Before The Bell
The latest run by the bulls continued on Wall Street yesterday. That advance followed winning sessions during the first three trading days of this week. Behind this most recent upturn was optimism about the economy, hopes for the passage of a needed fiscal stimulus package by a fractured Congress, and the persistence of generally supportive quarterly earnings. It is not that such profit reports have been good; but only they have been less dire than forecast. And profit expectations often surpass profit results in importance on the Street. The big item, for much of the day, was anticipation of the jobs report (issued this morning by the Labor Department). The issuance showed that the nation added 1.8 million positions in July. (This release is discussed in more detail below.) Overall, the report was a positive one, but is unlikely to be a game changer, as far as Wall Street is concerned, as there was some loss of positive momentum.
As for the equity market yesterday, stocks started out the session groping for direction, with alternating gains and losses for the first three hours, or so, of trading. Then, as we moved more deeply into the afternoon, the buyers came out in force, as we entered the final hour of trading, the Dow Jones Industrial Average, the S&P 500, and the NASDAQ were all at session highs with the blue chips and the NASDAQ climbing further past 27,000 and 11,000, respectively. As to leaders on the day, it was once again the technology stocks.
And among those market stalwarts, it was the usual suspects namely Apple (AAPL), which topped $450 a share for the first time ever. Also up strongly was the stock of Facebook (FB). Earnings, meantime, now are playing a lesser role, as most companies in the S&P 500 have issued their quarterly results and a majority of them have done a bit better than forecast, although earnings are down in the aggregate. As August advances, the poorly performing retailers will report, and here the results may be less welcoming.
In other news, the economy was out front once again, and yesterday morning it was the weekly report on first- time unemployment claims. Expectations had been for a fairly stable reading of 1.4 million filings. Instead, the number came in at 1.2 million--a welcome surprise. That result preceded by one day the just-released report on employment and unemployment for July (see below). Finally, there was Washington, where the two sides remain far apart on reaching a stimulus deal as we go to press this morning.
Regarding the late trading, the market continued to trend upward into the close, with the indexes all ending the trading day at or very near session highs, with the 110-point rise in the NASDAQ being out front on a percentage basis. After the close and last evening, the futures were trading with little movement. Now, this morning, with the just issued jobs report showing that the nation created 1.8 million positions last month, a bit more than the 1.5 million consensus forecast, the futures have narrowed their losses a little.
In other aspects of the report, the Labor Department noted that the jobless rate fell from 11.1% in June to 10.2% in July. The labor-force participation rate, meantime, came in at a lackluster 61.4%., which was little changed from the month before. Also, jobs gains were notable in retail trade, manufacturing, and healthcare, as more of the country reopened in spite of the acceleration in COVID-19 cases. Finally, revisions in job gains were positive in May but negative in June, while average hourly wages crept up modestly.
All in all, this was a solid, but not memorable, report that does not figure to be a major market mover in the hours ahead. Negotiations in Washington and the latest deterioration in our relations with China could well take center stage today.
– Harvey S. Katz, CFA
At the time of this article's report, the author had positions in AAPL.
