Whipsawed. Stocks started the day higher before getting broadsided by threats of more tariffs, but recovered in the last hour of trading, with only the Nasdaq ending in the red. In today’s After the Bell, we…
- discuss the market’s back-and forth;
- talk about why another crisis is possible, but not probable, yet;
- and look at NiSource’s(NI) nearly 12% tumble.
Stocks went on a wild ride on Friday: After pushing higher at the open on hopes of more trade talks, threats of more tariffs sent indexes down by midday. Still, hope springs eternal, and only the Nasdaq failed to stage a recovery.
The Dow Jones Industrial Average gained 8.68 points, or 0.03%, to 26154.67, while the S&P 500 rose 0.80 points, or 0.03% to 2904.98, the longest winning streak for the latter since mid-February. The Nasdaq Composite lost 3.67, or 0.05%, to 8010.04. All three indexes were up for the week.
Today’s action was a neat microcosm of equity markets activity in recent months: U.S. investors are concerned about tariffs, but are able to recover from worrying headlines fairly quickly, comforted by strong economic data at home.
“In the United States, we continue to observe above-trend fundamental data, including strong corporate earnings, capital expenditures (business investment) and consumer sentiment,” writes BlackRock Multi-Asset Strategies’ Michael Fredericks. Domestic stocks easily outpacing their international counterparts last month, with the S&P 500 climbing more than 3% in August, while other areas of the world, like Europe, were stuck in the red. Fredericks believes that U.S.’s outperformance will continue near term, leading him to favor domestic-focused assets.
What a difference a decade makes. Ten years ago we had just tilted into what would become the financial crisis, as headlines have been gleefully touting, and today the economy appears to be humming along.
Of course, that may seem like an uncomfortable bit of déjà vu, given that there are plenty of “echoes of pre-crisis periods,” as business and consumer confidence remains high, as does investor complacency, writes Commonwealth Financial Network’s Brad McMillan. “Everything is going right, and the past is surely prelude to the future. We can’t have another crisis because…and here you can fill in your favorite answer.”
Perhaps the biggest lesson of the financial meltdown, then, he writes is not to get too comfortable, or take on more risk than you can bear. Yet just because another downturn is possible, that doesn’t mean “we have to have another crisis,” McMillan notes.
Indeed, for now there’s more reason for optimism. While retail sales this morning came in a bit light, they still expanded, and given the blistering pace earlier in this year, a breather isn’t much cause for alarm. For the first eight months of 2018, retail sales growth excluding gasoline was 4.9%, notes Moody’s Mickey Chadha “and we expect this trend to continue through 2018 on the back of a strong economy.” His firm is forecasting retail sales coming in near the high end of his full-year forecast of 3.5% to 4.5%.
That robust project comes as fundamentals from job creation to wage growth are “solid and should remain supportive of the collectively upbeat mood of consumers and their spending habits,” writes Plante Moran Financial Advisors’ Jim Baird. Today’s data “raises a cautionary flag, but its significance shouldn’t be overstated.”
And it will take more than wind and rain to knock stocks from their perch. While retail and restaurants often come into focus in storm season, Hurricane Florence’s impact should be manageable for those categories, and in general, storms have little effect on markets overall, despite the devastation on the ground.
LPL Financial’s Ryan Detrick writes that looking back on hurricane data shows that “markets generally appeal to have taken the catastrophes in stride. After the 15 most expensive hurricanes in U.S. history, the S&P 500 has been higher six months later all but two times, and the six month returns are also “quite strong.”
Stay safe and dry this weekend.
The Hot Stock
Advanced Micro Devices (AMD) shot to the top of the index, after Argus upped its price target.
AMD rose $2.24, or 7.4%, to $32.72.
Analyst Jim Kelleher boosted his price target on the shares to $40 from $23, and reiterated a Buy rating. He writes that AMD’s Epyc server chips are increasingly threatening Intel’s(INTC) dominance in data central processing units (CPUs), while its Ryzen product is becoming more popular in desktops and notebooks. He admits that investor enthusiasm has gotten a bit ahead of fundamentals, but he doesn’t think the shares are overvalued, given growing momentum and Intel’s struggles.
AMD has gained 218.3% year to date, and climbed 167.8% in the past 12 months.
The top five stocks in the S&P 500:
Advanced Micro Devices: 7.4%
L Brands(LB): 5.6%
Principal Financial Group(PFG): 3.8%
Transdigm Group(TDG): 3.3%
Lincoln National(LNC): 3.1%
The Biggest Loser
NiSource sank to the bottom of the index, as one of its units was responsible for the deadly gas explosions near Boston late Thursday.
NiSource sank $3.29, or 11.7%, to $24.79.
A gas main belonging to NiSource subsidiary Columbia Gas of Massachusetts over pressurized and exploded, leading to at least one death and property damage in several towns north of Boston. Wells Fargo’sSarah Akers says that the explosions will be an overhang for the stock “for some time” as NiSource could face fines and penalties depending on the outcome of any investigation into the incident. Still, she kept an Outperform rating on the shares. Evercore ISI wasn’t as patient, however, and downgraded the shares to Underperform.
Year to date, NiSource is down 3.4%, and it’s lost 7.1% in the past 12 months.
The bottom five stocks in the S&P 500
Nektar Therapeutics(NKTR): -4.3%
Under ArmourClass A (UAA) -3.6%
Under ArmourClass C (UA) -3.3%