Closing Market Summary: Roller Coaster Ride Ends on a Mixed NoteWall Street went on a roller coaster ride on Wednesday as investors tried to extend the new year rally, but struggled to justify further gains.
Stocks got off to a good start with the Dow, the S&P 500, and the Nasdaq up between 0.4% and 0.7% shortly after the opening bell. However, the bears took control about an hour into the session and pushed the major averages into negative territory; at their worst marks the day, the Dow, the S&P 500, and the Nasdaq held respective losses of 0.4%, 0.5%, and 1.1%.
In the end, the Dow finished higher by 0.2%, closing at a new all-time high, while the S&P 500 and the tech-heavy Nasdaq lost 0.1% and 0.6%, respectively. Today's loss breaks a three-session winning streak for the S&P 500, but the index still remains solidly higher for the week (+1.0% WTD) and for the year (+6.1% YTD).
Heavily-weighted sectors like financials (+0.7%), health care (+0.3%), and consumer discretionary (+0.4%) did relatively well on Wednesday, but the underperformance of the top-weighted technology space (-0.9%) kept the S&P 500 in check.
Texas Instruments (TXN 109.70, -10.19) was the weakest tech component in the S&P 500, tumbling 8.5%, after its latest earnings report came in as expected, but didn't impress investors enough to justify the chipmaker's 25.0% gain over the last seven weeks. Apple (AAPL 174.22, -2.82) was also weak, losing 1.6%, after Bernstein analyst Toni Sacconaghi said iPhone sales for the current quarter may be disappointing.
In other corporate news, United Continental (UAL 69.05, -8.92) plunged 11.4% after announcing a plan to boost capacity growth 4-6% in 2018 and likely in 2019 and 2020 as well. The concern is, if demand starts to slow, the airline might have to slash its prices to fill the extra seats, which in turn could fuel a price war within the industry. The U.S. Global Jets ETF (JETS 33.00, -1.44) moved in tandem with United, losing 4.2%.
General Electric (GE 16.44, -0.45) dropped 2.7% after reporting below-consensus earnings and revenues for the fourth quarter. However, GE did reaffirm its profit guidance for 2018, prompting a sigh of relief from investors, who have suffered major losses as of late; GE shares dropped 13.3% last week and 44.8% over the course of 2017. Meanwhile, fellow industrial giant United Tech (UTX 135.68, -0.35) slipped 0.3% on Wednesday despite beating earnings and revenue estimates for Q4.
In the health care space, Abbott Labs (ABT 61.72, +2.49) had a positive showing, jumping 4.2% to a new all-time high, after reporting above-consensus earnings and revenues for the fourth quarter and issuing positive guidance for Q1.
The U.S. Dollar Index fell 0.9% to 89.05, hitting a fresh three-year low, after U.S. Treasury Secretary Steven Mnuchin said he welcomed a weakening of the greenback. However, Mr. Mnuchin later clarified that he wasn't "advocating" for a weaker dollar. The U.S. dollar lost 0.8% against the euro (1.2401), 1.5% against the British pound (1.4210), and 1.1% against the Japanese yen (109.13).
In the bond market, U.S. Treasuries fell on Wednesday, pushing yields higher across the curve. The yield on the benchmark 10-yr Treasury note climbed three basis points to 2.65%, while the 2-yr yield also tacked on three basis points, closing at 2.08%.
Elsewhere, the major stock indices in Europe ended on a lower note, closing at their worst marks of the day; Germany's DAX and the UK's FTSE dropped 1.1% apiece, while France's CAC declined 0.7%. The European Central Bank will meet on Thursday, but it's expected to leave rates unchanged. Investors will be interested in ECB President Mario Draghi's press conference, however, as he could attempt to talk down the strengthening euro.
In the Asia-Pacific region, equity indices had a mixed outing with Japan's Nikkei (-0.8%) showing relative weakness. China's Shanghai Composite was the top performer, adding 0.4%.
Reviewing Wednesday's batch of economic data, which included Existing Home Sales for December, the FHFA Housing Price Index for November, and the weekly MBA Mortgage Applications Index:
- Existing home sales decreased 3.6% in December to an annualized rate of 5.57 million units (consensus 5.70 million). The November reading was revised to 5.78 million from 5.81 million.
- The key takeaway from the report is that notable supply constraints remain, which will continue to act as a drag on overall sales due to the limited inventory and the high prices on available inventory that is crimping affordability, particularly for first-time buyers.
- The FHFA Housing Price Index rose 0.4% in November (consensus +0.4%), while the October increase was revised to 0.6% from 0.5%.
- The weekly MBA Mortgage Applications Index increased 4.5% to follow last week's 4.1% rise.
On Thursday, investors will receive several pieces of economic data, including weekly Initial Claims (consensus 240K), New Home Sales for December (consensus 679K), Advance International Trade in Goods for December (consensus -$68.5 billion), Advance Wholesale Inventories for December (consensus +0.3%), and Leading Indicators for December (consensus +0.5%). Leading Indicators will be released at 10:00 AM ET, while the rest will cross the wires at 8:30 AM ET.
- Nasdaq Composite: +7.4% YTD
- Dow Jones Industrial Average: +6.2% YTD
- S&P 500: +6.1% YTD
- Russell 2000: +4.2% YTD
AT&T says it supports net neutrality — but it’s staying quiet on whether it could charge more for faster access
It’s part of a new ad blitz, as the company suggests new regulation should target tech giants.
AT&T embarked on a major ad blitz on Wednesday to stress its support for net neutrality, promising it would not block websites or degrade speeds based on the content that its customers consume.
But the wireless giant’s pledge — appearing in major newspapers like the New York Times and the Washington Post — stayed mum on whether it might someday charge startups, tech giants and others for faster delivery of their sites and services, though AT&T has avoided such an idea in the past.
And the company’s chief executive, Randall Stephenson, even suggested that any new regulations should target telecom giants as well as their tech counterparts, potentially including companies like Facebook, Google and Twitter — an idea likely to draw a sharp rebuke in Silicon Valley.
AT&T’s public commitments follow roughly one month after the Trump administration quashed rules that required internet providers to treat all web traffic equally. Like its peers in the telecom industry, AT&T has maintained that it supported net neutrality — but always felt that federal regulations adopted under former President Barack Obama were too heavy-handed and crimped investment.
For the moment, the FCC is finalizing its repeal, while court challenges — led by tech giants and consumer advocates — are beginning to materialize. In the meantime, though, AT&T said Wednesday in its open letter that it is still “committed to an open internet.”
As Stephenson defined it: “We don’t block websites. We don’t censor online content. And we don’t throttle, discriminate or degrade network performance based on content. Period.”
Absent from the company’s fresh pledge, however, was any explicit mention of “paid prioritization” — the idea that an internet service provider might offer or require tech giants and startups alike to pay for faster delivery of their streaming music, movies or other sites and services. Strong supporters of net neutrality long have derided these arrangements as “online fast lanes.” And some have feared that telecom giants like AT&T would pursue those deals in the coming months in the wake of FCC Chairman Ajit Pai’s repeal.
Asked about the omission, a spokesman for AT&T pointed Recode to the company’s comments dating back to 2014, when it said it wanted to ban some paid prioritization.
Then, the only kinds of fast lanes that AT&T endorsed were those elected by consumers. It never panned out, but its unique proposal at the time might have allowed wireless customers to elect to receive their movies streamed faster than their music. Otherwise, AT&T and the rest of the telecom industry have always said that some paid prioritization is necessary, such as in the context of telemedicine.
Meanwhile, Stephenson also on Wednesday called for Congress to write a new law governing net neutrality, putting an end to the bitter war at the FCC and in the federal court system over the agency’s authority to oversee the internet. Already, tech giants in Silicon Valley have filed or pledged to support a number of legal challenges in a bid to restore the agency’s net neutrality protections.
But AT&T took aim at some of those very companies, suggesting that any new net neutrality law should govern not only telecom giants, but perhaps tech platforms, too.
“Congressional action is needed to establish an ‘Internet Bill of Rights’ that applies to all internet companies and guarantees neutrality, transparency, openness, non-discrimination and privacy protection for all internet users,” Stephenson wrote.
The AT&T executive did not mention any tech companies by name, but he added: “Legislation would not only ensure consumers’ rights are protected, but it would provide consistent rules of the road for all internet companies across all websites, content, devices and applications.”
In recent months, conservatives around the country — including the likes of Republican Sen. Ted Cruz on Capitol Hill — have fumed at reports that they see as evidence that Silicon Valley is biased against them. Meanwhile, tech giants like Facebook, Google and Twitter certainly support net neutrality, but oppose any regulation of the content that appears on their sites and services.
AT&T’s political salvo on Wednesday comes as the company continues to war with the Justice Department, which is challenging the wireless giant’s proposed merger with Time Warner. The deal, if it is allowed to proceed, would greatly expand AT&T’s content offerings.
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