Before The Bell
Wall Street tried to resume its latest bull market advance yesterday, after a one-day hiatus, but found the going somewhat difficult at the outset. On point, after the first hour, or so, of trading, the Dow Jones Industrial Average was off about 165 points. The other indexes were in retreat, as well. On Wednesday, readers will recall, the key averages had finished lower after the Federal Reserve released the minutes from its late-July FOMC get together. In that issuance, the central bank had opined that it was increasingly worried about the economy.
Specifically, the Fed said that it was concerned that the still-spreading COVID-19 pandemic was putting pressure on economic growth. So, stocks wilted. Yesterday, it was less a case of continued concerns about the Fed and more about further signs of economic softness that led to the early selling. Specifically, one hour before the start of the new trading day, the U.S. Labor Department reported that weekly jobless claims had risen back above one million. It was just a week before that filings had come in under one million. Now, we were back at 1.1 million.
In addition to new weekly jobless claims, the Conference Board issued its Index of leading Economic Indicators. That metric, which helps predict the future course of business activity, showed a modest 1.4% rise in July. That was less than half the respective increases of 3.1% and 3.0% in May and June. The stock market was hardly overjoyed by that issuance. Nevertheless, after its brief early downtick, the market shifted gears and began to improve as we neared the noon hour in New York.
In fact, as the afternoon began, so did the Street's comeback, although the turnaround remained muted for the balance of the afternoon. When all of the numbers were in, the Dow would finish up by 47 points; the S&P 500 would add 11 points, but remain short of 3,400; and the NASDAQ, boosted by notable advances in tech names Apple (AAPL) and Tesla (TSLA), would climb 118 points. In all, the NASDAQ would edge close to 11,300. Traders, it would appear, are content with the Fed's low-interest-rate stance and the likelihood of more fiscal stimulus.
On the whole, the stock market's latest show of strength (particularly the NASDAQ) reflected ongoing strength in tech, which helped offset worries about the economy. It has been such economic concerns, which increased yesterday after the data on jobless claims (which suggested that the rolling business shutdowns could reverse earlier employment gains) and the leading indicators were released, that have held the Dow back in recent days. The economy is clearly mixed and upcoming data will be critical.
Looking ahead to the final session of the week, and after modest gains yesterday, we see that the early read on the equity futures is pointing to a slight retreat at the open.
– Harvey S. Katz, CFA
At the time of this article's writing, the author had positions in AAPL.
