Before The Bell
Once again, Thursday’s session started with the stock market moving selectively higher. In all, the early advance yesterday made it four times in as many days this week that equities generally posted morning gains. But yesterday, it was the tech-heavy NASDAQ and to a degree the S&P 500 Index that showed the initial strength. The Dow Jones Industrial Average, which was weighed down by a sharp drop in shares of Cisco Systems (CSCO), moved lower by contrast. The company saw its stock fall 11% after issuing a weak earnings forecast for the current quarter.
But it was more than earnings that preoccupied the Street yesterday and it will likely be the same story today. In the spotlight during the latest session, the U.S. Labor Department reported that first-time jobless claims fell by less than one million in the latest week for the first time since March. Still, job losses remain uncomfortably high. Also, in the news was the continuing stalemate in Congress over a new stimulus package. Recently, in order to break the deadlock, the President has taken executive action to pass short-term measures.
Now, this morning, we would expect the goings on in both Washington and the economy to play large roles in the trading day, with earnings season just about over. On the docket today as far as the economy is concerned, will be reports on consumer sentiment and industrial production. Overall, with the third quarter about half over, our thinking is that there will be a return to GDP growth in the period, with output likely to jump by as much as 20%. Note, though, that after a 32.9% plunge in output in the second period, such a gain would be off a very low base.
Meanwhile, as far as yesterday was concerned, an early flurry on the technology side, which saw big gains in such stalwarts as Apple (AAPL) and Tesla (TSLA), would propel the NASDAQ to a session-best advance of 112 points. But it would give back much of that advance in the afternoon. The Dow, under pressure from a handful of stocks, including the aforementioned Cisco, could not mount any charge and stayed in the loss column throughout the day, finally closing down 80 points. All told, it was a mixed session by the close.
Now, the week’s final session is about to get under way. To start, we saw that in after-hours trading last evening, that shares of Applied Materials (AMAT) rose modestly after the company posted better-than-expected quarterly earnings. As for the dealings in Washington, the two sides appear to still be far apart and the Senate is scheduled to go on vacation later today. So, unless there are last-minute agreements, the process could be held over until September.
Finally, in data just out, the government reported that retail sales rose by 1.2% in July. That was about half the expected gain of 1.9% and was well below the increases tabulated in May and June. However, if we strip autos out of the mix, the uptick was stronger than expected with an advance of 1.9% versus the forecast of 1.2%. So it was a mixed issuance, on balance. As for today's doings on Wall Street, the early read on the futures is likewise mixed with the Dow pointing to an opening loss and the NASDAQ a gain.
- Harvey S. Katz, CFA
At the time of this article's writing, the author had positions in AAPL.
