After the Close
The stock market opened lower this morning, recovered some ground around noon, but deteriorated as the session progressed. At the end of trading, the Dow Jones Industrial Average was down 99 points; the broader S&P 500 Index was off 20 points; and the NASDAQ was lower by 101 points. Market breadth showed a negative bias, as decliners easily outpaced advancers on the NYSE. The technology sector weighed heavily on the market. However, it should be noted that this group of volatile stocks may have been overdue for some profit taking. In addition, the healthcare and utility issues were quite weak. In contrast, the energy and financial names managed to make positive strides.
Meanwhile, traders received a few economic news items to review today. Specifically, The S&P Case-Shiller Home Price Index advanced 5.7% during the month of April. While this reading did show some progress, analysts had been looking for a slightly stronger showing. Further, the Conference Board’s Consumer Confidence Index edged up to 118.9 in June, which was a bit better than had been expected. Tomorrow, we will get a look at pending home sales for the month of May. Also, the EIA will deliver the latest weekly crude oil inventory numbers. Elsewhere, it should be noted that some of the weakness in the market today may have been due to recent political events. Specifically, today the Senate chose to postpone voting on a healthcare bill, and this may have caused some traders to worry about the Administration’s ability to achieve results.
Finally, in the corporate arena, we heard from Darden Restaurants (DRI). That stock traded modestly higher in response to a respectable release. After the market closes, KB Home (KBH) weighs in with its numbers.
Technically, the stock market has pulled back over the past several sessions, as traders seem to be in need of direction. The second quarter comes to a close in a few days, and in a couple of weeks, earnings season will start to dominate the headlines. This event may help provide 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 - 12:15 PM EDT
U.S. equities traded in mixed fashion on Tuesday morning. Sentiment somewhat brightened as the morning progressed, with traders’ reaction to a pleasantly surprising consumer confidence update at 10:00 AM (EDT) helping to pare some losses and lift several indexes above their respective breakeven lines. The NASDAQ, however, remained in the red as the midday hour neared, due in large part to early morning struggles by Alphabet (GOOG). The tech conglomerate was fined $2.7 billion for what the European Union deem antitrust practices. Though it may elect to appeal the ruling, the historically high valuations in the tech sector compelled investors to collect some profits following the regulatory update.
Meanwhile, traders were given some encouraging news on the business beat, which we believe contributed to the mid-morning upturn by the Dow, S&P 500, and Russell indexes. The Consumer Confidence Index rose to 118.9 in June, up from the preceding month’s reading of 117.9 and markedly better than the slight decrease anticipated. Though consumers generally do not expect an acceleration in economic growth, the pervading optimism for the labor market, operating conditions, and overall expansion ostensibly bolstered the bullish case as we entered the afternoon.
As for oil, traders continued to take advantage of low crude prices, with that commodity rising more than 2%. But, in our view, this increase is not reflective of a sudden injection of positivity into the market. No, global oversupply concerns continue to weigh on sentiment here, with Libya and Nigeria’s rising outputs serving as the most recent examples of this concerning headwind. Still, the fourth consecutive upward movement has been a welcome reprieve for investors. The energy industry has accordingly been the best-performing sector thus far in the session.
So as we pass noon in New York, we see the advance-decline ratio is essentially even, with small-cap issues helping to offset profit taking from select pockets of large-cap equities. We believe some increased attention will be paid to Washington in the coming days, where Senate Republicans are working to garner support for their healthcare bill. That proposal has seen considerable blowback so far, and further roadblocks to implementing this aspect of the President’s platform could end up delaying key economic reforms on taxes, regulation, and trade. Stay tuned. – Robert Harrington
As of this article’s writing, the author did not hold positions in any of the companies mentioned.
Before the Bell
It was an up-and-down morning to start the final week of the first half yesterday morning. On point, stocks surged at the open, with the Dow Jones Industrial Average quickly speeding to a gain of more than 100 points. Joining the initial move higher were the other large-cap indexes, including the tech-laden NASDAQ, which jumped ahead to an early morning gain of some 40 points, as some well-known technology names rallied further. A modest uptick in the troubled oil market also helped.
But the initial gains failed to last, and by mid-morning, the Dow had given back all of its early strength, even falling back into the red briefly, before regaining its bearing and heading higher once more. In all, as we approached the noon hour in New York, the blue-chip composite was back in the black to the tune of some 50 points. Things were not going as well for the NASDAQ, however, as a setback in some big technology stocks pushed that composite into the red and held it there through the morning.
The market's latest reversal was partly in response to a renewed drop in oil, with a barrel of crude falling back below $43 in New York trading early yesterday. The drop in crude, albeit a positive for consumers' wallets, is also worrisome as it can mean slowing economic growth worldwide, as well as potential deflation. Indeed, with inflation already below the Federal Reserve's preferred target, there is at least some pricing concerns at the central bank. The drop in some tech stocks also hurt market sentiment, as did a weak economic number.
With regard to this last item, the Commerce Department reported that orders for durable goods dropped 1.1% in May, a larger setback than expected and the second decline in as many months, suggesting that an early-year surge had faded. Breaking the market down at this point, most of the 10 leading equity sectors were still higher, with technology the notable laggard, while advancing issues continued to hold a formidable lead on declining equities on the Big Board, which suggested some underlying strength to the afternoon.
However, the anticipated afternoon buying never really materialized with any degree of enthusiasm, as the Dow Industrials waxed and waned, remaining in the black throughout the afternoon, but with no buying enthusiasm of note evolving at any time. Overall, most of the indexes closed higher, with some solid strength in the utilities. Also, the market benefited from a modest recovery in oil prices. On the whole, trading was listless on this first Monday of summer, with the lone area of material weakness being the tech group.
In all, at the close, the Dow managed to break its four-day losing streak, adding a modest 15 points, led by a better-than-one-point gain in Disney (DIS - Free Disney Stock Report). The S&P 500 Index marked time, while the NAASDAQ, under pressure from losses in the technology group, gave back 18 points. The small-cap Russell 2000, meantime, pushed ahead slightly, adding almost two points. So, it was an unexciting Monday start to the summer on Wall Street.
Now, the first Tuesday of the summer gets under way, with stocks mixed in Asia overnight, while in Europe, the principal bourses are heading lower so far this morning, despite higher oil prices. In other markets, gold is up again; oil, as noted, is a bit stronger; and Treasury yields are edging upward. As to our futures, the early read is a little weaker ahead of several Federal Reserve speakers, including Chair Janet Yellen, and before the release of consumer confidence data at 10:00 AM (EDT). – Harvey S. Katz
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
