So here’s the hangover after the party, as 3M (MMM) and Pioneer Natural Resources (PXD) outweigh gains in U.S. Steel (X), Chico’s FAS (CHS) and Wal-Mart (WMT).
Bloomberg News The S&P 500 has dropped 0.8% to 1,832.77 at 12:01 p.m., while the Dow Jones Industrial Average has fallen 123 points, or 0.7% to 16,4547.13.
Why is the market dropping? It’s certainly not the economic data, which indicates further strength in 2014. Initial jobless claims fell to 339,000, beating forecasts for 344,000, but the numbers have been erratic–and not necessarily trustworthy– thanks to the holiday season. The ISM Manufacturing Index fell to 57 in December, beating forecasts for 56.8, an indication that the manufacturing recovery is rolling along. Jefferies’ Thomas Simons explains:
Recent data suggests that the manufacturing recovery is gaining traction once again and that the combination of the government shutdown and the latest round of fiscal follies in Washington have had little more than a passing effect on the sector…We have been expecting an acceleration in manufacturing based on auto production, developments in the energy sector, and the strength of the housing recovery and we think that this acceleration will continue through the second half of the year to buoy overall economic growth.
Deutsche Bank’s Alan Ruskin notes that the ISM order minus inventories is “the highest since mid 2010 – an encouraging forward looking growth signal.”
Considering the general strength of the day, why are investors feeling down today? Bloomberg blames Wells Fargo’s downgrade of Apple (AAPL), which has weighed on tech shares today. The Wall Street Journal says its the fault of weak overseas markets. Considering that a number of last year’s top-performing stocks are falling today, it could just be early-year rebalancing.
Consider: Wal-Mart, which returned just 18% in 2013, has gained 0.6% to $79.18 at 11:59 a.m., despite having to recall Chinese donkey meat. 3m, which rose 54% last year, has fallen 1.4% to $138.30. United States Steel, meanwhile, has gained 4% to $30.68after it was upgraded to Buy from Hold by KeyBanc. It rose 25% in 2013 including reinvested dividends. Pioneer Natural Resources, which advanced 73% last year, has dropped 3% to $178.54today. Chico’s FAS, which returned just 3.4% in 2013, has gained 3.5% to 19.49 after being upgraded by Jefferies.
Is it out with the old and in with the new?
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