Before The Bell
The stock market started positively yesterday, as sentiment improved concerning the coronavirus pandemic. Several news reports suggested that a vaccine was closer to being a reality than previously expected, which would help the economy recover faster. However, the indices spent most of the day trading in a sideways fashion, not moving too far in either direction after the initial move up. However, the day ended with a strong rally, as several indices reached all-time highs. The Dow Jones Industrial Average concluded the day up 378 points, while the S&P 500 finished higher by 34 points. Meantime, market breadth was decidedly positive yesterday, as advancers outpaced decliners by a 2.5-to-1.0 ratio. Moreover, energy issues were some of the strongest on the day, while healthcare equities were among the weakest.
Looking ahead, the futures markets also started positively and continued to gain throughout the night. At around midnight, the Dow futures were up 160 points on the Dow, and the S&P was up 17 points. In the early morning, the indices had given up only a small portion of that positive move, suggesting a strong start to the day.
Meanwhile, there was a significant change in the constituency of the Dow Jones Industrial Average that was announced after the closing bell yesterday. Specifically, Amgen (AMGN), salesforce.com (CRM), and Honeywell International (HON) will be added to the index, while Exxon Mobil (XOM), Pfizer (PFE), and Raytheon Technologies (RTX) will be removed. Dow-30 component Apple (AAPL) had already announced a 4-for-1 stock split. This move reduced the weighting of technology issues that make up the price-weighted Dow index. Changes to the Dow’s component list are somewhat rare, as the last time this occurred was in 2018. Additionally, this marks Honeywell International’s rejoining that index after being removed in 2008.
Looking to the rest of the week, all eyes will be on U.S. Federal Reserve Chairman Powell’s Jackson Hole speech on Thursday. Early reports suggest that this will involve a change in the Federal Reserve’s target inflation rate. Meantime, several economic reports will be released in the morning today, such as the August Consumer Sentiment Index and the Case-Shiller Housing Price Index. Finally, several key earnings reports this week should show how the economy performed in the second quarter and its trends going forward. Overall, we think most traders will be paying attention to earnings and economic reports today.
- John E. Seibert III
At the time of this article’s writing, the author held positions in one or more of the companies mentioned.
