After The Close
The futures markets started the day trading selectively lower, as profit taking from yesterday’s large gains caused the markets to suggest an early retreat. However, this forecast was short lived, as a rally took over once the trading session began in earnest, and stock prices rose across most of the indices, including the S&P 500 and NASDAQ. However, the Dow Jones Industrial Average was dragged down by another poor price performance from Boeing (BA – Free Boeing Stock Report). This company has been hurt by a series of groundings of its planes, after one crashed in Ethiopia this past weekend. The markets soon trended higher, though, as news of the Consumer Price Index rising for the first time in four months aided investor sentiment. Further, the Dow broke even for a spell, and then rose by as many as 25 points. Meantime, the S&P 500 was higher by as many as 15 points at its apex. The indices then broke lower and trended in that direction in the final part of trading. All told, the Dow closed lower by 96 points, while the S&P 500 finished up eight points, and the NASDAQ climbed 33 points.
Additionally, market breadth was rather positive as advancers outpaced decliners by a 1.9-to-1.0 ratio. Healthcare stocks were among the strongest performers on the day, aided by solid gains from Dow-component UnitedHealth (UNH – Free UnitedHealth Stock Report). Meantime, industrial equities were among the weakest, largely held back by underperformance of Dow-component Boeing.
In commodity news, oil prices were moderately higher, as supply cuts are expected to occur in Saudi Arabian and Venezuelan exports. Additionally, U.S. Treasury bond yields declined, as demand for safe-haven assets increased. Meantime, the VIX Volatility Index was lower, as the prices for options protection fell.
Looking ahead, a slew of economic news, including the Energy Information Administration’s weekly status report on crude oil inventories, is expected tomorrow. Too, reports on durable-goods orders for January and the Producer-Price Index for February are slated for release. The earnings front will be somewhat barren until Thursday, when a few larger companies report before the bell. These factors suggest that trading will likely move on swings in sentiment and any developments concerning a hoped for U.S. trade deal with China.
- John E. Seibert III
At the time of this article's writing, the author did not have positions in any of the companies mentioned.
Before The Bell
The stock market opened on a mixed note yesterday, following a steady stream of consecutive losses during the previous five-day trading span, with the Dow Jones Industrial Average dragged down by a major loss in the shares of aerospace and defense giant Boeing (BA – Free Boeing Stock Report). That issue tumbled on the heels of an airline crash over the weekend of one of that carrier's 737 Max 8 craft. Much of that composite's early triple-digit point loss was attributable to the steep drop in that one stock. Elsewhere, the indexes held their own initially.
In fact, the S&P 500 Index and the NASDAQ quickly surged higher during the morning hours, buoyed by strength in the technology groups, in general, and in the shares of Apple Inc. (AAPL – Free Apple Stock Report) in particular. The sharp gain in Apple stock, which reached $6.00 in mid-session, came about after that issue received an upgrade from a brokerage house. That strength more than offset the steep pullback in Boeing, and, as we reached the late morning, the NASDAQ was soaring and the Dow, once off about 200 points, was higher by more than 100 points.
That improvement would continue into the afternoon, and as we hit the halfway mark of the trading day, both the Dow and the NASDAQ were sprinting along with comfortably more than 100-point increases. Also emboldening traders was the fact that Federal Reserve Chair Jerome Powell said over the weekend that the nation's economy was still strong. That confidence no doubt perked up the Street after a dour employment report for February in which the nation added just 20,000 new jobs had dampened sentiment last Friday.
So, armed with the Apple brokerage upgrade, the expectation that the Fed will continue to pursue a stable interest rate course, and some confidence that the employment report for February may have been an outlier, the market continued to roll higher. Some bargain hunting after last week saw the largest decline in 2019 to date also was a factor in the midday strength. With earnings season in the rearview mirror, there is naturally a tendency to look more carefully at the economy for possible market direction.
The stock market then strengthened as the afternoon proceeded, with the aforementioned strength in shares of Apple easily offsetting the setback in Boeing. In all, as the session wound down, the major averages were all near their sessions highs, with the Dow finally ending matters ahead by 201 points. The S&P 500 surged 40 points and the NASDAQ, on the strength, in technology, added 150 points. As such, a big chunk of last week's setback was erased, with only the downturn in Boeing standing in the way of a really big wire-to-wire win.
Looking ahead to a new day now and casting our eyes overseas, we see that stocks in Asia were up sharply in the overnight hours. In Europe, meantime, the principal bourses are edging higher thus far this morning. In other markets, oil prices are up solidly in early dealings and U.S. Treasury yields, which closed up at 2.64%, are now passing hands at 2.65%. Finally, after yesterday's bullish tide, the U.S. equity futures are showing early modest strength in the pre-market hours.
– Harvey S. Katz, CFA
