Before The Bell
Wall Street began yesterday's session, following a weaker performance on Wednesday, with some early losses, especially in the Dow Jones Industrial Average. The initial pullback, which would carry the blue chips to a loss of close to 300 points in the first half hour, came on the heels of the release of some disheartening economic news. First, the Commerce Department reported that housing starts had tumbled 22.3% in May, while building permits, a more forward-looking metric, fell just 6.8%.
More worrisome, and perhaps more indicative of the current dour business outlook, would be the Labor Department's data showing that unemployment claims had swelled by 5.245 million in the latest week. That was the fourth staggering increase in as many weeks. In all, the job losses in that relatively brief span total 22.025 million. That loss nearly matches the 22.442 million positions added since the end of the last recession in 2009. In the meantime, the latest tally was modestly above the forecast loss of 5.1 million jobs.
The weak jobs number was an offsetting influence on market trading with the Administration's efforts to restart at least part of the economy in the next few weeks. Meantime, as the morning moved along, the bulls would begin to make their move, and as we passed the 90-minute trading mark, the Dow had erased nearly all of its early losses, while the NASDAQ, which had been in the plus column almost throughout the morning was adding to its initial gains, and was boasting a 125-point advance on strength in technology.
All the while, first-quarter earnings continued to come out and, for the most part, they were not making good reading, with Morgan Stanley (MS) among the headline casualties, as the investment banking giant reported a drop in earnings and warned of more difficult times ahead. Then, as the afternoon began, the bears returned to take the reins, albeit very briefly, as the Dow again fell to near session lows. But that was a short-lived affair, and stocks continued their recovery through the remainder of the afternoon.
The comeback would be led by the NASDAQ, with a 100-point surge in shares of Amazon.com (AMZN) leading the group. That behemoth, now selling for $2,400 a share, is benefiting from the inability of consumers to shop off line. Shares of Netflix (NFLX) also gained, as many more Americans, unable to attend movies or shows, are opting for movies at home. In all, the Dow would climb just 33 points, but the NASDAQ would surge by 139 points and the S&P 500 would add 16 points. Small caps would lag, however, with the Russell 2000 easing a bit.
Now, the week concludes, and after yesterday's volatility and key housing news, the day ahead should bring more earnings reports and further market gyrations. To this point, the indications are that stocks will open strongly to the upside on better-than-expected GDP data out of China and on encouraging drug possibilities on the COVID-19 front from Giliead (GILD) when trading resumes. One data point to watch for in the coming minutes will be the report on the leading economic indicators.
- Harvey S. Katz, CFA
At the time of this article's writing, the author did not have positions in any of the companies mentioned.
