After The Bell
After opening the day deep in the red, the major U.S. indexes stormed back into Wednesday afternoon. The initial selloff stemmed from concerns over swelling tensions between the United States and China, with the latter announcing last night that it is implementing tariffs on 106 more American goods, including cars and soybeans. The potential consequences of a full-fledged trade war are yet unknown, but some investors worry that they could impact jobs, inflation, and monetary policy. But while the Dow Jones Industrial Average had fallen more than 500 points at its morning nadir, sentiment turned as the day wore on.
Indeed, the three large-cap composites (as well as the small cap Russell 2000) all surged well above yesterday’s closing price after the early morning plummet. The NASDAQ 100 led the way, adding 101 points. The S&P 500 and Dow were also considerably higher, with the latter expanding by some 230 points. The resurgent pattern was broad-based in nature, though consumer goods (both cyclical and non-), healthcare, and technology stocks were especially strong. By the closing bell, each of the market sectors was in positive territory for the day, with advancing shares roughly doubling declining issues.
In addition to traders once again taking advantage of oversold valuations, the rebound was supported by a favorable jobs report from Automatic Data Processing (ADP). The payroll processor reported that U.S. businesses added 241,000 positions in March, well above the consensus expectation of 205,000. Particular strength was noted within the professional services, healthcare, and utilities markets, among others. On Friday morning, the Labor Department will weigh in on the job market with its nonfarm payroll update. Analysts expect around 173,000 jobs to be added.
Looking ahead, ongoing updates on trade, technology, and Friday’s jobs report will be the primary factors that determine how the rest of the week wraps up. One virtual certainty is that volatility will persist as investors grapple over myriad economic and political developments ahead of next week’s first batch of quarterly earnings. Stay tuned.
– Robert Harrington
At the time of this article’s writing, the author did not hold positions in any of the companies mentioned.
Before The Bell
Following a woeful start to the week and the second quarter, in which worries about technology and possible trade disputes had pummeled the major equity averages, stocks attempted to recoup part of that Monday setback. And they did meet with success in that endeavor, with the averages all moving ahead nicely during the morning. In all, the Dow Jones Industrial Average, a 459-point casualty on the first trading day of the quarter--after having fallen by more than 750 points earlier in the day--rebounded by over 250 points late yesterday morning, before fading near noon to conclude the first part of the day with a gain of some 130 points.
The rebound yesterday morning came as technology made a partial recovery from an oversold condition. In fact, so steep were the Monday losses that the Dow moved more strongly into correction territory; the S&P 500 Index entered that undesirable locale; and the NASDAQ surrendered its gains for the year. All told, the blue chip composite started yesterday off by 4.3% for the year, with the S&P 500 Index being close behind on the negative scale. As for yesterday's stronger start, some of the major tech names, including the much-battered Amazon (AMZN), were up modestly in the early going.
However, with the President continuing to heavily criticize Amazon, it remained a volatile issue rising and falling in alternating buy and sell programs. As for technology, this sector had been the leader on the Street, with three of the top four Dow stocks in the opening period coming from that sector, as well as fully five of the top 10. But some market watchers and traders are reassessing their positions, and the stocks have fallen back sharply, in response. Meantime, as the afternoon moved into gear, the stock market retained its higher bias, with the Dow out front on the comeback trail.
The modest gains then persisted through the middle of the afternoon, with the Dow's advance mostly staying in the 100-200-point range. The other indexes also tracked somewhat higher, albeit below their best levels of the day to that time. As to the overall tone of the advance, nine of the 10 leading equity groups were higher in mid-afternoon, with energy leading the way on increasing oil prices, and with technology the lone casualty. Meanwhile, gaining stocks led declining issues by a healthy nine-to-five margin on both the Big Board and the NASDAQ, as the bulls continued to wrest the reins from the recently triumphant bears.
Then, as we moved inside the final hour of the session, the bulls started to storm ahead, sending the Dow to a late-afternoon gain of 400 points, almost matching the sharp drop the day before. However, the S&P 500 and the NASDAQ's gains remained well shy of equaling the prior session's losses. A nice comeback in tech helped the late-day gains. At the close, the Dow managed to retain 389 of its late-day 400-point advance, while the S&P 500 and the NASDAQ also held onto much of their advance. All in all, it was a nice comeback for the bulls, as what may well be a volatile second quarter gets under way.
Looking out to the middle trading day of the week, and ahead of a critical release on non-manufacturing activity from the Institute for Supply Management, we see that stocks were mixed in Asia overnight, following the late-day fireworks on our shore. However, stocks are now lower in Europe thus far this morning on renewed trade war worries between the United States and China. Also, oil, a moderate gainer yesterday, is seeing some selling action this morning on crude stock build fears, while Treasury note yields, which moved up to 2.78% yesterday, are passing hands at 2.76% at this time. Finally, U.S. futures are plunging after yesterday's big comeback following word that China has just slapped tariffs on 106 U.S. products, including cars and chemicals. So, we would expect to see more volatility in the hours to come.
– Harvey S. Katz, CFA
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
