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Markets Are Starting to Show Cracks

Anthony Mirhaydari

U.S. equities bounced around the unchanged line on Monday, recovering from a spill right after the opening bell.

But there was plenty of action in General Electric Company (NYSE:GE), which plunged 7.2% after the company announced a 50% cut to its dividend ahead of today’s investor day.

The dividend was previously cut in 2009. And before that, you must go back to the Great Depression for a similar move. The decline built upon a 35% year-to-date decline as the company struggles amid a management changeover. Forward earnings guidance was also cut.

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In the end, the Dow Jones Industrial Average gained 0.1%, the S&P 500 added 0.1%, the Nasdaq Composite wafted up 0.1% and the Russell 2000 lost a fraction. Treasury bonds were mixed, the dollar rose, gold gained 0.4% and crude oil was little changed.


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Breadth was negative, with 1.3 decliners for every advancing issue. Volume was a little light, at 95% of the NYSE’s 30-day average. Utilities led the way with a 1.2% gain while energy was the laggard, down 0.5%.

Mattel, Inc. (NASDAQ:MAT) surged nearly 21% after the WSJ reported after the close on Friday that Hasbro, Inc. (NASDAQ:HAS) had made a renewed takeover offer as the toy industry struggles amid the Toys R Us bankruptcy and fatigue with media franchises like “Star Wars.”

Time Warner Inc (NYSE:TWX) fell 2.3% after Bloomberg reported the Department of Justice is encouraging AT&T Inc. (NYSE:T) to address anti-trust concerns before Thanksgiving or face a lawsuit to block the deal.

Conclusion


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While the bulls did their best to make the market seem tranquil, cracks are marring the façade. The Nikkei 225 posted its fourth consecutive decline today, the worst selloff since April.

High-yield bonds, such as those in the Barclays High Yield Bond ETF (NYSEARCA:JNK), suffered another downtick today. And biotechs are under pressure.

Investors will contend with a heavy calendar of comments from Federal Reserve officials this week as well, with chairman Janet Yellen on the docket for Tuesday. We will also get updates on inflation and retail sales this week.

Evidence of overheating and rising prices will not only focus attention on the coming December rate hike but on the pace of hikes that await in 2018 as well.

Check out Serge Berger’s Trade of the Day for Nov. 14.

Today’s Trading Landscape

To see a list of the companies reporting earnings today, click here.

For a list of this week’s economic reports due out, click here.

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Anthony Mirhaydari is the founder of the Edge (ETFs) and Edge Pro (Options) investment advisory newsletters. Free two- and four-week trial offers have been extended to InvestorPlace readers.

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