After The Close
The stock market moved lower earlier today, and remained in negative territory throughout the afternoon. Clearly, investors were concerned that trade relations between the United States and China will probably remain under pressure for some time, and that a quick deal may not materialize any time soon. At the close of the session, the Dow Jones Industrial Average was down about 101 points; the broader S&P 500 Index was off eight points; and the NASDAQ was lower by 35 points. There was a negative tone to the market today, as losers were easily ahead of winners on the NYSE. The industrial and basic materials issues moved lower, while, the healthcare names and utilities managed to advance. The rotation into the more defensive issues (and stocks with limited exposure to China) suggests that traders are taking a more cautious stance.
There were few economic reports released this morning. However, in the early afternoon, the FOMC published the minutes from its latest meeting. For the most part, the report suggested that the economy remains upbeat, with few signs of inflation. Further, the central bank seemed inclined to hold interest rates steady. The report held few surprises. Tomorrow, we will get a look at the latest weekly initial jobless claims, as well as new home sales for the month of April.
Finally, in the corporate arena, we heard from a few leading companies over the past 24 hours. Specifically, shares of Lowe’s (LOW) lost ground, after the home improvement retailer posted weaker-than-anticipated numbers and tempered its outlook. In contrast, shares of Target (TGT) moved higher as traders reacted favorably to a solid report.
Technically, the stock market retreated in early May, but seems to have stabilized for now. The S&P 500 Index is now sitting just under its 50-day moving average, located near the 2,875 level. Pushing stocks above this mark will be the next challenge for the bulls. However, it is not clear what will serve as the catalyst needed to fuel such a move.
– 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 early ascent in the stock market, which caused the Dow to surge by nearly 200 points in the first hour, or so, of trading, would extend to the S&P 500 and the NASDAQ, both of which remained up smartly as we reached the noon hour in New York. The Dow also stayed nicely higher throughout the morning. The move to ease restrictions on China's telecom giant Huawei, as noted, was the pivotal factor in the market's comeback. The equity market also got a boost from Dow component Boeing (BA – Free Boeing Stock Report), after a news story said that a bird collision may have caused the March crash of the 737 Max aircraft.
Shares of chipmakers also rose on the easing trade restrictions, as did stocks in China. Still, the recent tit-for-tat in tariffs between the United States and China remains in place and that is making traders anxious over here. Hence, we have seen an elevated level of volatility in our markets in recent weeks. At this juncture, there seems to be no easy or quick cure for what ails the global trade market. Meanwhile, in addition to technology, there was news on the retail store front, with department store chain Kohl's (KSS) shares tumbling almost 10% on a weak quarterly earnings issuance.
Further, on the economic front, the National Association of Realtors reported that sales of existing homes fell for the second month in a row in April, weighed down by a shortage of more affordable houses. This is the latest suggestion that after an export and inventory-induced jump in economic growth in the first quarter that the nation's extended expansion is now slowing. This downtick, which was 0.4%, followed reports last week in which declines were registered by retail sales and industrial production. Conversely, housing starts rose in April, underscoring the divided nature of the housing market.
As to the market, stocks continued to press higher in the afternoon, with this apparent easing in global trade tensions in hand. And at the close, the Dow, which at one point surged to a gain of some 220 points, would finish ahead by 197 points. The NASDAQ and the S&P 500 would add 83 and 24 points, respectively. Strength would be registered by the basic materials issues and the technology stocks, while consumer staples would falter, in no small part to some softness in the retail sector. Also rising yesterday were bond yields, while the VIX volatility index eased
Looking ahead to a new day now, we see that stocks were mostly higher in Asia overnight, while in Europe, the principal bourses are thus far tracking upward, despite lingering trade tensions. Also, oil prices are sliding on increased U.S. stockpiles and Treasury yields are essentially flat. And the U.S. equity futures are pointed downward. As before, the emphasis likely will be on trade developments with China, with some economic news and earnings reports (mainly from the retail sector) of note. Stay tuned.
