After The Close
Stocks began the final session before the Memorial Day weekend on a solid note. Although the U.S. equity markets took a big dip around mid-morning, they regained their footing and remained on the plus side for the rest of the session.
Trade issues have held sway over investors for some time now, and today was no exception. The markets appeared to be encouraged when President Trump indicated he might lighten up his tough stance against Huawei Technologies as part of a more encompassing trade deal with China. Although there are no new trade talks slated, the President continues to suggest that the yearlong brinkmanship may come to an end relatively quickly.
At the closing bell, the Dow Jones Industrial Average had tacked on 95 points, or 0.4%. Meanwhile, the broader S&P 500 (which had briefly dipped into the red earlier in the session) was ahead by four points, and the tech-heavy NASDAQ was up by eight. Most of the 10 major market sectors ended the day in positive territory, with the biggest gains coming from basic materials and telecommunications (both up nearly 1%), while healthcare, financials, and energy stocks all rose about half a percent. Utilities came in last, ending just under breakeven.
Elsewhere, after dipping to a two-month low yesterday, oil prices regained some lost ground today. Light sweet crude moved up 1.6%, to around $58.80 a barrel. However, the commodity was down 6.3% for the week, and has shed more than 10% over the past 30 days. Lastly, trading in Europe was also upbeat, with the major bourses spending the entire session in the green. The UK’s FTSE 100 and France’s CAC-40 were up close to three-quarters of a percent, while Germany’s DAX wasn’t far behind, with a half-percent gain.
– Mario Ferro
At the time of this article's writing, the author did not have positions in any of the companies mentioned.
Before The Bell
Another day, another round of volatility. And yesterday, it was all to the downside. On point, after a more modest move lower by the stock market on Wednesday, investors were sent reeling in the latest session, as intensifying trade worries with China pushed the Dow Jones Industrial Average down by more than 400 points in the first few minutes of action. The early losses in the S&P 500 Index and the NASDAQ were similar in proportion. The small-cap Russell 2000 also was getting pounded early on. A notable early casualty on the Dow Industrials was United Technologies (UTX – Free UnitedTech. Stock Report).
As noted, the big issue was trade, with one pundit claiming that the global trade landscape looks bleaker than ever. Tech stocks, in response to the ill winds blowing in from China, were getting hammered, as well, especially some of the chipmakers. Weakness in U.S. manufacturing was another problem for the bulls. One additional headache is that earnings reporting season is practically over, save for the retail group, several stocks of which have gotten hit in the past few days. There is simply no catalyst to propel stocks forward currently. So equities sold off, especially in the first hour of trading before an attempt at a comeback unfolded.
However, unlike most earlier late-morning attempts at a recovery this year, the latest try went virtually nowhere. In fact, things would get worse again before they got better, with the Dow's loss ascending the 400-point mark on several additional occasions as we moved into the early and middle stages of the afternoon. One problem was that U.S. companies continued to stop shipping to Huawei, the large China-based telecom provider. But the real reason for the biggest selloff was that China was beginning to take a harsher tone in its trade rhetoric with the United States.
Meanwhile, in other news, the Census Bureau yesterday noted that new home sales had dropped back in April, with that key metric falling from 723,000 homes in March to 673,000 last month. Still, that total, albeit down 6.9% month to month, was the second highest figure in the first four months this year. The top housing total in the past year was May's 650,000 homes sold on an annual basis. So, housing, while down certainly, is not out. This report, it should be noted, followed data showing a mostly unchanged reading in existing home sales last month and a gain in April housing starts.
Regarding the market, the selling then would continue as we approached the final hour of trading, with the Dow's loss mostly staying in the 400-point range until the last half hour when a buying spurt evolved, which saw the Dow pare a one-time 450-point slide to 300 points for a time, before monetarily easing back before a last-minute push left that 30-stock composite off by 286 points. Also lower were oil prices and Treasury note yields. And, notwithstanding the late buying, losing stocks still overwhelmed gaining issues on the Big Board. All in all, it was not a good day to be long the market.
Looking ahead to the final trading session of the week and after yesterday's selloff, we find that stocks were mixed in Asia overnight, while in Europe, the early read on the principal bourses is nicely higher. Also, of note, oil prices are rebounding, following yesterday's big selloff, although they remain sharply lower for the week, and Treasury note yields, which tumbled below 2.30% on the 10-year instrument, are now at 2.33%. All of this suggests that our market will open the session to the upside after yesterday's declines. Finally, we wish our readers a happy, safe, and meaningful Memorial Day Weekend.
- Harvey S. Katz, CFA
