After The Close
The stock market started the day lower, owing to negative assessments about the economic outlook in Great Britain. This was partially due to an increased likelihood that the country may take a “hard Brexit” approach to dissolving its relationship with the European Union. The U.S. dollar surged against the British pound, further causing the indices to move lower. However, this action was partially mitigated when solid durable goods orders for February were reported. This caused the market to open just under yesterday’s close. However, a weak earnings report from Walgreens Boots Alliance (WBA – Free Walgreens Stock Report) led the Dow Jones Industrial Average to fall by as many as 136 points in the early moments of trading, while the other indices fell in tandem. After hitting this low, the Dow trended in a sideways fashion for much of the day, while the other composites recovered all of the prior losses. All told, the Dow closed the day down 79 points, while the S&P 500 was flat, and the tech-heavy NASDAQ index was up almost 20 points.
Note that today’s trading marks a change in the membership of the Dow Jones Industrial Average.DowDuPont (DWDP – Free DowDuPont Stock Report) completed its spinoff of Dow, Inc. (DOW), which took its constituency in the aforementioned index.
Additionally, market breadth was slightly negative in the early portion of the day, as decliners outpaced advancers by a 1.3-to-1.0 ratio. However, this ratio closed near even by the end of the session. Communications stocks were among the strongest performers today, while energy issues were among the weakest. This is somewhat surprising, given the positive price action in the related commodities.
In commodity news, crude oil prices were higher today, as supply concerns caused positive price action. Meantime, U.S. Treasury bond yields were lower across the board as a flight to safe-haven assets occurred. However, the VIX Volatility Index decreased as demand for options protection declined.
Looking ahead, tomorrow’s economic slate is somewhat bereft of scheduled reports, and the major highlight will be the Energy Information Administration’s weekly report on crude oil inventories. In addition, the earnings docket is quite empty, as the market will wait for earnings season to kick off in earnest. This suggests that tomorrow’s trading will be based on changes in sentiment and any news that breaks.
- John E. Seibert III
At the time of this article’s writing, the author had positions in DowDuPont (DWDP) and Dow, Inc. (DOW).
Before The Bell
A surprisingly good report on industrial activity in China and indications of some further progress on the trade front with that nation helped the stock market get off on the right foot yesterday, thereby extending the strong equity rally into the first day of the new month and new quarter. This further early rise followed the best first quarter for the stock market in two decades and the best quarterly showing altogether since 2009, with the key indexes scoring double-digit percentage wins for the period.
This early market rise, which quickly saw the Dow Jones Industrial Average surge by more than 200 points, came in spite of some rather dour tidings on February retail sales. On point, that metric fell 0.2% on a consecutive-month basis, with notable declines in sales at clothing dealers, department store chain, and at building supplies outlets, offset by a solid gain at on-line merchandisers. That report, which had been delayed somewhat by the earlier government shutdown, is a somewhat older issuance, and thus had little apparent bearing on the market.
The big stories, however, were about China's surprising economic strength and the optimism on trade. Hopes on the latter front, in fact, had been instrumental in propelling stocks strongly higher in the first quarter. So, not surprisingly, the market's rally continued with the Dow's morning gain pushing past the 200-point level on the way to even more sizable increases later on in the morning and nearly afternoon. It was a strong en route to what would be another wire-to-wire win for the bulls.
Meanwhile, after this unimposing retail report, the Institute for Supply Management reported that manufacturing activity had increased a bit more strongly in March than in February, but that even with this modest increase in the ISM Index, activity levels remained well below the strong pace of 2018 and the opening month of this year. But just the small further uptick was what the Street wanted, especially with both new orders and prices both on the mend. Thus, the market continued to climb, with the Dow's advance surpassing 300 points by mid-afternoon.
The gains then continued into the late afternoon, with the Dow continuing its upward move finally closing at a near-session-best gain of 330 points. The NASDAQ on a late run, added 100 points, while the S&P 500 Index rose 33 points, climbing closer to the 2,900 mark. For the Dow, the gain brought that composite up above 26,000. Most sectors saw gains, including the small-cap Russell 2000, while nearly all equity categories gained. One group that did not participate was the food processors, which saw modest losses in several issues.
Now, a new day begins and with the first day of April having been a stellar one, we see that stocks were generally higher in Asia overnight. In Europe, meantime, the chief composites are climbing, as well, so far this morning, In other markets, oil prices are up, hitting a 2019 high in the process and Treasury note yields, up sharply to 2.50% yesterday on the 10-year note, are now passing hands at 2.47%. Finally, after a news-driven session yesterday, the U.S. equity futures are showing little early change.
– Harvey S. Katz, CFA
