Before The Bell
It was a new day on Wall Street yesterday and for one morning, at least, a slightly revised mood. So, after the stock market went roaring ahead on Monday, with the Dow Jones Industrial Average surging past 28,000 once more, the equity futures suggested a somewhat higher opening for much of the pre-market session. Accordingly, stocks got out of the gate quickly. But the sellers entered the fray soon thereafter, and as the morning ended in New York, the blue chip index, which had been reconfigured notably after the close on Monday, was off by some 190 points.
What changed things, besides some overdue profit taking in a pricey market? The big news item yesterday morning came from the economic front, where the Conference Board, a private-based research group, reported that its consumer confidence survey had fallen rather sharply in August, the second month in succession that this sentiment barometer had declined. In all, the confidence index is at a six-year low. Behind the latest shortfall were concerns about the availability of jobs and the overall health of the economy. On the other hand, data showed that new home sales had jumped in July.
Beyond this mixed economic performance, the equity market was being somewhat influenced by the changes in the Dow's composition, which had been announced after the close of trading on Monday, but not implemented just yet. Specifically, three stocks were added. One of them, the diversified manufacturer Honeywell (HON) was returning to the index. Also entering the index were salesforce.com (CRM) and the biotech giant Amgen (AMGN). They are replacing, respectively, Raytheon Technologies (RTX), oil behemoth Exxon Mobil (XOM), and the drug maker Pfizer (PFE).
Not surprisingly, the three additions would rise in price on the day, while the trio departing the Dow would falter. Meanwhile, in other news, data out yesterday indicated that home prices continued to rise in June, as more Americans are now facing an affordability crunch. Buyer enthusiasm, along with a low supply of availability of properties on the market, are contributing to the price increases and the rise in new home sales. As to the equity market, prices started to improve as the afternoon proceeded, and by the close, the S&P 500 Index and the NASDAQ were higher, with only the Dow off modestly.
In sum, the market continues to be helped by a supportive Federal Reserve, by generally positive news on COVID-19, as the level of new infections continues to go down and by expectations of a vaccine and/or a treatment for the disease rise. Also, investors are looking to later in the week when central bank Chair Jerome Powell will be giving his take on the U.S. economic outlook. Overall, as we look ahead to the final two sessions of the week, the mood on the Street still is positive, so we would not be surprised to see additional strength going forward.
As to the new day, we see that the early read on the stock market on our shores is rather mixed, with the NASDAQ suggesting additional strength, but the Dow showing little movement.
– Harvey S. Katz, CFA
At the time of this article's writing, the author had positions in PFE.
