Stocks thrashed out a mixed open, but quickly turned negative Monday as markets in Europe weakened and early earnings and economic news were mixed.
XBank of America (BAC) slumped following its third-quarter report. Sears Holdings (SHLD) collapsed after filing for Chapter 11 bankruptcy protection. Cannabis stocks Cronos Group (CRON) and Tilray (TLRY) opened sharply higher. Tandem Diabetes Care (TNDM) spiked after receiving permission to sell its insulin pumps in Canada. Aerospace surveillance leader L3 Technologies (LLL) rebounded hard after Harris (HRS) announced it would acquire L3 in a deal valued near $15 billion.
The Nasdaq Composite led the early declines, falling 0.7%. FANG stock tech leaders all lost ground, Netflix (NFLX) fell furthest — down 2.3% after Raymond James lowered the stock's price target. American Airlines (AAL) scored the biggest early gain among Nasdaq 100 stocks, up 2.6% after an analyst price target hike.
The Dow Jones industrial average flashed in and out of narrow gains. The S&P 500 dropped 0.2%. Microsoft (MSFT) and Visa (V) weighed hardest on the Dow, down 1.3% each. On the upside, McDonald's (MCD) and JPMorgan (JPM) led.
L3 Technologies and Harris were the early leaders among S&P 500 stocks.
New York Factories Surge, Retail Sales Slump
Retail sales rose less than expected in September, up 0.1%, according to the Commerce Department. That was equal to August's gain, but far below analyst forecasts for a 0.6% rise. Minus automobiles, sales slumped 0.1% — down sharply from August's 0.3% increase and disappointing projections for an increase to 0.4%.
Manufacturing improved in the state of New York, sending the New York Federal Reserve's October Empire State Manufacturing Survey to 21.1. That was a step up from 19 in September, and well above economist estimates for a downtick to 18.8. New orders and shipments picked up noticeably, while inventories held steady and prices edged lower, but remained at elevated levels.
Nasdaq Meets Resistance At 200-Day Line
All three indexes are in a battle to retain support at their 200-day moving averages. This long-term line often acts as a backstop level of support once the 50-day line is breached. The Dow tested its 200-day average repeatedly from March through July. The S&P 500 found support there between February and July. The Nasdaq posted three distinct bounces: one in February, two in April.
However, the market's losses on Thursday showed all three indexes punching further below their 200-day levels than at any previous point this year. The Dow and the S&P 500 regained the line on Friday.
The Nasdaq's rebound on Friday stopped short of regaining support. Monday's early action suggested that the index's 200-day moving average could be shifting from support to resistance. That may signal that the tech-heavy index will have a more difficult time taking back its recent losses.
McDonald's Upgrade; BofA Beat
Among Dow stocks, McDonald's added 0.5% after Evercore-ISI raised its rating on the stock to outperform, from in line. McDonald's shares are up almost 12% from a March low, making their way up the right side of an eight-month consolidation.
Bank of America slipped 1.4% after reporting a 38% jump in third-quarter earnings, and a 3% revenue gain. Both numbers were above analyst targets, and the bank reported a $118 million reduction in provisions for credit losses, and a $29 billion rise in average loan and lease balances. Bank of America shares slumped 5.9% last week, retesting its prior low for the year from July.
Sears Holdings unraveled 11% after the company announced it would seek Chapter 11 protection in the latest, spectacular failure of iconic U.S. retail brands. The company was scheduled to make a $134 million debt payment on Monday, and had reportedly instead lined up $1.875 billion in bankruptcy financing in an effort to keep stores open through the reorganization.
Chief Executive Eddie Lampert said he would step down immediately, but will retain the chairman role. Already a penny stock, Sears shares had collapsed more than 99% to trade below 1, after peaking in 2007.
Largest U.S. Defense-Industry Merger
L3 Technologies jumped more than 9%, while Harris popped 8%. Harris reported along with its fiscal first-quarter results that the two companies would join in a merger of equals. Harris topped analysts' first-quarter expectations and said the two companies would merge to create L3 HarrisTechnologies. The deal would create an operation with combined market capitalization of more than $33 billion. It would outweigh Boeing's (BA) 1997 wedding with McDonnell Douglas to become the largest defense merger on record.
Shares of both L3 and Harris are pulled back from highs, consolidating since April.
Global Markets: China, Japan Tank; Europe Climbs
Asia's markets veered lower Monday, despite pledges by regulators to support liquidity and further open the markets. The Shanghai Composite dived 1.5% to a new low 46-month low. Hong Kong's Hang Seng dumped 1.4% to retest its 17-month low etched on Thursday.
In Japan, Tokyo's Nikkei 225 careened 1.9% lower, as profit-taking accelerated and sent the index below its 200-day moving average.
Markets in Europe weakened and turned mixed in afternoon trade. Frankfurt's DAX led with a 0.4% gain.
Oil Climbs As Pompeo Flies; Bonds Edge Up, Dollar Dip
The markets' other vital signs were mixed. Oil prices ticked higher as concerns rose of an international response to the disappearance of a Saudi journalist from the Saudi consulate in Istanbul, Turkey last week. President Trump said early Monday he was sending Secretary of State Mike Pompeo to discuss the matter directly with Saudi King Salman. West Texas Intermediate Rose 0.3% to $71.57 a barrel, after falling 4% last week. Brent crude gained 0.4% to $80.72.
The yen and euro rose vs. the dollar. The bond market — a critical player in the stock market's recent action — showed mild strength, with bonds ring and sending the 10-year-yield 1 basis point lower to 3.15%.
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