Before The Bell
The stock market started in the green yesterday, as a few retailing names reported strong first-quarter results. Dow-Component Walmart (WMT) recorded better-than-expected results, and its stock moved higher in the first moments of the trading session. Likewise, The Home Depot (HD) posted impressive results, suggesting that consumers are in a good position and have been using their stimulus checks. However, the indices quickly gave up their gains and trended sideways for most of the session. The market broke lower and traded well into the red in the final hour, ending not too far from its daily lows. Overall, the Dow Jones Industrial Average closed 267 points to the downside, the S&P 500 was off 35 points, and the NASDAQ was down 75 points. Commentary by Treasury Secretary Janet Yellen on possible corporate tax hikes roiled investors during the final few hours of trading.
The negative price action was largely concentrated in some mega-cap telecommunications stocks, as decliners only outpaced advancers by a 1.2-to-1.0 ratio. Energy issues were among the worst performers yesterday, hurt by a slide in the related commodities. REITs were among the best performers, though they only traded slightly above breakeven levels on average. Meantime, traders picked up some options protection by purchasing the CBOE Volatility Index (VIX). On point, the futures market started negatively yesterday evening, and the selling intensified overnight, suggesting a weak start to the trading day.
Looking ahead, most eyes will be on the economic data releases, including the minutes from the Federal Reserve’s April monetary policy meeting (due at 2:00 P.M. EDT). Traders will be looking to gain additional insight into what the central bank leaders are thinking about monetary policy, and if their stance on interest rates has changed some in recent months in lieu of the emerging inflationary pressures. Additionally, a few regional Fed Presidents will give remarks, which may further clarify the situation.
Meantime, a few large-cap companies will report quarterly results before and after today’s trading session, with a heavy concentration of the reports in the retailing sector. All told, around 90% of S&P 500 companies have already reported, and the results have made for good readings. In the coming days, the economic releases will include the latest initial weekly jobless claims data (tomorrow) and existing home sales for April (Friday). This should provide further insight into how the economy is recovering from the coronavirus pandemic. That said, we think the release of the FOMC minutes this afternoon will likely drive much of the trading over the course of the next three days.
– John E. Seibert III
At the time of this article’s writing, the author held positions in one or more of the companies mentioned.
