Before The Bell
The stock market started unevenly yesterday, as traders weighed the strong price action from Monday versus the potential for news to break from the Federal Reserve Chairman’s testimony to Congress on the coronavirus pandemic. The release of existing home sales early in the session shifted sentiment positively, as home prices have reached a record high, though it marked the fourth-straight month of total sales declines. Still, traders thought this was positive, and the markets trended higher throughout the session.
Overall, the NASDAQ eventually reached an all-time high. The S&P 500 also traded just below its record level, but the Dow Jones Industrial Average remained quite a few points off its top mark. In the afternoon, the markets trended sideways until Fed Chairman Jerome Powell’s testimony, where he reiterated that inflationary pressures would likely be transitory, suggesting further accommodative interest-rate policy. At the market’s close, the S&P 500 was up 22 points, the NASDAQ was higher by 112 points, and the Dow rose 69 points.
Market breadth was positive, as advancers outpaced decliners by a 1.2-to-1.0 ratio. Consumer discretionary stocks were among the best performers on the day, while utilities were the notable laggard. Moreover, U.S. Treasury bond yields were mixed as short-term rates rose and long-term rates fell. This set of circumstances usually is a negative for financials earnings as they lend long and borrow short. Meantime, oil prices ended the day higher, helping boost the related stocks.
The futures market started stronger last night, buoyed by the Fed Chairman’s testimony. The move higher continued modestly through the evening. By morning, the futures had given back most of their gains, but are still up slightly, suggesting a modest start to the trading session.
Looking ahead, the economic calendar is light today, with only a few releases on the docket. These include some early inflation data for June and new home sales for May. The latter, due at 10:00 A.M. (EDT), may give some insight into construction activity, as more state economies are reopening. Additionally, the earnings calendar is quite sparse, as we are still weeks away from the commencement of second-quarter reporting season. Still, data releases will pick up later in the week, including the final GDP estimate for the March quarter and initial weekly jobless claims tomorrow. All told, we think traders will be looking toward these economic data releases over the next few days and for any insights into how the U.S. economy is recovering and how the Fed views interest rates.
– John E. Seibert III
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
