After The Close
The major U.S. stock indexes started the day to the upside, but after peaking around lunchtime, sentiment turned decidedly negative in the afternoon as investors took a shellacking.
In today’s economic news, the S&P/Case-Shiller national index showed existing home prices advancing more than expected in January, thanks to a combination of steady demand and the lowest inventories in nearly two decades. Elsewhere, the New York Conference Board reported that U.S. consumer confidence was down in March, though sentiment remained comparatively high. However, investor attention continued to focus on a potential trade war with China. Specifically, technology issues took a beating following reports that the Trump Administration was looking to restrict Chinese investments in certain sensitive technology sectors, including semiconductors and 5G wireless communications. This selective rout apparently spooked investors, triggering a widespread equity selloff in the late afternoon.
At the closing bell, the Dow Jones Industrial Average was down 345 points, or 1.4%, while the broader S&P 500 was off by 46, or 1.7%. However, the NASDAQ took the worst beating, ending down 212 points (2.9%). Among the 10 major market sectors, declining issues beat out gainers by a wide margin, led by technology (down 3.6%), consumer cyclicals (-1.7%), and financials (-1.7%). The other end of the spectrum was dominated by defensive issues, namely utilities which were up 1.1%, while telecommunications stocks were fractionally positive. Elsewhere, oil prices initially traded higher, peaking in midmorning at $66.41 a barrel, largely on hopes that OPEC and other major producers would extend their production curbs. However, light sweet crude retreated to a loss of 1.2%, to $64.74 a barrel, as concerns over rising U.S. inventories increased. Expectations are that the U.S. Energy Administration’s report tomorrow will show an increase in stockpiles in excess of 750,000 barrels.
Taking a quick look at the European bourses, we see that the mood was more upbeat today. The U.K.’s FTSE 100 and Germany’s DAX led the charge, each gaining 1.6% on the session. However, France’s CAC-40 also participated, rising 1% for the day.
– Mario Ferro
At the time of this article's writing, the author did not have positions in any of the companies mentioned.
Before The Bell
Stocks surged out of the gate yesterday following steep back-to-back losses this past Thursday and Friday, which had combined to throw the Dow Jones Industrial Average back into correction territory. On point, after that blue chip composite had lost a combined 1,150 those two days, word that China had proposed to purchase additional semiconductors from the United States, as a way of reducing that country's trade surplus with our nation, helped to mollify investors stateside. Heretofore, investors had been fearful of a looming trade war. That move by China sent stocks soaring at the open.
In all, the Dow opened with a buying burst, rising by some 500 points early on in a widespread advance taking in almost all groups. The market had expressed concerns late last week about a trade war, following the President's aggressive stance regarding China and trade. The move by the Administration had sent the bulls racing for cover during the previous two trading sessions. Elsewhere, the news has been largely supportive, with gains in existing home sales and orders for durable goods--both reports being issued last week--helping to reassure some skittish investors, at least for the moment.
As to the morning's equity trading, stocks, as noted, soared during the first minutes of trading, with the Dow's rise holding in the 500-point range through the first half hour of the session, and with the tech-driven NASDAQ joining the parade higher. The semiconductor stocks, meantime, were in the vanguard of the advance following China's indication that it would buy additional chips from the United States as a way of lessening its trade surplus with our nation. Other tech stocks also jumped, with Dow component Microsoft(MSFT – Free Microsoft Stock Report) leading the blue chips higher at that point.
The buying surge then persisted as the morning proceeded, although there was some brief slippage as we neared the noon hour in New York. Thus, after the early 500-point surge in the Dow, we saw some momentary selling that about halved the gains. As noted, though, the profit taking was brief. Indeed, as the clock struck noon, the Dow was back up over 300 points. The blue chip gain would surmount 400 points by 1:00 PM (EST) and more than 500 points as we headed into the final hour of trading. It would soon cross the 600-point barrier, and then head still during this bullish stampede.
And the market's advance was inclusive, taking in all of the 10 major equity groups, with the technology sector (up more than three percent late in the day), the financials and the recently beaten down consumer cyclical category close behind in the winner's circle. All told, the late equity trading saw advancing stocks leading declining issues by some five-to-two on the Big Board and more than two-to-one on the NASDAQ. And the buying frenzy continued into the close, as noted. It was an incredible day for the bulls, with the bears having no place to go.
When the fireworks finally concluded, the Dow was up 669 points, having momentarily just about hit the 700-point mark late in the final hour. The S&P 500 soared 70 points, meantime, and the NASDAQ, on the back of a strong tech rally, jumped 228 points, or better than 3%. In all, the blue chip composite made up all buy some 450 points of last week's late swoon. Now, the test will be to sustain the advance, with data on consumer confidence due out later this morning.
Meanwhile, a new day is now upon us, and looking out to stocks across the globe in early dealings, we see that equities were trading sharply higher in Asia overnight, on easing global trade concerns, following the U.S. market's big gains, while in Europe, the bourses are now pressing higher, as well. Elsewhere, oil, a casualty yesterday, is trading up slightly so far this morning. And Treasury note yields are passing hands at 2.85% thus far today. Finally, our equity futures are pointing to early strong gains on the trade relations improvement once live market action resumes later this morning.
– Harvey S. Katz, CFA
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
