Before The Bell
After a woeful first half of the trading session on Monday, in which the Dow Jones Industrial Average tumbled by some 950 points to well below 27,000 on economic and coronavirus concerns, the stock market spent the next session and a half trying to undo the early week damage. Leading the way back were tech names, with modest gains late Monday and Tuesday. As before, the economy was on the minds of investors, as was COVID-19, which are closely linked.
As to yesterday's action, the market started the session to the upside, buoyed by the constructive Monday close and hopes that Federal Reserve Chair, Jerome Powell would trike a hopeful note when he addressed Congress. However, those early hopes soon were dashed, as the Fed Chair suggested that he was concerned about the slow pace of the economic comeback. He opined that there was still a need for more fiscal stimulus from the government.
After that commentary, the market quickly did an about face and soon the arrows were mostly red. But this downturn was brief and shallow and by late morning and early afternoon, equities had started to recover, albeit hesitantly. True, Chair Powell did acknowledge that the economy was in a rebound, but he was quick to stress that there will be risks to employment and GDP if lawmakers cannot agree on an additional fiscal relief package.
The stock market also might have been affected by a report out early in the session on sales of existing homes. Such activity did show an uptick in August over July, but this gain was less than in the previous month and was below expectations--largely reflecting the inadequate supply of homes available for purchase. As to individual issues partaking in the day's action, shares of Amazon.com (AMZN) were nicely higher, but the stock of electric car maker Tesla (TSLA) was off sharply.
The stock market then would amble forward through the middle of the afternoon and then into the day's final minutes, with all of the major indexes rising modestly further. In all, the NASDAQ would lead the way, with a 184-point gain on strength in some high-profile tech names. The Dow Industrials, meantime, would add 140 points. Worries about the economy and the intensifying COVID-19 outbreak in Europe capped the market's latest improvement.
Now, looking ahead to the middle session, we see that shares of Dow component NIKE (NKE) were up in after hours trading last night on a profit beat. It was much the same story for KB Home (KBH). But ailing carmaker Tesla saw further selling in the extended trading hours. As to the day ahead, the latest trends in the futures suggest a strongly positive opening this morning, as the bulls, emboldened by NKE stock strive to extend yesterday's rebound.
- Harvey S. Katz, CFA
At the time of this article's writing, the author did not have positions in any of the companies mentioned.
