After The Close - The stock market put in a constructive session today, as investors shrugged off concerns about the health crisis in China, to concentrate on corporate profits here at home. Further, some traders on Wall Street may be thinking that central banks and government agencies across the globe will be willing to prop up their economies if the virus creates meaningful disruptions. Of note, China has already taken measures in this regard. At the close of trading, the Dow Jones Industrial Average was ahead about 175 points; the broader S&P 500 Index was up 24 points; and the NASDAQ was higher by 108 points. Market breadth was favorable, with winners comfortably ahead of losers on the NYSE. The technology and healthcare names led the market higher, while the basic materials issues lagged the broader pack.
Meanwhile, there were no major economic reports released this morning. In addition, tomorrow and Wednesday will be light days for economic news. However, on Thursday the weekly initial jobless claims, and the January Consumer Price Index (CPI) will be reported.
In corporate news, the fourth-quarter earnings season continues to unfold. By now we have probably heard from about half of the numerous publicly traded companies slated to report their numbers. Today, shares of Allergan (AGN) traded higher, after the drug company delivered an upbeat report. In addition, shares of Lowes Corp. (L) advanced, as investors were pleased with the insurance operator’s issuance.
Technically, the stock market has been holding up reasonably well, as we move into the month of February. However, it remains to be seen if the bulls can keep their buying campaign in place in the weeks ahead. – Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before The Bell - The first trading week of February was a wild one for Wall Street. After a dour close to January, which saw the Dow Jones Industrial Average fall more than 600 points on January 31st, the stock market rallied early last week. The buying was broad based, and the major equity averages retraced the prior week’s losses and then some, with the NASDAQ hitting a record high in the process. The bulls were out in full force before the bears returned on Friday and the selling picked up to end the week.
With fourth-quarter earnings season nearing a conclusion and a positive one at that with more than 80% of the S&P 500 companies reporting, the focus of the investment community has been on the coronavirus outbreak in China. The deadly virus, which is becoming a pandemic in China and has spread to other parts of the globe has unnerved investors and led to a spike in volatility. In addition to the health concerns, Wall Street is worry about the negative impact the virus will have on China’s already struggling economy and the economies of the countries that do business with the Asian superpower. This fluid situation is leading to wide swings in trading, depending on what reports are surfacing. The market sold off on Friday, despite a strong report from the Labor Department (more below), on worries that the coronavirus is spreading to other countries.
As noted, the major averages sold off on Friday, with the Dow 30, the NASDAQ Composite, and the S&P 500 Index down 277, 52, and 18 points, respectively. Overall, declining issues led advancers by a notable margin on both the Big Board and the NASDAQ, and nearly all of the 10 major equity groups were in negative territory. The biggest laggards were the economically sensitive sectors, which sold off on fears about what impact the coronavirus may have on the health of the global economy.
The spreading of the coronavirus grabbed the attention of the investment community for much of last week. The market rallied early in the week when sentiment was that the virus can be contained, but reversed course on Friday when reports surfaced of additional cases of the virus spreading, including in the United States. The coronavirus news has overshadowed what has been a very strong stretch of earnings news and a few encouraging reports on the U.S. economy. Perhaps, the positive news from Corporate America and business beat are serving as a counterbalance to the coronavirus worries, and preventing a notable selloff on Wall Street.
On Friday, the news on the economy was very encouraging, as the Labor Department reported that nonfarm payrolls jumped by 225,000 in January, far outdistancing the consensus expectation. And although the unemployment rate ticked up slightly, the increase was most likely the product of the labor participation rate rising notably, with more people confident about the prospect of finding employment. Over the last six months, monthly jobs gains have averaged more than 200,000 positions, which is the sign of a healthy economy. This week, the news on the economy will include data on producer and consumer prices, industrial production, and retail sales. We will also get prepared mid-week remarks by Federal Reserve Chairman Jerome Powell on the state of the economy and monetary policy. Our sense is that despite the strong jobs market, the central bank will continue to keep its accommodative policies in place to support economic growth, given the unknowns about what impact the coronavirus will have on the global economy. This backdrop will likely continue to provide support for both the corporate world and Wall Street. That said…
With the new trading week starting on the homeland, the equity futures were pointing to a lower opening for the U.S. stock market, and the major market averages indeed opened on a mixed note. So far overseas the trading mood has been dour. Indeed, the main indexes in Asia finished lower overnight, while the major European bourses are in negative territory as trading moves into the back half of the session on the Continent. Stay tuned. – William G. Ferguson