Before The Bell
The U.S. stock market moved nicely higher yesterday, starting the new week on Wall Street on an upbeat note. Overnight, the international markets managed to make some progress. In Asia, the Nikkei put in a strong session, while in Europe, the FTSE 100 delivered a less impressive performance. On our shores, though, the equity futures are pointing to a softer opening.
Investor sentiment remains positive, as the second-quarter earnings season continues to unfold. Many companies have fared much better than had been anticipated. However, the bar had been set very low. In fact, profits for S&P 500 companies, in aggregate, were expected to drop roughly 40% during the quarter. Among the big names to watch, Walt Disney (DIS) weighs in with its numbers today.
Meanwhile, a flurry of M&A announcements helped encourage the bulls yesterday. Specifically, Microsoft (MSFT) confirmed that it was in talks to buy the U.S. operations of China-based social media company TikTok. In addition, shares of Varian Medical Systems (VAR) surged on acquisition-related news. Finally, Alphabet’s Google (GOOG) announced a deal with security company ADT, Inc. (ADT). M&A activity is generally applauded by Wall Street. When a large company makes a purchase, it represents an investment in the future and indicates a positive outlook. Business combinations also tend to yield various synergies.
In economic news, the July employment report will be delivered at the end of this week. This item will be closely followed by investors. Currently, analysts think that roughly two million non-farm jobs were added to the economy in July, with the unemployment rate settling at about 10.5% for the month. Elsewhere, the government is trying to craft another coronavirus stimulus package, and Wall Street may be hoping that the measure will give the economy a boost.
Technically, the stock market put in a constructive showing in July. It is likely too early to tell how August will shape up. Nonetheless, the S&P 500 Index has been trading above its 200-day moving average (located near the 3,050 mark) for some time, and this may be a bullish indication. From a sector perspective, technology stocks continue to show leadership. The technology group has fared well during the pandemic, as the Internet has become an essential hub for communications and commerce.
– Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
