After the Close
The stock market moved strongly higher today, as the nation’s economy continued to show signs of improvement. At the close of trading, the Dow Jones Industrial Average was ahead 136 points; the S&P 500 Index was up 18 points; and the NASDAQ was higher by 48 points. There was a definite positive bias to today’s session, as advancers were well ahead of decliners on the NYSE. All of the major equity sectors made progress, with pronounced strength in the healthcare and consumer cyclical issues. The technology and telecom names posted more modest gains.
Meanwhile, traders received some constructive economic news this morning. Specifically, according to Automatic Data Processing (ADP), 253,000 jobs were added to the private sector during the month of May, up nicely from the 174,000 figure logged in April. This month’s figure likely caught Wall Street by surprise, as analysts had been looking for more limited progress. Meanwhile, initial jobless claims came in at 248,000 for the week of May 27th, which was somewhat higher than anticipated, but still a low number. We will get a closer look at the nation’s employment situation tomorrow when the government releases its May employment report. Further, it should be noted that the Federal Reserve is slated to make an interest rate decision at its upcoming June meeting. Most on Wall Street think another small rate hike will be approved.
Elsewhere, a few corporations delivered their financial results over the past 24 hours. Of note, shares of Palo Alto Networks (PANW) soared after the networking company delivered solid results. Furthermore, shares of Dollar General (DG) climbed in response to a solid report.
Technically, the stock market regained its footing today. Further, it was encouraging that the major averages displayed some strength as the day came to a close. For now, the bulls remain in control. However, equity valuations are extended, and it is not clear what will serve as the catalyst needed to push stocks materially higher from here. – Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Mid-Day Update - 11:30 AM EDT
We have turned the calendar to June, but as far as the bulls are concerned, it appears to be business as usual, which means that their ability to rally the stock market remains intact. On point, after a hesitant opening, in which the Dow Jones Industrial Average edged slightly lower, the perennial market optimists have again pushed their way higher. In fact, as we neared the end of the first hour of trading, that composite was already up some 25 points. The morning's advance also took in the Standard & Poor's 500 Index and, importantly, the small- and mid-cap composites.
However, after a sharp early sprint to new high ground, the NASDAQ's gain withered somewhat, although that tech-laden composite did remain modestly in the black. This was something of a turn for an index that has led the charge higher this year. Meantime, in news of importance, services provider ADP (ADP) reported that private-sector payrolls soared in May, rising by 253,000 for the month, easily eclipsing estimates for a gain of 185,000. This positive surprise, which comes on the heels of a few less-than-stellar economic statistics in recent days, suggests that the economy is still on the mend after a disappointing first quarter.
The ADP report is watched closely as this metric (normally out on the first Wednesday of a month, but delayed by a day due to the Memorial Day holiday) is often seen as a preview of the government's report on non-farm payrolls, which is due tomorrow at 8:30 AM (EDT). Expectations have been running for a similar 185,000 gain in the government issuance. But that forecast may now rise in light of the aforementioned private-sector outperformance. In other data, weekly jobless claims nudged up to 248,000 in the latest week, a bit above expectations, but still a low number by historical standards.
In other news, the Institute for Supply Management reported that its purchasing managers' survey registered a tally of 54.9 in May. That was up nominally from the 54.8 score inked a month earlier, and was well above the dividing line between an expanding manufacturing sector (above 50.0) and one that is contracting. In all, this was the 96th month in a row that the nation's economy has expanded. Breaking the report down, we see that the new orders index rose from 57.5 to 59.5; employment ticked up from 52.0 to 53.5; but the production index eased from 58.6 to 57.1. The response to this report was, however, muted.
The big number, of course, will be tomorrow's non-farm payrolls change. Expectations are that even if the number comes up short, the Federal Reserve will raise interest rates when it convenes later this month. A stronger increase in jobs, though, could encourage the lead bank to hike rates again as soon as September. Such a follow-up move so soon might push the Fed to raise rates by as many as four times this year. After yesterday's Beige Book summary release, our thinking remains that just three rate hikes (the one voted on in March, one later this month, and one late this year) will be the outcome.
All told, as we head into the late stages of the morning, we see that the Dow is still holding on to a modest 20-point gain; the S&P 500 is better by three points; and the NASDAQ is up by six points. Moderate increases also have been tabulated by the S&P Mid-Cap 400 and the small-cap Russell 2000. Meantime, most of the 10 leading equity groups are higher this morning, while advancing stocks hold better than a two-to-one lead over declining issues suggesting that this early modest advance has a degree of staying power. – Harvey S. Katz
At the time of this article's writing, the author did not have positions in any of the companies mentioned.
Before the Bell
Following an unimposing start to the holiday shortened trading week on Tuesday, Wall Street seemed ready to begin Wednesday's session in mixed fashion, following uneven action overseas earlier in the day. But hopes for at least a nominal advance were dashed early in the trading day as Wall Street moved out to a weaker start that soon had the Dow Jones Industrial Average pulling back by some 75 points. The tech-laden NASDAQ also weakened noticeably in the morning, losing close to 40 points. Larger proportionate declines were then inked by the small-cap dominated Russell 2000 and the S&P Mid-Cap 400.
The early selloff, which was an extension of the late fade on Tuesday, was partly due to some further incremental profit taking as the month of May concluded. It also represented the fact that prospects for the Trump Administration's ability to implement its highly touted pro-growth economic policies--which are headlined by tax reform, deregulation, health care, and infrastructure expenditures--have come into question as the White House has been trying to right a ship that has sailed into choppy waters lately. The big post-election rally had been based on hopes for these measures.
However, the early selloff, as so many prior to it, did not mushroom into anything big as the morning pressed ahead, as the earlier noted 75-point decline in the Dow was pared to fewer than 25 points late in the first half of trading. Among the morning's strong points were positive action in the utilities and health care groups, two of the more conservative sectors. Again, the basic materials and energy sectors faltered, and they were joined by the heretofore strong technology group. As we headed into the noon hour in New York, the market was still lower, but well off the morning's nadir.
Stocks then traded in a narrow band as the afternoon got under way and investors awaited the Federal Reserve's Beige Book economic summation to be issued at 2:00 PM (EDT). That release, however, shed little new light on things, as the 12 Fed Districts across the country continued to report modest to moderate rates of business improvement. Our sense is that the Beige Book will do little to steer the Fed off course, and the likelihood remains that the lead bank will increase interest rates at its next FOMC meeting in mid-June. At least one more rate hike appears likely in the second half, even as inflation remains below the Fed's targets.
The market then stabilized at modestly lower levels into the close, with some slight firming as the final minutes ticked down, so that at the conclusion of trading, the Dow was off just 21 points; the S&P 500 was down just nominally; and the NASDAQ, once off some 40 points, ended lower by just a token five points. Overall, gaining and losing groups were split fairly evenly, as were advancing and declining issues on the Big Board. All in all, it was the second undistinguished trading session in a row following what had been a very strong five-day span.
Looking out now to a new day, and following yesterday's indecisive trading, the principal markets in Asia were mixed overnight, while on the Continent, the European bourses are showing early gains. Elsewhere, oil, a casualty in recent sessions, is now showing some slight improvement in New York; metals prices are off a bit; and Treasury yields, which eased just below 2.20% on the 10-yuear note yesterday, are nudging higher. Finally, U.S. equity futures are moving up slightly at this hour, thereby presaging a better start to the new session, as we commence the sixth month of the year. – Harvey S. Katz
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
