After The Close - The U.S. stock market put in a stellar session today. Further, all of the major averages managed to maintain their early gains throughout the afternoon. Notably, this suggests some conviction on the part of the bulls. At the end of the day, the Dow Jones Industrial Average was ahead 112 points; the broader S&P 500 Index advanced 18 points; and the NASDAQ tacked on 72 points, making for a 1.8% gain. Strength on the technology-heavy composite is encouraging, as there has been considerable weakness here over the past few weeks. Also, the Russell 2000, a small cap index, surged over 2% today. This also indicates that traders may be feeling less risk averse, as they are willing to buy the smaller growth names.
Market breadth was decidedly favorable today, as advancing stocks outnumbered decliners by about three to one on the NYSE, with a similarly strong showing on the NASDAQ. Almost all of the market sectors participated in the up move. There was leadership in the basic materials area, with large gains in the metals and mining issues. The technology group was also an area of strength, as traders bought into the Internet names. In contrast, the utilities, which tend to be defensive holdings, fell out of favor today.
Technically, today’s big up move suggests that the bulls are still in control of the situation. Specifically, today’s advance puts the Dow Jones Industrials at record high ground. In addition, the S&P 500 Index is pressing higher. However, it remains to be seen if the broadbased index can advance from here, as it has been locked in a trading range for some time. Meanwhile, the NASDAQ is further past the 4,000 mark, which corresponds to its 200-day moving average. Elsewhere, sentiment remains quite complacent, as the VIX dipped about 6%, to just over 12, today.
Meanwhile, traders received no notable economic news this morning. Tomorrow will be a slightly busier day for news, as we are set to get a look at the retail sales figures for April. Import and export prices for April are also due out.
The first-quarter earnings season has entered its final leg, and traders received few major corporate releases today. However, after today’s close we will hear from McKesson (MCK). That issue was up slightly during the day. Elsewhere, there was some M& A news announced this morning, and that may have helped sentiment. Specifically, Hillshire Brands (HSH) agreed to buy Pinnacle Foods (PF). - Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
12:10 PM EDT - The U.S. equity market got off to a roaring start today—with the Dow Jones Industrial Average hitting a new intra-day all-time high in the process—and is not looking back as trading moves into the second half of the session. What is making the move all the more impressive is that it is on high volume, which is showing some conviction on the part of the bulls. On a morning that was very quiet on the business beat and also lacked major earnings news, investors were encouraged by some merger and acquisition news (more below) and, maybe more so, by increasing sentiment that Russia is not going to invade Ukraine, though that matter is very fluid and the situation can change on a dime.
Thus, at the midday hour on the East Coast, the major U.S. equity indexes are significantly higher. Investors are showing an increased appetite for risk, which is helping the more volatile tech-heavy NASDAQ and small-cap Russell 2000 move notably higher. We think the aforementioned sentiment about Eastern Europe is helping matters on this front. (In fact, we also are seeing investors beginning to buy riskier Russian securities this morning.) Overall, advancing issues are far outnumbering decliners on both the New York Stock Exchange and the NASDAQ, to the tune of more than five to one on the latter.
From a sector perspective, the buying is pretty encompassing, with leadership coming from the recently volatile basic materials and technology groups. In the basic materials space, the stocks of the aluminum, steel, and metals & mining companies are in demand, while the technology sectors is being led higher by the IT services and semiconductor stocks. Not surprisingly, some of the defensive sectors, including the utilities and telecommunications stocks, are not faring as well, but the profit taking there is still insignificant.
There was some significant M&A news from the corporate world this morning—and usually such activity is taken as a positive sign about the equity market’s health. Specifically, we learned that Hillshire Brands (HSH) is buying Pinnacle Foods (PF), while Botox maker Allergan (AGN) has rejected Valeant Pharmaceuticals’ (VRX) recent offer, noting that the unsolicited bid undervalues the company. With regard to the latter situation investors may be thinking that a richer bid may be forthcoming, we shall see. These reports come on the heels of Friday’s news that Apple (AAPL) is close to buying headphone maker Beats Electronics for north of $3 billion.
As noted, the market got a boost from reports this morning that some progress is being made between Russia and Ukraine to avoid a large-scale conflict in the region. Specifically, the Kremlin made it clear that it has no intension to try to annex Ukraine’s eastern provinces after a referendum vote allegedly backed sovereignty for their regions. Too, the office of Russia’s President Vladimir Putin urged Ukraine’s government to engage in talks with representatives of the eastern part of the country following yesterday’s vote. The nonviolent stance, which contracts Russia’s quick annexation of Crimea in March, appears to reflect hope that Putin may negotiate a solution for the worst crisis between Russia and the West since the Cold War era. Investors both here and abroad were clearly enthused by the new direction being taken. The major European bourses were all higher, as trading reached the closing bell on the Continent.
With the situation in Eastern Europe looking a bit better and the near-concluded earnings season proving to be better than most expected, investors are once again gobbling up stocks, including the more risky momentum issues in the technology and biotech spaces. Such buying has valuations looking frothy, but could remain at elevated levels given the lack of alternative investments. Interest rates remain near all-time lows. - William 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 – Although the pursuit of headphone maker Beats Electronics by computer and personal electronics icon Apple (AAPL) dominated the M&A headlines on Friday and over the weekend, there is other news to be aware of that did much more to move the markets. Notably, packaged foods company Hillshire Brands (HSH) has agreed to acquire industry peer Pinnacle Foods (PF) for more than $36 a share in cash and stock, a premium of nearly 20% above PF’s pre-announcement closing price. Pinnacle stock is soaring ahead of the bell, as a result, while HSH shares are up moderately. Elsewhere, the Board of Directors of drugmaker Allergan (AGN) has unanimously rejected a $47 billion takeover bid from rival Valeant Pharmaceuticals (VRX). AGN is up slightly in the premarket.
Corporate news is rather light elsewhere on this Monday morning, as the majority of March-period earnings reports have already been released. – Matthew E. Spencer
At the time of this article’s writing, the author had positions in AAPL.
Before The Bell - Wall Street ended an unprepossessing week for stocks on a modestly firmer note on Friday, with that modicum of strength evolving as the session wound down, after a seesaw first five to six hours of trading. All told, however, it was a challenging week for equities and for investors, and especially so for those who are long tech issues and small-cap equities. That is because these two volatile groups, represented by the tech-heavy NASDAQ and the Russell 2000, respectively, have underperformed the Dow Jones Industrial Average and the Standard and Poor's 500 Index for a number of weeks now.
This dichotomy within the aggregate equity market, reflects a general shunning of risk in favor of more stable groups and the stocks of companies with less poorly defined prospects. This rotation away from riskier assets may reflect the greater perceived risks from abroad, as well as some understandable angst as valuations remain stretched after more than a half decade's worth of formidable bull market advances.
Also, the near absence of hard economic news in the latest week, save for data on non-manufacturing activity issued last Monday and the trade gap, which came out on Tuesday, allowed investors to focus on global events, earnings, and valuations. And here, the news was mixed, at best, with the ebb and flow of events from Ukraine again proving to be unsettling, at times. As for earnings, they were generally decent, continuing a pattern set earlier in the cycle, though there were some high-profile misses, which is often the case as the reporting season winds down and the smaller names, which report later on in the cycle, issue their results. All told, three-quarters of the companies in the S&P 500 have beaten their lowered net targets, while more than half have done so on the top line. Finally, there are valuations, which remain rather extended, but which are reasonable, we think, in light of the low inflation backdrop, which makes higher P/E's more defensible.
Holding sentiment down, at times in recent weeks, has been the inability of the Dow and the S&P 500 to forge ahead to new highs, while trends in the NASDAQ and the small-cap Russell 2000, as noted, have been especially unnerving. Interestingly, it was this pair of indexes that led the way higher on Friday, as the NASDAQ gained some 20 points, or just about half a percentage point, while the Russell was a 10-point gainer, which translates to a gain of nine-tenths of a percentage point. Conversely, the Dow added 32 points, or just 0.2%, while the S&P 500 tacked on less than three points, for a gain of less than 0.2%.
Looking ahead now to a new week, we will see considerably more activity on the business front and still less action on the earnings line as fewer companies report their results for the three months ended in March. That said, the nation's retailers, which typically close out their first-quarter books on April 30th, will be making their tallies known rather shortly. Elsewhere, the global situation, which seemed to quiet down somewhat late last week will remain a wild card, while economic news, as noted, will be heavier, starting out with data on retail sales tomorrow morning. Other highlight reports this week will include surveys on producer and consumer prices, and issuances on industrial production, factory utilization, housing starts, jobless claims, and consumer sentiment.
As to the day ahead, we see that the markets in Asia were generally higher overnight, while they are pressing ahead in Europe thus far this morning, as investors appear to be ignoring the ongoing unease in Ukraine and focusing, instead, on a heating up of merger activity this morning, with news that Hillshire Brands Co. (HSH) is moving to take over food processor Pinnacle Foods (PF) for $6.6 billion, for a purchase price of just over $36 a Pinnacle share. Pinnacle stock is indicating an opening just above that price, implying that there may have to be a richer offering to get the deal done. Hillshire stock also is suggesting a higher opening, albeit not as strong an uptick. – Harvey S. Katz
At the time of this article's writing, the author did not have positions in any of the companies mentioned.