After The Close - The stock market got off to a mixed start this morning, firmed up considerably in the early afternoon, but softened somewhat in the final hour of the session. At the close of trading, the Dow Jones Industrial Average was ahead 41 points; the S&P 500 Index was up five points; and the NASDAQ was higher by three points. Nonetheless, there was a healthy amount of buying today, as advancers outpaced decliners by a solid margin on the NYSE. From a sector perspective, the energy and basic material issues displayed leadership, helped by rising crude oil prices. Of note, the world’s most heavily traded commodity moved to over $51 a barrel in New York, on hopes that supply levels are now moving lower. On balance, some of the consumer and healthcare names lagged the broader market.
Meanwhile, a few economic reports were released today. Specifically, housing starts dropped to 1.047 million units, annualized, during the September, while, building permits climbed to 1.225 million units (up 6%) for the month. Elsewhere, in the early afternoon, the Federal Reserve’s Beige Book summation for October showed that the economy was progressing at a respectable pace. Tomorrow we get a look at the employment situation, with the release of the weekly initial jobless claims figures.
In corporate news, a number of leading corporations weighed in with their results over the past 24 hours. In the Dow, shares of Intel (INTC – Free Intel Stock Report) fell quite a bit, as investors were not overly enthusiastic about the chip giant’s outlook. In the financial space, shares of Morgan Stanley (MS) rose after the investment services firm delivered decent results.
In general, the stock market continues to move in a sideways pattern. Perhaps, as the third-quarter earnings season progresses, traders will get a better sense of the situation. More important than the quarterly figures that will be provided, will be the guidance that corporations deliver for the remainder of the year. - Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
12:00 PM EDT - After a selloff on Monday and a nice recovery yesterday, in what could easily be considered another in a series of Monday-Tuesday reversals, the buyers and sellers are at it again this morning. And thus far, the nod is going to the bulls, and in a generally solid way. Specifically, as the morning concludes, we see that the Dow Jones Industrial Average is up 65 points; the S&P 500 Index is ahead five points; but the NASDAQ is falling back slightly, with the latter hurt, in part, by weakness in the shares of semiconductor giant Intel (INTC - Free Intel Stock Report).
As has been the case so far this week, Wall Street sentiment is being influenced by earnings data, as peak reporting season is under way and a succession of major corporations already have weighed in with their results. Up until this morning, some 80% of the companies in the S&P 500, which have issued their metrics, so far, have outperformed expectations. Of course, many of these profit targets had been lowered in recent weeks. Thus, the bar was not all that high to begin with. By comparison, those companies that have failed to excite traders often have been dealt with harshly.
As to the current session, the better showing by the Street is being helped by recent good earnings data. On the Dow, for example, this included financial services powerhouseGoldman Sachs (GS - Free Goldman Sachs Stock Report), which reported yesterday. That company's solid showing is helping the issue gain some welcome traction. But the applause is not universal, as Dow component, Intel, albeit reporting solid third-quarter results, issued revenue guidance for the final period that fell short of expectations. That stock, a solid performer up until this point in 2016, is off some 5% this morning.
In other influences today, the Commerce Department reported that housing starts fell 9% in September, an unexpected and rather sharp decline. However, building permits jumped by more than 6%, with this more forward-looking metric's nice gain taking some of the sting out of the starts number. The housing report followed reports of slight gains in industrial production and factory use for last month. Those figures were issued on Monday. These reports will be followed later today by the Federal Reserve's Beige Book issuance at 2:00 PM (EDT).
Breaking the mid-session advance down, we see that gaining stocks are well ahead of declining issues, to the tune of better than two to one on the NYSE, while nine of the 10 major equity groups are higher, with notable gains in the energy, basic materials, health care, and financial groups, but with some weakness in the consumer sector. Higher oil prices have played a constructive role in the market, as well this morning. So, as we head toward the afternoon and the Beige Book, the market is pointing to the bulls making it two out of three so far this week. - Harvey S. Katz
At the time of this article's writing, the author had positions in INTC.
Before The Bell - It was another one of those typical Monday/Tuesday reversals on Wall Street yesterday, which has been rather commonplace throughout most of this year. Indeed, after a down start to the week on Monday, the major equity indexes retraced some of the losses yesterday. Trading was driven by a slew of earnings reports from the corporate world, most of which were greeted rather positively by Wall Street. The major indexes were up sharply within the first few minutes of trading, then hit a bit of a lull in the mid-morning hours, but were able to steady some in the afternoon and finish in positive territory. For the day, the Dow Jones Industrial Average, the NASDAQ, and the S&P 500 Index added 76, 44, and 13 points, respectively.
In all, it was a decent showing for the bulls after Monday’s setback, with the tech-heavy NASDAQ and the broader S&P 500 Index performing better than the Dow 30. Too, the gains were broadbased, as both the small- and mid-cap sectors finished in positive territory. There also was a plurality of advancing issues on both the New York Stock Exchange and the NASDAQ, and all of the major equity groups, save the consumer sector, ended the day in positive territory.
As noted, the main catalyst behind yesterday’s solid performance for stocks was a number of encouraging earnings reports. As far as the Dow-30 companies, the reaction was mixed. Investors cheered the latest results from UnitedHealth Group (UNH - Free United Health Stock Report) and Goldman Sachs (GS - Free Goldman Sachs Stock Report), but were not happy with what they saw from IBM (IBM - Free IBM Stock Report) and Johnson & Johnson (JNJ - Free Johnson & Johnson Stock Report). Shares of UnitedHealth were notably higher, helping lift the Dow 30 and, more so, the recently struggling healthcare sector. Likewise, investors bid up shares of Netflix (NFLX) after the video streaming and original content producer reported significantly better-than-expected subscriptions gains last quarter.
Not surprisingly, given the favorable reaction to the UnitedHealth and Netflix reports, the healthcare and technology groups were among the best-performing sectors yesterday. The basic materials and utilities sectors also provided a good deal of leadership. The basic materials group got a big boost from the strong performances of the precious metals stocks and the metals and mining issues. In all, there were several places to turn to for those looking to up their exposure to stocks. That brought along with it an increased appetite for risk yesterday, as reflected by the drop of 5% in the S&P 500 Volatility Index (or VIX).
Lost in all of the earnings news yesterday was another important reading on the U.S. economy from the Labor Department. Specifically, consumer prices rose by 0.3% last month, in line with the consensus expectation and matching the gain in producer prices, which was released last Friday. Consumer prices increased in September at the fastest pace since the spring season, as gasoline costs jumped after declining for two consecutive months. But inflation still remains modest, as prices were up 1.5% for the 12 months ending September 30th, which is below the Fed’s target of 2.0%. All in all, we think this data will not deter Federal Reserve policymakers from increasing the short-term interest rate by 25 basis points before the end of this year. The consensus is that the central bank will make a move at its December FOMC meeting.
Meantime, this morning brought some news on the economy, both here and overseas. Overnight, we learned that China’s economy grew by an annualized rate of 6.7% in the third quarter, which matched expectations and, maybe more importantly, showed signs of stabilizing. The main indexes in China were relatively flat on the report. And just minutes ago, the Commerce Department reported mixed residential construction data, as housing starts fell both on a sequential and year-over-year basis, but building permits, a more-forward looking indicator, were up nicely. In all, both metrics, on an annualized basis, are still running comfortably above the one million mark.
Looking at the day at hand, we expect that trading will be driven once again by a heavy slate of earnings news. The headline report came after the close of trading yesterday from Intel (INTC - Free Intel Stock Report); shares of the chip making giant are down in pre-market trading on a disappointing revenue forecast. Investors should also be aware that the latest Federal Reserve Beige Book summation of economic conditions is due out at 2:00 P.M. (EDT) this afternoon. That report is used by the FOMC when determining what actions to take on the monetary policy front, so the release of its findings may have an impact on trading later this afternoon.
With less than an hour to go before the start of trading stateside, the equity futures are suggesting a modestly higher opening for the U.S. equity market The NASDAQ futures, though, are being held in check by the drop in shares of Intel at the start of trading. Stay tuned. - William G. Ferguson