After The Close
The stock market opened higher this morning, and selectively managed to hold onto its gains throughout the afternoon. At the close of trading, the Dow Jones Industrial Average was ahead roughly 298 points; the broader S&P 500 Index was up 20 points, and the technology-heavy NASDAQ was higher by 40 points. Market breadth was favorable, with advancers nicely ahead of decliners on the NYSE. Essentially all of the major market sectors made some contributions, with notable strength in the industrial and energy issues. In contrast, the healthcare names lost some ground today.
There were no notable economic reports issued this morning. Tomorrow will also be a light day for news. On Wednesday, we will get a look at new home sales for the month of April. In addition, the FOMC will release the minutes from its latest meeting. That report will likely be watched closely by traders following the Federal Reserve’s monetary policy and stance on interest rates.
In the corporate space, few widely watched companies posted their quarterly profit reports over the past 24 hours. However, shares of General Electric (GE- Free General Electric Stock Report), which have lost considerable ground over the past year, rebounded quite a bit in price today, after the industrial giant announced a deal to sell some transportation assets to Wabtec (WAB) in a transaction valued at $11 billion.
Technically, the stock market has firmed up nicely in the month of May. The S&P 500 Index is now back above its 50-day moving average, located at the 2,675 mark.
— Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before The Bell
The final day of trading last week was a ho-hum one for equity investors, with little for traders to get excited about. In fact, there were more issues that unnerved investors than encouraged them late in the week—and that scenario was again on display Friday. The major equity indexes delivered a mixed performance that had a bearish undertone to it. On the negative side were respective declines of 28 and seven points for the NASDAQ and the broader S&P 500 Index, respectively. Meantime, the Dow Jones Industrial Average and the small-cap Russell 2000 were relatively unchanged on the day, each finishing one point to the upside.
As noted, the bears held a modest upper hand on Friday, with declining issue leading advancers by the slimmest of margins on both the Big Board and the NASDAQ. From a sector perspective, nearly all of the 10 major equity groups were in the red, save for gains from the healthcare and technology stocks. The biggest laggards for the session were the consumer staples, financial, and technology categories.
For the week, the bears produced a modest win, overcoming a slightly higher opening to the five-day stretch, with thoughts last Monday that there may be an easing in the trade tensions between China and Russia, with the Trump Administration commenting that it may be walking back its penalties against China-based smartphone maker ZTE Corporation. But those feelings did not last very long, as rising fixed-income rates prompted some profit taking in an equity market where valuations are still looking stretched. Higher bond yields make fixed-income instruments more attractive to equity investors, especially those that value the income-oriented stocks. Moreover, the announcement that the United States was pulling out of the nuclear deal negotiated with Iran, which was discussed during the previous Administration, and the escalating tensions between Israel and Palestine unnerved investors. The thought is that the possibility of forthcoming sanctions against Iran could push the price of oil even higher, which is flirting with levels not seen since 2014. The threat of higher gasoline prices and rising mortgage rates could have an impact on the consumer and housing sectors, which combine for a huge portion of the nation’s economic output.
Speaking of the U.S. economy, the news will focus on the housing market, with data due later in the week on new and existing home sales for the month of April. Also this week, we will receive the latest report on durable goods orders. And on Wednesday afternoon, the minutes from the latest monetary policy meeting will be released at 2:00 P.M. EDT. That report will be scrutinized for more clues about the central bank’s feeling on inflation and for a sense of what Fed leaders, including Chairman Jerome Powell, are thinking with regard to tightening the monetary reins further this year. Inflation bears watching, given the recent jump in bond yields and the aforementioned rising oil prices. As for the earnings beat, the first-quarter reporting season is near its conclusion, save for data from some retailers with April-ending quarters. The earnings season has been a good one for Corporate America, with most companies helped by the stronger economy and the lower tax rate that went into effect this year.
But with less than thirty minutes to go before the commencement of trading stateside, the equity futures are presaging a sharply higher opening for the U.S. equity market. Overnight in Asia, the main indexes finished nicely to the upside. Driving equities higher around the global are signs of easing trade tensions between the United States and China, at least for the moment. Over the weekend, comments from U.S. Treasury Secretary Steven Mnuchin that the U.S. trade war with China was "on hold" following an agreement to drop their tariff threats that had roiled global markets this year has sparked buying. In addition to stocks, oil prices and the U.S. dollar were on the rise on the commentary from President Trump’s top economic advisor. Stay tuned.
– William G. Ferguson
