After The Close - The stock market started in the red today, as trader sentiment waned over the three-day holiday weekend. The Dow Jones Industrial Average fell 70 points in the early part of the session, while the other indices were down in tandem. However, the markets started to rebound, and the NASDAQ even reached the green for a short spell. Then, news broke that the first recorded case of Wuhan Coronavirus (which has killed six people in China) has been documented in the United States, and the indices all broke lower. Too, the decline in the DJIA was exacerbated by reports stating that Boeing (BA – Free Boeing Stock Report), told suppliers that it didn’t expect the Max planes to be approved for service by the FAA until mid-2020. The composites fell to new daily lows before bouncing back some. Overall, the indices ended the day near the lows, with the Dow closing down 152 points, the S&P 500 was off by nine points, and the NASDAQ fell 18 points.
Moreover, market breadth was somewhat negative as decliners outpaced advancers by a 1.5-to-1.0 ratio. REITs were among the best performers on the day, while energy issues were among the weakest.
In commodity news, oil prices were slightly lower today, as oversupply worries more than offset weaker output from Libya. Meantime, U.S. Treasury Bond yields were lower, as demand for the safe-haven asset increased. Additionally, the yield curve flattened a bit, which usually is negative for financials. The VIX Volatility Index increased as traders bought more options protection.
Looking ahead to tomorrow, a notable amount of economic data will be released, including the Energy Information Administration’s weekly report on crude oil inventories. Also, existing home sales are on the docket, which will help show how well the housing market is faring.
Moreover, several companies are slated to report quarterly earnings results tomorrow, including Dow-component Johnson & Johnson (JNJ – Free J&J Stock Report). Too, we think trading will be affected by earnings results from Dow-30 component International Business Machines (IBM – Free IBM Stock Report), slated for after the close today.
Overall, we believe that trading tomorrow will be affected by any changes in the political situation at home or any developments concerning the Coronavirus. - John E. Seibert III
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before The Bell - Investors will be greeted with a heavy slate of earnings news this week as they return from the long holiday weekend. (The U.S. stock and bond markets were closed yesterday for the Martin Luther King holiday.). Last week, the earnings season kicked off in grand fashion with a very strong report from Dow-30 component JPMorgan Chase (JPM – Free JPMorgan Chase Stock Report). The banking giant, along with fellow Dow-30 member Goldman Sachs (GS – Free Goldman Sachs Stock Report) and a slew of other banking heavyweights, such as Wells Fargo (WFC), reported impressive quarterly results, and the investment community responded in kind. The strong earnings news, combined with the signing of the partial (phase one) trade deal with China and no further escalation in tensions between the United States and Iran, paved the way for another winning week on Wall Street.
To recap, the Dow Jones Industrial Average, the NASDAQ Composite, the S&P 500 Index, and the small-cap Russell 2000 delivered respective advances of 1.8%, 2.3%, 2.0%, and 2.5%. The aforementioned events were behind the steady gains Wall Street witnessed last week, which included respective gains of 51, 32, 13, 17 points for the aforementioned indexes on Friday. The final session of the bullish five-day stretch, though, produced a mixed picture from an advance/decline perspective. Indeed, there were more winners than losers on the New York Stock Exchange, while the reverse held true on the NASDAQ. However, nearly all of the 10 major equity groups finished in positive territory, with the only laggard being the financial sector. Our sense is that it was a case of some profit taking after the group performed well earlier in the week. The bullish performance was once again led by the basic materials and technology stocks on Friday. Those two groups are getting a boost from the signing of the partial trade détente last Wednesday.
Looking ahead to the abbreviated four-day stretch of trading, the investment community, as noted above, will be focused on a plethora of earnings reports, including quarterly data from six Dow-30 components. International Business Machines (IBM – Free International Business Machines Stock Report) is the first Dow-30 company to report this week, with results due after today’s closing bell. The expectation among market pundits, which was only amplified by the strong bottom-line results from the banking giants last week, is that the fourth-quarter earnings data will prove supportive for equities. The earnings reports will overshadowed what will be a very light week of news from the business beat. In fact, the only two notable reports on the economy scheduled for release this week are existing home sales data (Wednesday) and the leading economic indicators (Thursday).
With less than an hour to go before the commencement of the new trading week on Wall Street, the equity futures are pointing to some modest profit taking in the U.S. stock market. So far overseas, the bears are controlling trading. The main indexes in Asia fell overnight and the major European bourses are in the red as trading moves into the back half of the session on the Continent. Foreign investors were unnerved today by reports about a deadly respiratory virus in China that appears to be spreading. Hong Kong’s Hang Seng Index fell 2.8% on the report, which coincided with a credit rating downgrade and a lead official calling for new security legislation. Stay tuned. – William G. Ferguson