Before The Bell
The bulls massed once more yesterday morning as they tried to extend the latest string of all-time records for the S&P 500 Index and the NASDAQ. And once more, they were initially successful, as the Dow got off to a solid start with the blue chips pushing ahead by more than 140 points in the first half hour of trading. The S&P 500 also was in the green, with that index once more edging up to just under 3,400 as the noon hour arrived. The NASDAQ, in the meantime, pushed back into positive territory after an early dip into the red.
All told, the Dow was ahead by 65 points as noon arrived in New York; the S&P 500 was better by seven points; and the NASDAQ was up by 35 points. The standout performer at that time was the small-cap Russell 2000, which was up 15 points after dipping by about that much on Tuesday. The moderate uptrend then would continue into the 2:00 PM (EDT) hour. At that time, the Federal Reserve would release the minutes from its most recent FOMC meeting. That issuance, normally a non-event, unleashed some modest selling this time around.
As for the minutes, the Federal Reserve policymaking body expressed concern about the coronavirus's continuing impact on the nation's economy. The stock market reacted negatively to the downbeat business outlook and some negative comments about the yield curve, sending stocks and bond yields lower and the dollar higher Fed officials also discussed so-called outcome-based forward guidance on inflation and unemployment. Overall, the lead bank issued a sobering assessment of the economic backdrop and the need for more fiscal assistance.
As to specifics, the Fed said that most banks are in strong shape, but it did express worry about burgeoning levels of public debt. Regarding the stock market, the averages turned abruptly and headed lower just after the release of the minutes. And, despite several attempts to rally anew would end the session modestly in the minus column. All told, the Dow would lose 85 points; the S&P 500 Index would ease 15 points; and the tech-driven NASDAQ would end off by 64 points.
Meanwhile, in other news, retailer Lowe's Companies (LOW) posted strong second-quarter earnings that easily surpassed the prior year's results and expectations. Also, in after-hours trading, shares of giant chipmaker Intel (INTC) rose about 4% after the Dow-30 component announced a major share-buyback plan. Further of note, the new day will see the release of data on the leading economic indicators for July. In June, we saw a 2.0% increase; forecasts for July are for a gain that is half as large.
Finally, after yesterday's weaker close, and some slight easing in the futures last evening, the current read on the market this morning is for small early losses.
– Harvey S. Katz, CFA
At the time of this article's writing, the author had positions in INTC.
