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Shall we declare a winner in January’s tug of war between bulls and bears? I think we shall, as yesterday’s washout put investors solidly on the defensive. It’s amazing how things can turn on a dime.
Wednesday after the bell momentum king Netflix (NASDAQ: NFLX) put the pedal to the metal with a stellar earnings report. Shares soared in the after-hours market. As we slumbered here in the States, things took a turn for the worse overseas. China released economic data that for the first time in six months suggested contraction.
That was enough to tilt the war in favor of the bears. We started weak from the get-go and selling accelerated throughout the day. There were minimal attempts to nibble at these discounted prices, but not nearly enough to change the negative tenor of the day. The major indexes were all down approximately 1% on the day. Netflix was the lone bright spot finishing the day with a gain of more than 16%.
eBay ekes out small gain
The negative tone in the market put a damper on what could have been a strong day for eBay (NASDAQ: EBAY). The online auction site and owner of PayPal released earnings after the market closed Wednesday. The company beat earnings estimates by a penny per share and matched revenue expectations. Guidance was below consensus, but an announcement that Carl Icahn had taken a stake in the company supported shares.
For his, part the activist investor is suggesting that eBay would be worth more if it spun-off its PayPal business. Management has thus far resisted such talk, but Icahn tends to be quite persistent in these matters.
Whatever transpires is likely to be good for investors. The stock opened smartly higher before succumbing to the bear tidal wave. Shares finished up only fractionally – still a good result on a tough day.
Union Pacific riding the rails
There is nothing but blue skies ahead for the rail sector. Industry leader Union Pacific (NYSE: UNP) had a nice gain of 3% after a solid earnings report. The company beat earnings estimates by 6 cents per share, thanks to higher shipments of grain easily offsetting a decline in coal shipments. With a steadily growing United States economy and low valuation, Union Pacific should continue its impressive run.
McDonald’s stock moves higher despite sales disappointment
On the surface, with a horrible market day and a disappointing sales number for McDonald’s (NYSE: MCD), one might think shares were crushed. That was not the case as investors ignored the bad news of the day. Instead they chose to focus on the good news of an earnings report that beat estimates by a penny per share. That was enough to convince the market to focus on putting a tough year for the company in the rear-view mirror. The focus is on the future and apparently the current sentiment is that McDonald’s will have a decent year. Shares closed at $95.26, up 0.5%.
Homebuilders and gold fare well as yields sink
One consequence of the weakness in China and a down market for stocks was yields falling. The ten-year Treasury note yield fell to 2.77%. That strength supported gold prices as the yellow metal added $24 a near 2% gain. Shares of Lennar (NYSE: LEN) and Toll Brothers (NYSE: TOL) finished the day in the green. The big winner was KB Home (NYSE: KBH) with a gain of 1.4%.
On Deck
Stocks are set to fall further in the stock market today. Trading overseas was weak. Could a contagion be taking hold? Only time will tell.
On the earnings front Microsoft (NYSE: MSFT) issued a strong report and shares are higher in pre-market trading. It was a cautious, but still solid report from Starbucks (NASDAQ: SBUX). It too is seeing green in pre-market trading.
Market’s rarely recover on Friday after a Thursday sell-off. Investors tend to be cautious as we head into the weekend. Look for the same today. At best we open lower and trade sideways with perhaps some tepid buying at the close. We hope you enjoyed this issue of the Stock Market Today. As always, please feel free to leave a comment below.