Before The Bell
Geopolitics are once again taking center stage on Wall Street. To wit, following weeks in which a meeting between the President and the leader of North Korea had been on the front burner and trade talks with China had been advancing, prospects for both have lessened. To be sure, things are often in flux around the world these days, but for now at least, the President has suggested that the North Korea summit is off. There also has been talk that the widely heralded potential for a trade deal with China might not come to fruition. So, after rallying early in the week, stocks have found much tougher sledding more recently.
In addition to geopolitics, there also is the Federal Reserve. On Wednesday, the central bank released the minutes from, its latest FOMC meeting. That issuance implied there would be two more interest rate hikes this year, but probably not a third, an admission that pleased investors. The result was a late rally during the middle session of the week. But after mulling about early yesterday morning, the President's acknowledgment that the proposed meeting with North Korea had been cancelled, caused stocks to swoon later in the morning. In all, after the first hour of trading, the Dow Jones Industrial Average was off by more than 190 points.
The stock market then stayed lower throughout the remainder of the morning, as the focus stayed on offshore developments. Also, helping to keep the decline in some check is the fact that yields on Treasury issues fell for a second day in a row, with the 10-year Treasury note easing to a return of 2.96%. Still, even with that offset, the market continued to heads lower, but the descent was orderly, with the Dow dropping by a morning worst 280 points. But the market did attempt a rebound of sorts as we moved closer to the noon hour in New York. However, the blue chip composite was still off notably as the afternoon began.
The market would then improve further, with the Dow's 280-point session worst-loss reduced to just over 100 points as the lunch hour ended, and investors apparently seeing the meeting's cancellation with North Korea perhaps being less consequential than they had feared earlier in the day. Still, the overall thrust of the market was downward as the afternoon moved further along. But then the smaller cap groups improved further enabling them to get into the plus column, as the S&P 500 and the NASDAQ edged toward breakeven. Only the Dow stayed measurably lower, but, there, too the losses were pared further.
Things changed little as the afternoon moved along and as we entered the final hour of trading. As before, the Dow led the way lower, but the deficit did narrow further, while the S&P 500 and the NASDAQ held just slightly in the loss column. As the session concluded, the Dow was off by just 75 points, a notable improvement on the morning, while the S&P 500 off six points) and the NASDAQ (down two points) did little in the aggregate. The small-cap Russell 2000, meantime, edged up almost a point.
Looking out at a new day, now, we see that shares were lower across Asia overnight, but are now climbing in Europe. Also, oil is down, after Russia said that it would boost output, while Treasury yields are little changed. Finally, U.S. futures are setting up for a modestly lower open when live trading resumes.
— Harvey S. Katz, CFA
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
