After The Close
The market started trading quite positively today, aided by solid price action from Dow-30 component Boeing (BA – Free Boeing Stock Report). This helped the Dow Jones Industrial Average climb more than 170 points in the early portion of trading, while the other composites marched higher in tandem. Then, the market reached an overbought condition, and started to slip in the second half of the day. The S&P 500 was in the red for a spell. However, the markets regained some of their early steam, and attempted to record new highs for the day. This move nearly succeeded on the Dow, but not the NASDAQ. All told, the Dow was higher by 167 points, the S&P 500 was ahead six points, but the NASDAQ slipped almost four points.
Additionally, market breadth was quite positive, as advancers outpaced decliners by a 1.7-to-1.0 ratio. Materials stocks were among the best performers on the day, while Technology issues were among the weakest.
In commodity news, oil prices on Brent crude rose past $70 per barrel today, topping the prior five-month high. Lower global supplies and increased demand forecasts have caused the price to rise in recent months. Meantime, U.S. Treasury bond yields were slightly lower, as demand increased for the safe-haven assets. The VIX Volatility Index fell, as sellers outnumbered buyers for options protection.
Looking ahead, all eyes will likely be on the nonfarm-payroll report tomorrow. This issuance states how many jobs were added in March. In addition, last month’s unemployment rate will be recorded, and these two releases should somewhat be indicative of U.S. economic health. The earnings docket is a lot emptier, but earnings season will kick off in earnest over the next few weeks. For now, we expect trading to focus on the key economic figures as well as progress with China on trade.
- John E. Seibert III
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before The Bell
The stock market resumed its upward climb yesterday, gaining nicely from the start of the trading session on optimism that a trade deal with China would get done sooner than later. However, the initial optimism was dented somewhat by some weak payroll data and by a disappointing report on non-manufacturing activity. In the case of the payroll data, ADP (ADP) noted that private payrolls rose by 129,000 last month, which was well below the expectation of a 173,000 increase. At the same time, the services sector came in with a softer-than-forecast reading on non-manufacturing activity in March.
With regard to the latter, the Institute for Supply Management survey came in at 56.1 in March. Although that was solidly in the expansion category, it was a reading that was below the February tally and less than forecasts. Other components in the aggregate survey slowed their advance as well, including production, new orders, deliveries, and exports. But employment strengthened in the past month. In all, this was the weakest reading in more than a year. That release, coming a half hour into the morning's market session, slowed the advance temporarily.
By late morning, however, the upturn was back on stronger footing, as the optimism on a trade understanding had managed to overcome some concerns about slowing economic improvement. In all, as we headed into the first part of the afternoon, the Dow Jones Industrial average was back up by a hundred or so points, while a proportionately stronger advance was being put in by the tech-heavy NASDAQ. The equity market was being boosted by strength in technology, with the semiconductors in the lead within that key sector.
Then, following that mid-session spurt by the averages, the market's gains withered for a stretch, with the Dow actually going a bit negative as we entered the final hour of trading. However, after four straight days of gains in the S&P 500 Index, investors were reluctant to sell aggressively on the rising probability that a trade understanding can be reached between the United States and China. Overall, the day's gains were continuing to be led by the materials and technology stocks. One issue that did not become engaged on the upside yesterday was Boeing (BA - Free Boeing Stock Report), which slid more than one percent late in the day.
Meanwhile, one possible reason for the late fade is the possibility that a trade deal may already be factored into the elevated level of the equity market. As for a deal, our sense is that one will be forthcoming, but the need is for one of the two parties to blink first. Neither seems intent on doing that just yet. Still, there's enough hope that after the late pause, the market started to strengthen anew into the close, with the Dow coming back onto the plus side of the ledger as the final bell sounded. All told, the Dow would end up by 39 points, while the S&P 500 and the NASDAQ would advance by six and 37 points, respectively.
Looking out on a new day and one session ahead of the critical U.S. employment report, in which our nation was expected to have added 170,000 jobs, we see that shares on Asia were mixed in the overnight hours, while in Europe, the principal bourses are tracking a little lower on weak metrics out of Germany thus far this morning. Elsewhere, oil prices are edging downward in early dealings, while Treasury note yields, which edged a little higher yesterday, are backing off slightly thus far in early trading today. Finally, the U.S. equity futures now are doing little of note in the pre-market hours this morning.
– Harvey S. Katz, CFA
