After The Close - The U.S. stock market made further progress today. At the close of the session, the Dow Jones Industrial Average was up 45 points; the broader S&P 500 Index was ahead six points; and the NASDAQ added on 11 points. Market breadth was slightly favorable, as advancing issues outnumbered decliners by a narrow margin. Most market sectors gained ground today, which was encouraging. The industrials made strides, with strength in the trucking names. The basic materials, too, performed well, as the chemicals issues advanced. Meanwhile, there was some sluggishness in the consumer area, and the healthcare group lagged a bit.
Technically, today’s move higher put both the S&P 500 Index and the Dow within striking distance of new high ground. The NASDAQ is still lagging, but remains stable. Meanwhile, the market has been quite choppy lately, and the lack of clear sector leadership has probably not helped instill confidence.
The economic reports were mixed today. Specifically, the ADP Employment Change report showed improvement during the month of April. Furthermore, the Chicago PMI indicated that economic activity in that region picked up in April. In contrast, investors may have been a bit disappointed with the advance reading for first-quarter GDP. However, this did not seem to discourage traders, too much. Investors also took news that the Fed would continue to taper its asset purchases in stride.
Meanwhile, although many of the large names have reported, the first-quarter earnings season still bears watching. We recently heard from eBay (EBAY). That stock slipped, after the Internet auction company issued weak guidance. Things went well for Time Warner (TWX). That stock rose, as investors were pleased with the media giant’s results. Tomorrow, we hear from energy leader Exxon Mobil (XOM - Free Exxon Stock Report). - Adam Rosner
At the time of this article’s writing, the author had a position in Time Warner (TWX).
12:10 PM EDT - The major U.S. equity indexes started the session to the downside—with a disappointing initial reading on first-quarter GDP (see below) and some weak earnings results, particularly from the technology and consumer staples sectors, weighing on equities. However, soon thereafter they began to work their way back to the neutral line, where most of the major indexes currently stand as we reach the midday hour on the East Coast. That said, for the most part it has been a directionless day thus far on Wall Street, as the spread between advancing and declining issues is rather narrow on both the New York Stock Exchange and NASDAQ, more so the Big Board. Even though trading volume is heavy today, we sense that most investors are somewhat reluctant to make a big move in either direction ahead of commentary on the Federal Reserve’s Federal Open Market Committee meeting, which will be made public at 2:00 P.M. (EDT).
As noted, the big news this morning was on the economy, as the Commerce Department reported its initial reading for first-quarter GDP and it was far from uplifting and likely had a lot to do with the weak opening for the U.S. equity market. Specifically, the nation’s economic output rose by a nominal 0.1% in the first quarter of 2014, which was well below the 2.6% in the final quarter of 2013 and the consensus expectation of 1.2%. Many pundits are blaming the severe winter weather that blanketed much of the nation for the first two-plus months of this year for the weak growth, and we think for that reason the market did not sell off more initially. Investors should note that we will be getting another major report on the economy this afternoon, when the Federal Reserve releases the results of its latest two-day monetary policy meeting. The expectation is that the central bank will hold interest rates steady and continue the tapering of its monthly bond-buying program. Any deviation from this could be a game changer for the market.
Meantime, another day of heavy earnings news brought some mixed results, which seems to be the trend from Corporate America this reporting season. On the negative side, were quarterly reports from eBay (EBAY), Twitter (TWTR), Express Scripts (ESRX), and Panera Bread (PNRA). The Twitter report is weighing on the social media stocks today. Conversely, investors were pleased with the latest results from WellPoint (WLP) and Hyatt (H). The former company noted that larger enrollments under the Affordable Care Act helped its quarterly results and should continue in the months to come.
From a sector perspective, the biggest laggard is the consumer noncyclical stocks, with most of the damage being done by the poor performance of the retail drug issues. The aforementioned Express Scripts report is pressuring the group. The technology stocks also are down, but nonetheless off of their earlier lows. The social media stocks are weighing on the technology sectors thus far today. On the bright side are the performances of the industrial and telecommunications sectors. Within those groups, notable movers higher include Energizer Holdings (ENR), Huron Consulting (HURN), and Level 3 Communications (LVLT). All three of those moves were prompted by quarterly earnings releases. Investors should also note that Energizer has announced this morning that it is splitting into two companies.
Looking ahead to the remainder of the trading session, it has the possibility of being a very active. In addition to the aforementioned Federal Reserve’s monetary policy news, some investors may be looking to recalibrate their stock portfolios on the final trading day of April. Often there is some liquidation on such days and this could, along with the mixed earnings news today and the ongoing fluid geopolitical situation in Eastern Europe, make for an interesting close to the month of April for equity market participants. We shall see… - William G. Ferguson
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 – The earnings parade continues, with some disappointing news out of Silicon Valley. Notably, shares of Twitter (TWTR) are down sharply ahead of the bell, after the social network operator failed to impress investors with its user growth or outlook, despite delivering a better-than-expected bottom-line performance in the first quarter and a large year-to-year increase in revenues. Wall Street also took issue with a quarterly update from online auctioneer eBay (EBAY), and that stock is also indicating a lower opening this morning, albeit to a lesser extent than TWTR. Other equities moving lower in the premarket on earnings news include pharmacy benefit manager Express Scripts (ESRX), hard disk drive manufacturer Seagate Technology (STX), and restaurant operator Panera Bread (PNRA). On the other hand, investors applauded quarterly results from entertainment company Time Warner (TWX), hotel operators Hyatt (H) and Marriott (MAR), and health insurer WellPoint (WLP). Consequently, these equities are up in pre-market trading.
Elsewhere, on the M&A front, electric utility Exelon (EXC) has agreed to acquire industry peer Pepco Holdings (POM) for $27.25 a share in cash. POM stock is soaring ahead of the bell, in response. The same is true for shares of Energizer Holdings (ENR), after the battery maker released March-period financials and announced plans to split into two separate publicly traded companies, one focused on personal care and the other on household products. – 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, which could not make up its mind on Monday, gaining early, then faltering during the middle part of the session, before finally rallying into the close, expressed no such indecision yesterday. To wit, the market largely staged a wire-to-wire win, with across-the-board strength. All told, the Dow Jones Industrial Average rose 87 points; the Standard and Poor's 500 Index added nine points; and the tech-heavy NASDAQ jumped 29 points. The small and mid-cap indexes also acquitted themselves well.
Behind this positive action during the month's penultimate session were a number of strong earnings reports, some reasonable, if not necessarily stellar, economic data on consumer confidence, and an apparent lessening in tensions between Russia and the West over Ukraine--at least for now.
Breaking these occurrences down, we note that the Conference Board, a New York-based research organization, reported that its gauge of consumer confidence had registered a reading of 82.3 in April. That is the same score that had been initially estimated for March, before the result in that earlier month had been revised up to 83.9. Still, the outcome was good enough to assuage concerns that the business expansion might falter. If anything, we think the current quarter will see a healthy step-up from the listless pace of growth seen in the first quarter (see below).
Then, there was earnings, where drug making behemoth and Dow-30 component Merck (MRK - Free Merck Stock Report) posted solid results during the first quarter and saw its stock move ahead nicely in apparent response. On the other hand, there was weakness in the shares of luxury goods retailer Coach (COH), after that merchant reported weaker sales in North America. Coach shares dropped more than 9% on the day, to come within a point, or so, of a 52-week low.
But the big positive influence was an apparent decrease in tensions between Russia and the West. That reflected some assurance from the former that it would not invade Ukraine. Such a possible territorial violation has been on the minds of traders for the past month, or more, and had contributed to some weakness in Europe's bourses earlier in the month. Yesterday, though, the markets on the Continent moved higher in seeming response to the more conciliatory tone being expressed.
Overall, then, the market appears to be making a nice push to close out the month, which notwithstanding considerable volatility, has been a decent one for equity holders. Indeed, following the selloff in late March, the recent firming has been sufficient to put the Standard and Poor's 500 Index back in the black on a cumulative basis for the year, while the Dow has just about overcome its nominal year-to-date deficit, being behind by a mere 0.2%. It has been another story for the NASDAQ and the small-cap Russell 2000, which even after yesterday's strength, are still in the red for the four months, albeit modestly.
As to the rest of the week, the Federal Reserve will be wrapping up its latest two-day FOMC meeting this afternoon. No change in interest rates and a further monetary tapering (i.e., a reduction in bond buying) are the expectations. Then, there is the Commerce Department's release of first-quarter GDP data just moments ago. That result, which had been expected to be underwhelming was just that as growth dwindled to a scant 0.1% for the period, which was well under the underwhelming estimate of 1.2%. Much of the blame for the poor showing goes to the weather. A notable comeback is expected in the current period, which could see an advance of about 2.5%, as the long-awaited spring thaw sets in and, presumably, brings some more welcome economic metrics.
As to the outlook in the day ahead, we note that stocks pressed a little higher in Asia overnight, while they are generally showing irregular moves in Europe so far this morning. Over here, meantime, the Standard and Poor's 500 Index futures are now mixed having erased an earlier modest loss, while the NASDAQ futures are still in the red, but now by just six points. The relatively weaker indications by the NASDAQ most likely reflecting a large pre-market decline in the shares of social networking provider Twitter (TWTR), which reported mixed results for the latest quarter after the market closed yesterday. - Harvey S. Katz
At the time of this article's writing, the author did not have positions in any of the companies mentioned.