After The Close
Enthusiasm over Monday’s trade deal between the U.S. and Mexico spilled over into today’s session, with the S&P 500 and NASDAQ hitting new intraday highs this morning. However, profit takers moved in and stocks ended up just above breakeven.
Investors had a handful of economic data to digest today. The Conference Board reported that its index of consumer confidence increased to 133.4 in August, up from a July reading of 127.9, marking an 18-year high. Elsewhere, the S&P/Case-Shiller national index of home prices showed that prices continued to rise in June, increasing 6.2% year over year. However, the pace continued to decelerate.
At the closing bell, the Dow Jones Industrials were up 14 points, the broader S&P 500 Index was up fractionally, and the tech-heavy NASDAQ tacked on 12 points. In terms of market sectors, declining issues dominated today, led by energy (-0.9%) and telecommunications stocks (-0.5%). On the plus side, consumer cyclicals, technology, and healthcare shares squeaked out gains of less than 0.1%.
Elsewhere, light sweet crude shed about a third of a percentage point, to $68.65 a barrel, but remained near its three-year high. Oil prices have been rallying over the past 12 months, rising over 45% due to supply disruptions and U.S. sanctions on Iran.
Lastly, the major European bourses had a mixed showing. The U.K.’s FTSE 100 gained half a percentage point, while France’s CAC-40 had a more modest gain and Germany’s DAX fell slightly.
– Mario Ferro
At the time of this article's writing, the author did not have positions in any of the companies mentioned.
Before The Bell
The gains then accelerated, so that as we reached the one-half-hour mark of this latest trading session, the Dow had sprinted out to a 200-point advance on that trade optimism. The S&P 500 and the NASDAQ, already at record levels, moved further into uncharted territory. But it was the blue chip index that led the way early as it often does when there is good news on the trade front. Thus far in August, the major indexes are all holding strong increases, led by the tech-heavy NASDAQ, as the summer rally rolls along.
Meanwhile, the market is also getting a lift from reassuring comments last Friday from the Federal Reserve Chair Jerome Powell, who suggested that the lead bank would continue its gradual approach to raising interest rates as he was not yet concerned that the economy would be overheating anytime soon. His comments were taken as an indication that he feels the business expansion is strong enough to withstand efforts to normalize monetary policy. Faith in the durability of this extended upturn has been one of the hallmarks of the long market rise.
Stocks strengthened further as the morning proceeded, with the Dow crossing the 26,000 threshold, gaining better than 275 points as we headed into the afternoon. This buying stampede, which took the NASDAQ past the 8,000 mark and the S&P 500 to the edge to just short of 2,900, was broad-based. The optimism on the NAFTA front was so pervasive, meantime, that the advance continued with nary any letup. Among the big gainers on the day to that point were the car makers, which stand to gain nicely from a trade deal with Mexico.
Then, late in the day, it was announced that Mexico and the United States had, indeed, agreed to a trade pact. That progress allowed the market to retain its mid-session advance, with the leading averages all remaining near their best levels of the day. The strong showing was led by the materials and the financial stocks. Individually6, some of the better gains were tallied by Boeing (BA – Free Boeing Stock Report) and Caterpillar (CAT – Free Caterpillar Stock Report). The banks also fared well on the day. In all, with earnings for the second quarter in the rearview mirror, yesterday was all about trade and Mexico.
The strong advance would continue into the close, with the Dow finishing up with a 259-pouint surge, helping that composite to stay above 26,000. It wasn't too many weeks ago, that this composite had been below 25,000. Other strong gains were secured by the S&P 500 (up 22 points) and the NASDAQ (ahead by 72 points). But the Russell 2000 (better by three points) was a notable laggard. Breaking the advance down, we see that nine of the top ten groups were higher on the day, led by materials, energy, industrials, and technology.
Looking out at a new day now, we see that stocks were mostly higher in Asia overnight following up on the big gains in New York yesterday, while in Europe, the major bourses are showing improvement thus far this morning. Also, yields on the 10-year Treasury note, which closed yesterday at 2.85%; are still passing hands at 2.85%; oil prices are grudgingly higher; and the U.S. equity futures are suggesting a somewhat better opening when live trading resumes later on this morning. Once more, we would expect trade to be a major story.
