Before The Bell
After a strong start to the new trading week on Wall Street on Monday, as equity investors looked forward to the selective re-opening of the country, stocks moved out to further gains in early dealings yesterday morning. Once more, it was cautious optimism on the reopening front, as states such as Georgia, South Carolina, and Texas commence the reopening process. Constructive earnings results from health care giants such as Merck (MRK) and Pfizer (PFE) also helped the bullish cause, as the Dow Jones Industrial Average went out to nearly a 400-point first-hour advance.
The early improvement came in spite of the fact that the Conference Board issued its key survey on Consumer Confidence a half hour into the trading day. That pivotal release showed a marked descent for April, falling from a downwardly revised 118.8 reading in March to just 86.9 during this month. The sizable drop reflected the rapid and deadly spread of the novel coronavirus, which disrupted economic activity and threw more than 26 million Americans out of work. The April result was a bit worse than forecast.
Meanwhile, back on Wall Street, the stock market's early celebration would be short-lived, with the Dow, the S&P 500, and especially the NASDAQ all going negative shortly before 11:00 AM (EDT). Then, after a brief respite, the Dow and the S&P would edge back into the black as further selling ensued, so that as we passed the noon hour in New York, all three of the large-cap indexes were in negative territory. The NASDAQ was particularly hit hard with the tech-laden composite falling back by 100 points in early afternoon.
The sharp drop in the NASDAQ was led by such high-profile issues as Netflix (NFLX) and Amazon (AMZN). This mid-session reversal came after the Dow Industrials had closed above 24,000 on Monday for the first time in some 10 days. These gains--with April showing a healthy aggregate advance-- reflect building optimism on the disease front. This positive sentiment, however, could quickly reverse should there be another disease flare-up following the reopening of certain states.
The market then would continue to meander about into the early and middle of the afternoon, as the Federal Reserve would be holding its latest FOMC meeting, which will conclude this afternoon. With interest rates already historically low, investors will be assessing what the bank has to say about other means at its disposal to possibly get the economy back on track. However, our sense is that most moves to come will be on the fiscal side, with further government programs likely to be adopted by the Congress in the coming weeks.
Then, after modest firming into the final hour of trading, with the Dow heading back up by more than 100 points, the principal indexes eased back into the close, with all three of the large-cap composites finally ending matters in the red. The declines in the Dow (32 points) and the S&P 500 (15 points) were modest, while the NASDAQ's loss of 122 points was sizable reflecting the steep setbacks in several large-cap tech issues. Meantime, the Fed is continuing with its meeting and we will get the results of that confab later today. As for the day ahead, the futures are signaling a nicely higher opening when trading resumes later this morning.
— Harvey S. Katz, CFA
At the time of this article's writing, the author had positions in PFE.
