After The Close
The market started positively today, aided by strong earnings results across a few large companies. Indeed, Dow-component Walgreens Boots Alliance (WBA – Free Walgreens Stock Report) was higher in the early moments of the trading session. Too, the White House hinted that Phase One of the trade deal with China could be signed next month. These factors encouraged a broad stock market rally to occur, and the S&P 500 reached an all-time high within the first few minutes of trading. Though the Dow Jones Industrial Average and NASDAQ followed the move upward, those composites remained a few hundred points from reaching new highs. The market trended sideways throughout much of the day, not moving far from the day’s highs. All told, the Dow closed higher by 133 points, the S&P 500 was up 17 points, and the NASDAQ was better by 83 points.
In general, market breadth was directionless, as advancers and decliners were about even. Technology stocks were among the best performers on the day, while utility equities were among the weakest. An increase in interest rates hurt the latter.
In commodity news, oil prices were lower today, as sentiment declined concerning future demand. Meantime, the U.S. Treasury bond yields were mostly higher, as traders moved away from the safe-haven asset. Still, this may be posturing before the Fed meeting on Wednesday. The VIX Volatility Index was lower today, as demand for options protection fell a bit.
Looking ahead, all eyes will likely be on the U.S. Federal Reserve this week, as it is slated to release its interest-rate policy and accompanying statement on Wednesday. Traders are currently pricing in a 25-basis-point cut, but with the stock market at all-time highs, this could be an uncertain proposition. Too, consumer confidence for October will be released.
Meantime, the earnings season will continue in full tomorrow, with Dow-components Pfizer (PFE – Free Pfizer Stock Report) and Merck (MRK – Free Merck Stock Report) slated to report earnings results before the opening bell. All told, we think Tuesday’s session will be driven by earnings results released in the next 24 hours.
– John E. Seibert III
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before The Bell
The most recent five-day stretch of trading on Wall Street went to the bulls. Investors seemed to look past another round of lackluster data on the economy, including a pullback in existing home sales, and instead concentrate on a heavy dose of earnings news led by more than 10 reports from Dow-30 components. In general third-quarter earnings season, which included data on more than 100 S&P 500 companies last week, has proven supportive for equities, with the major equity averages pushing to near record highs.
On Friday, earnings new was again the main focus of Wall Street, and, for the most part, the reports made for good readings. The headline report came after the closed of trading on Thursday, when chip-making giant Intel (INTC – Free Intel Stock Report) reported better-than-expected quarterly results and raised its full-year guidance. The Intel data, along with solid reports from fellow Dow-30 components Verizon Communications (VZ – Free Verizon Stock Report) and Visa (V – Free Visa Stock Report), offset uninspiring quarterly reports from AB InBev ADR (BUD) and Amazon.com (AMZN) and gave a boost to both the Dow Jones Industrial Average and the technology dominated NASDAQ Composite. Those two indexes produced respective advances of 153 and 57 points and were matched by similar percentage gains from the S&P 500 Index (up 12points) and the small-cap Russell 2000 (up eight points). The broader S&P 500 Index hit an all-time high during Friday’s bullish session, which saw the majority of the 10 major equity groups finish with up arrows and advancing issues outpaced decliners by a comfortable margin on both the Big Board and the NASDAQ. The leadership came from the basic materials, technology and energy sectors, while the more-defensive groups were out of favor as investors added riskier assets to their portfolios.
Turning to the week at hand, it promises to be a very busy one for Wall Street. Investors will be greeted by another heavy dose of earnings reports, with data due from six more Dow-30 companies, including technology behemoth Apple (AAPL – Free Apple Stock Report). This morning, Walgreens Boots Alliance (WBA – Free Walgreens Boots Alliance Stock Report) continue the positive momentum, as the drugstore chain reported a better-than-expected quarterly profit. The Dow-30 component benefited from higher prices for branded drugs and an increase in prescription volume. The stock is pointing higher and giving a boost to the Dow futures in pre-market action. As noted, the earnings news has so far proved supportive for stocks, and we don’t expect that to change much this week. We will also get some major reports from the business beat, including the first estimate of third-quarter GDP from the Commerce Department. The expectation is that growth slowed in the three-month interim, hurt by a weakening global economy and trade disputes. In addition to the GDP reading, we will get reports on personal income and spending, manufacturing activity, and the latest report on the labor market (this Friday). All of this data have the potential to drive trading in combination with the heavy slate of earnings news. That said ...
The biggest event this week may come on Wednesday, when the Federal Reserve issues its monetary policy statement at 2:00 P.M. (EDT). The monetary policy decision comes after the conclusion of the two-day FOMC meeting, which commences tomorrow morning. The investment community will be waiting to see if the central bank cuts interest rates again this month in an effort to support continued economic growth, which has indeed shown some signs of fatigue lately. The consensus is that further monetary loosen is very much in play this week. In recent years, trading has been mostly contained in the days leading up to the Fed’s decision , and even with the plethora of earnings news we would not be surprised if that continues especially with a number of the important reports from the business beat (including employment and unemployment figures) coming late in the five-day stretch.
With less than an hour to go before the commencement of what promises to be a busy trading week for Wall Street, the equity futures are pointing to a modestly higher opening for the U.S. stock market. Investors are clearly happy with the recent earnings news and are continuing to add more risk to their portfolio. Hence, the related decline in bond prices in recent trading sessions. So far overseas, the trading has been positive. The main indexes in Asia finished higher overnight, while the major European bourses are now in positive territory as trading moves into the back half of the session on the Continent.
– William G. Ferguson
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
