionless day for the major U.S. equity indexes, with none of them straying too far from the neutral line throughout today’s session. Investors looked to be taking a bit of a breather after dealing with pronounced moves on both Monday and Tuesday. Our sense is that some relief among market participants that the escalating tensions in Eastern Europe have eased a bit, at least for the moment, and that world leaders are trying to come to a diplomatic compromise, was behind today’s nondescript and mostly sideways performance on Wall Street. The investment community also seemed to brush off two more disappointing reports on the economy as being weather related. Also, there were no surprises later in the day from the Federal Reserve’s latest Beige Book summation of economic conditions, and that kept trading in check today, as well.
At first blush, the performances of the major averages would suggest that it was a mixed showing for equities today. However, there was a weak undertone to trading for much of the session. Declining issues led advancers on both the Big Board and the NASDAQ. At the close, the Dow Jones Industrial Average was modestly lower; the S&P 500 Index was unchanged; and the NASDAQ was a few points higher. The small-cap Russell and the S&P Mid-Cap 400 Index finished in the red, which also was an indication of some pessimism among traders during today’s listless session.
From a top-10 sectors perspective, there were more down arrows than up arrows. The biggest laggards were the energy and utilities issues, with the losses in those two groups increasing in the final few hours of trading. The energy stocks were hurt by the second-consecutive day of sharp drops in crude oil prices on the New York Mercantile Exchange. Conversely, it was a good day for those long financial and technology stocks. Within the latter sector, shares of the software producers and the office equipment suppliers were the big winners. Speaking of technology, word surfaced late this afternoon that Israel’s Prime Minister Benjamin Netanyahu and California Governor Jerry Brown had signed a pro-business pact in which Silicon Valley and Israeli tech companies will collaborate on new technology developments and innovations.
As noted earlier, it was a busy day on the business beat. However, the day’s three major releases did little to spark trading on Wall Street. Weaker-than-expected reports on private-sector job creation from Automatic Data Processing (ADP) and nonmanufacturing activity from the Institute for Supply Management were quickly brushed off by investors as being weather-related issues. Then, this afternoon, the Federal Reserve’s Beige Book summation did not provide any surprises, as the report lent further support to the prevailing economic notion that the U.S. economy is expanding at a modest to moderate pace in most regions of the country. More important, it did nothing to contradict the prevailing sentiment that Federal Reserve will continue on its current monetary policy track, especially with regard to the tapering of its monthly bond purchases.
Meantime, the situation from Ukraine remains a fluid issue. No agreement regarding Ukraine was reached today between U.S. Secretary of State John Kerry and his Russian counterpart Sergei Lavrov in Paris. Too, Mr. Lavrov refused to meet with representatives from Ukraine. This situation bears close watching as any developments there could prompt some heavy trading in the world equity markets, just like what we saw to begin this week. - William G. Ferguson
At the time of this article’s writing, the author did not have positions in any of the stocks mentioned.
12:00 PM EST - The U.S. stock market is taking a pause this morning, as trader’s digest yesterday’s large gains. As we approach noon in New York, the averages are mixed. The Dow Jones Industrial Average is off 35 points; the broader S&P 500 Index is flat; and the technology-heavy NASDAQ is higher by three points. Advancing stocks are about even with decliners on the NYSE further suggesting a directionless session. Strength can be found in the financial, technology, and basic materials issues, while the energy sector is an area of weakness.
Technically, the stock market has been moving higher, as the bulls continue to buy on weakness. This behavior has been the hallmark of this market for some time now, and its continuation should not come as a surprise. Yesterday’s move put the S&P 500 Index back at new high ground. From here, we will be looking for the bulls to follow through with added buying over the next few days. If a move higher does not materialize, the Index may be headed back to the 1,840 area for more consolidation. The VIX is slightly higher to just over 14 today.
Meanwhile, there were a couple of notable economic reports released this morning. The results were a bit weak. For one, the ADP Employment Change report showed 139,000 private jobs added to the economy in February, which was less than had been expected. Also, the ISM Non-Manufacturing Index came in at 51.6 for the month of February, falling short of the consensus view. The Fed’s Beige Book summation is due out at this afternoon, and that may be keeping some traders on the sidelines.
We received a few corporate reports this morning. However, the pace is slowing down, now that the fourth-quarter earnings season is mostly over. Shares of PetSmart (PETM) are trading lower, after that company issued mixed results. Revlon (REV) is also headed lower after the cosmetics business put out weak quarterly results, due to charges associated with its decision to exit China. - Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Stocks to Watch From The Survey - As earnings season draws to a close, the number of companies in the headlines are diminishing, but there are still plenty of items to keep an eye on:
Aerospace concern Honeywell International (HON) gave new financial guidance as it opened an investor conference. It stated it expects double-digit earnings growth for the next five years, which includes delivering on its 2014 targets.
Tech behemoth Apple (AAPL) is expecting late summer launch of the iPhone 6. Most pundits had expected an earlier launch, so this news may not sit well with the investment community.
Also, Smith & Wesson (SWHC), the firearms maker, reported fiscal third-quarter results that came in above estimates. Handgun sales and margins are also set to rise in the current quarter according to management’s latest comments.
Lastly, Dow-30 component United Technologies (UTX - Free United Technologies Stock Report), an industrial conglomerate, got good news when the U.S. Air Force reversed a prior decision and decided to fund a helicopter pact at one of the company’s divisions. Initially, the Pentagon had stated the program was being postponed. - Erik M. Manning
At the time of this article's writing, the author did not have positions in any of the companies mentioned.
Before The Bell - The bulls came out early yesterday and never looked back, securing a wire-to-wire win for those perennial stock market optimists in the process. The catalyst for the Monday-Tuesday reversal, which we have alluded to on a number of occasions, was the perception that tensions had eased somewhat in the strife-torn Ukraine after reports surfaced that Russia had moved its troops back across the border and out of the tense area--at least for now.
Thus, the buying started early and never abated, as the major equity averages all posted stellar gains on the day, which included a new multi-year high for the tech-laden NASDAQ, an all-time peak for the Standard and Poor's 500 Index, another best-ever record showing for the small-cap Russell 2000 Composite, and a near-record-breaking performance for the 30-stock Dow Jones Industrial Average.
Meanwhile, the news out of the Ukraine would have been paramount on any day given the proximity of the principals to Western Europe and the potential for a military conflict of sizable proportions should cooler heads not prevail in the end. However, yesterday also was a day with fewer earnings releases, as fourth-quarter reporting season has just about concluded save for the retailers who are on a different reporting cycle. Also, there was no economic news of note. That will all change in the hours to come and over the balance of the week, though, as we are scheduled to get a critical report on non-manufacturing activity for February this morning at 10:00 (EST). A moderating gain is the consensus forecast. Then, this afternoon, the Federal Reserve will issue its so-called Beige Book economic summation of conditions across the country. That release is always eagerly awaited, as future central bank policies are often put into place based, in part, on the findings in this report.
In the meantime, on Monday, the companion issuance to the non-manufacturing survey was issued. That data on manufacturing was released and it showed some surprising strength over the past month. Then, tomorrow, the U.S. Labor Department will release data on weekly and continuing jobless claims, along with reports on productivity and unit labor costs. An issuance on factory orders also will be disseminated a bit later on during the session. Finally, the month's major issuance, the monthly data on employment and unemployment, will be out on Friday morning. That survey has the potential to shake things up--for good or bad--on Wall Street, even with the focus on Europe as it will likely continue to be for the next several weeks, or longer. Our sense is that this international conflict will not go away overnight, even if the immediate crisis seems to be easing.
As to the market in the latest session, the final numbers were eye openers, as they affirmed that the Dow surged by 227 points; the S&P 500 Index was better by 28 points; the NASDAQ jumped by 75 points; and the Russell 2000 rose by 32 points. There was no place for the forlorn bears to hide, as the buyers flocked to equities in a total reversal of Monday's weaker showing. In fact, the latest performance more than made up for the losses sustained during the day earlier when things seemed to be falling apart in Europe. We caution, though, that the situation there figures to be volatile and could change on a daily or weekly basis, so we may be facing a period of stepped-up volatility on the markets. Meantime, given the greater appetite for risk yesterday, bond yields rose, with the 10-year Treasury note's yield climbing to just under 2.70%.
Now, a new day is upon us, and after the fireworks on our shores, the markets in Asia were mostly ahead overnight, but modestly, while in Europe, the reduction in tensions, which fueled a strong rally yesterday, is being treated as somewhat old news so far this morning, and thus stocks are heading lower at this hour. As to our market, the early action in the futures suggests further gains at the outset of the day. However, a flare-up in tensions in the Ukraine cannot be ruled out down the road. That possibility may cap any future gains, at this time. Finally, in data just issued minutes ago, Automatic Data Processing (ADP) reported that its payroll survey indicated that the nation had added 139,000 private-sector jobs last month. That was moderately below the 160,000 increase that had been expected. Our sense is that the difficult winter weather played some role in this under-performance. - Harvey S. Katz
At the time of this article's writing, the author did not have positions in any of the companies mentioned.