After the Close
The stock market got off to a tentative start, made considerable progress for much of the afternoon, but weakened in the final hour of the session. At the end of the day, the Dow Jones Industrial Average was down 13 points; the broader S&P 500 Index was off slightly; while the NASDAQ clung to a modest gain. Market breadth was still slightly favorable, with winners ahead of losers on the NYSE. Strength was found in the healthcare and basic materials sectors. In contrast, some of the consumer names and utility issues underperformed today.
Meanwhile, traders received a few economic news items to digest this morning. Specifically, initial jobless claims came in at 241,000 during the week of June 17th, which was more or less in line with expectations. Further, the Conference Board’s Index of Leading Economic Indicators showed an increase of 0.3% for the month of May, which was up slightly from the April reading. Tomorrow, traders will get a look at new home sales for the month of May.
Elsewhere, in the corporate arena, we heard from a few leading companies. Most notably, shares of Oracle (ORCL) soared after the technology company delivered an encouraging report. However, shares of Steelcase (SCS) plunged after the furniture maker posted a weaker-than-expected set of numbers.
Technically, the stock market has been holding up well, but investors seem to be in need of some direction at this point, given the current equity valuations. The second quarter will soon be coming to a close, and many companies will be reporting their results and updating guidance. Perhaps this will provide traders with some much needed information. – 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 - 12:00 PM EDT
After moving lower for two of the first three days of this week, the bulls sought to capitalize on a slight uptick in oil prices to push the market higher in the early going this morning. But even though oil did tick higher in morning dealings, following a drop into bear market territory this week, concerns about oversupply linger. And so long as that is the case, that commodity might have difficulty rallying in a meaningful way. And stocks may remain under at least some pressure, as was the case in early trading today. All told, the early bounce in oil, which was only about $0.25 a barrel, left prices below $43 in New York.
Meanwhile, even though OPEC and other producers have agreed to reduce output by almost two million barrels a day for the next nine months, oversupply has persisted and prices are trading under pressure. So, stocks have wilted. And this state of affairs then continued in the first hour, or so, today. About the most the market could muster was a small early rally, with the Dow Jones Industrial Average rising some 15 points in the first hour. The other large-cap indexes and their smaller capitalization counterpart, however, all held in the red, if grudgingly.
In fact, the equity market has changed comparatively little, overall, this week, in part, we think, because energy plays a lesser total role than had been the case earlier in time. As to other influences on trading, Wall Street was keeping an eye on Washington as the Senate was prepared to introduce a draft of its health care bill, which is designed to repeal and replace the Affordable Care Act. On the health care front, in addition to legislative news, that sector is getting a lift from strength in the biotech field, where a solid multi-session rally remained in place.
In other market-influencing news, the government reported that fewer than 250,000 Americans had applied for unemployment benefits in mid-June. That low figure affirms the continued durability of the job market recovery. Also of note, the Conference Board reported that its Index of Leading Indicators had risen by 0.3% in May, a level that should point to further steady economic growth in the second half. All told, after a meager 1.2% GDP advance in the first quarter, we think growth will total near 3% in the current term and remain in this latter area over the year's final six months.
Encouragingly, though, equity prices strengthened as the morning drew to a close, with the Dow going positive now by almost 40 points, while the S&P 500 Index and the NASDAQ have inched back into the black, as well. The small- and mid-cap indexes also are heading higher now, if nominally. Further breaking the nascent advance down, nearly all of the top 10 equity groups are higher, led by energy and basic materials, while gaining stocks lead losing issues by about a nine-to-five ratio on the Big Board. In individual trading, shares of Oracle (ORCL) are now rallying on a positive earnings release late yesterday. – 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
It was an up-and-down performance for Wall Street over the first two sessions of this latest five-day span, with the bulls roaring ahead on Monday, as the Dow Jones Industrial Average added 144 points, before backtracking on Tuesday to blunt the cumulative two-day gain. The Street then began the day yesterday with brief strength, only to see some selling take hold rather early into the session. So, as we moved toward the noon hour in New York, the market had a mixed look to it, with the Dow lower, the S&P 500 little changed, and the NASDAQ nicely higher.
As to influences on trading yesterday, the big one remained oil, which entered bear market territory earlier this week. Further, after some initial buying, the commodity again moved lower as the day progressed. The early buying in this troubled commodity came about after the Energy Information Administration said that U.S. crude inventories had decreased by 2.5 million barrels in the latest week. So, crude initially jumped to just about $44 a barrel. It had fallen below $43 on Tuesday. Stocks also received an early lift on word that sales of existing homes had surprisingly edged higher in May (see below).
Specifically, that issuance noted that housing re-sales had reached their third highest level in a decade in May, rising 2.1%, to 5.62 million homes on an annualized basis. Sales also were up from a year earlier, even as supply was down more than 8% from a year before. Also gaining were prices, with an average residence going for 5.8% more than in May of 2016. Expectations had been for a small dip in such activity. So, the result was warmly received, and followed some other less upbeat business metrics released over the past fortnight.
Meantime, the selling accelerated after lunch, with the Dow quickly and steadily dropping to a mid-afternoon loss of close to 80 points. The S&P 500 Index also went negative, while the S&P Mid-Cap 400 and the small-cap Russell 2000 held just below the neutral line. However, on selective strength in technology, the NASDAQ remained in the black, with an afternoon gain in excess of 40 points. Overall, the session to that point had a lower look to it, with more stocks falling than rising on the Big Board. Once more, the primary reason for the late decline was oil, which resumed its descent in the afternoon.
As for oil, the price of a barrel of crude tumbled more than 2% again. Energy stocks faltered notably on these weak quotations, with that equity group surrendering almost 2% as the session wound down. Some call the fall in oil a supply issue, as production remains quite high. But lessening demand from China is another problem. A few pundits, meantime, foresee oil falling below $42 a barrel from its perch of just under $43. All told, the equity market had a modestly weaker tilt to it as we reached the final hour of trading. At that point, it seemed as though the bears were about to make it two out of three lower days this week.
And, indeed, the bears did just that, retaining control of the Dow, the S&P 400 and 500 and the Russell 2000 through the close. Only the NASDAQ managed a win, and did so impressively, with that index jumping more than 45 points, to end matters above 6,200. That put the tech-driven composite within a hundred points of its all-time high. As to individual sectors, the energy group again took it on the chin, with Dow stocks Chevron (CVX - Free Chevron Stock Report) and Exxon Mobil (XOM - Free Exxon Mobil Stock Report) again heading lower, along with quality driller Schlumberger (SLB), which lost 2% if its value once more.
Now a new day starts, and this penultimate session of the week saw stocks head lower in Asia overnight, while in Europe, the leading bourses are tracking a bit downward, as well, thus far this morning. Elsewhere, oil is ahead by pennies to this point; gold is higher; and rates on Treasury issues are flat. Meanwhile, U.S. futures are pointing to a lower opening, when trading resumes at 9:30 this morning. As before, we would look for oil to again dominate, as crude has recently pushed down toward what appears to be the $40-a-barrel mark. – Harvey S. Katz
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
