After The Close
Stocks managed to make some modest progress today, after yesterday’s sharp selloff. However, it should be noted that the market did soften late in the session, which may suggest a lack of commitment on the part of the bulls. At the end of trading, the Dow Jones Industrial Average was up 30 points; the broader S&P 500 Index was ahead six points; and the NASDAQ was higher by 27 points. Market breadth was constructive, with advancing issues ahead of decliners on the NYSE. From a sector perspective, the energy and basic materials issues displayed leadership, while the healthcare and utility stocks moved lower.
Just a few economic reports were released today. Of note, the Conference Board’s Consumer Confidence Index dipped to a reading of 126.4 for the month of June. It should be noted that the index is still at very healthy levels. Tomorrow, we will get a look at durable goods orders for the month of May, as well as the latest monthly pending home sales figures.
In the corporate arena, we heard from Lennar (LEN). Shares of the residential home builder moved higher, in response to an upbeat release. Elsewhere, shares of General Electric (GE) moved up after the conglomerate announced plans to spin off its healthcare business and sell its stake in Baker Hughes (BHGE).
Technically, the stock market has not performed well over the past few weeks. While today’s recovery was nice to see, it may not be enough to get the bulls back on track. Many traders will be looking closely at the second-quarter earnings season for guidance. Further, ongoing political and global developments will likely play a role in the market’s direction.
— Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before The Bell
Concerns about mounting trade disputes again are rattling Wall Street. Thus, following a string of setbacks in the stock market over the past fortnight, equities sold off anew yesterday morning on our shores. In fact, within the first hour of trading, the Dow Jones Industrial Average had fallen by more than 300 points. Also, after some solid resilience heretofore, the tech-laden NASDAQ tumbled by 142 points during this time span, as well. The apparent prime culprit was a move to check China's investments in U.S. technology firms.
Specifically, the U.S Treasury Department was drafting curbs that would disallow firms with at least 25% Chinese ownership from buying U.S. companies with "industrially significant technology." Also, reports noted that the U.S. Commerce Department was proposing enhanced export controls to keep these technologies from being shipped to China. As a result, the major casualties were on the technology front early on yesterday, with the Philadelphia Semiconductor Index taking an early better than 2% hit.
To be sure, the market did mount a comeback in mid-morning following the Dow's early 325-point plunge, but the damage remained widespread, as the Administration's trade war rhetoric continued to heat up. The Boeing Company (BA – Free Boeing Stock Report) was among the large early casualties falling sharply on those trade war concerns, as were other companies with dealings in China. Many large tech companies and high-profile NASDAQ concerns plunged, as did the small-cap Russell 2000 Index. It was a wave of selling as the morning wound down.
A report by the Wall Street Journal, meantime, suggesting that the Administration was planning to bar several companies based in China from making investments in U.S. tech companies was panned by Treasury Secretary Steven Mnuchin as fake news in a tweet. That response helped to stabilize the market for a brief time, but after that brief morning respite, the selling resumed, with the Dow heading down to a deficit or more than 400 points in the late stages of the morning.
To be sure, not all the news was dour, as there was a rumor out that food processing giant Kraft Heinz (KHC) was interested in possibly buying ailing food processor Campbell Soup (CPB). Shares of the former inched up in the morning, while Campbell stock soared nearly 10% in early dealings. Nevertheless, the market continued to founder, with the early afternoon seeing a further round of selling, with the Dow's loss swelling to nearly 500 points at one time later in the session.
Then, there was one last effort to rally the market following remarks by trade negotiator Peter Navarro suggesting that the market was overreacting to the trade news and that some of the rhetoric was a negotiating ploy. After these comments, the market came back somewhat, but the Dow still closed down 328 points, closing below its 200-day moving average. Elsewhere, nine of the 10 major equity groups fell on the day with the biggest losses in tech and energy, while losing stocks led gaining issues by a three-to-one count.
Looking at action going forward, we see that after yesterday's selloff in New York, shares were mostly lower in Asia in the overnight hours, while in Europe, the major bourses are thus far tracking a higher path. Elsewhere, yields on U.S. Treasuries, which fell to 2.88% yesterday on the elevated trade war fears, are still passing hands at that level. Further, oil prices now are up a tad and U.S. equity futures are suggesting a somewhat mixed opening when live trading resumes later this morning.
– Harvey S. Katz, CFA
At the time of this article’s writing, the author held positions in one or more of the companies mentioned.
