After The Close
The market started out mixed today, as the Dow Jones Industrial Average was lower, while the S&P 500 was higher. Too, this occurred despite some early positive results out of Dow-component Walgreens Boots Alliance (WBA – Free Walgreens Boots Alliance Stock Report), which posted stronger-than-expected quarterly results. The markets then trended higher as the session continued, as sentiment improved concerning a positive outcome between the U.S. and China in trade negotiations. However, this upbeat price action stalled for a bit, before the composites made a second move higher. At its daily heights, the Dow was higher by around 70 points, while the S&P 500 was up 16 points. The markets tapered off in the final portion of the session, and the Dow even moved nominally into the red. All told, the blue-chip composite closed down 10 points, while the S&P 500 was up by 11 points.
Additionally, market breadth was rather positive, despite the indices being not far off breakeven levels, as advancers outperformed decliners by a 2.4-to-1.0 ratio. Financial stocks were among the best performers on the day, while energy issues were among the weakest.
In commodity news, oil prices were just above breakeven levels ahead of the G-20 meeting. Meantime, U.S. Treasury bond yields were lower across the board, as traders moved into the safe-haven asset.
This move included some flattening of the yield curve as long-term rate decreases were larger than those in the near term. The VIX Volatility Index was only slightly lower today, despite a positive market. This shows that traders are holding onto their options protection.
Looking ahead, tomorrow will be full of economic data. This includes the University of Michigan consumer sentiment index for June. Additionally, personal income and spending for May are expected. Too, a few key quarterly earnings reports are slated for release, including one from Dow-component NIKE, Inc. (NKE – Free NIKE Stock Report) after the bell today. Overall, we think traders will be focused on any developments out of the G-20 meeting between President Trump and President Xi of China.
– John E. Seibert III
Before The Bell
Comments by the U.S. Treasury Secretary yesterday morning regarding a potential trade accommodation with China, suggesting that there was a path to a complete trade deal got the stock market off and running yesterday morning, following three straight losing sessions--the last of which was rather steep. The United States and China are scheduled to hold high-level trade talks this weekend at the G-20 summit. In addition to optimism on trade, the market got a lift from the technology sector, in particular the semiconductors, which were up en masse in the wake of strong gain in the shares of Micron Technologies (MU).
Other semiconductor stocks on the rise included Nvidia (NVDA) and Advanced Micro Devices (AMD). But the big story, at least for one day, was trade and the positive sentiments released by the Treasury Secretary. Specifically, he intoned that "we were about 90% of the way there, and I think there's a path to complete this." He, accordingly, expressed optimism about the pending G-20 meeting. Meanwhile, this strong early showing came on the heels of the worst one-day performance by the stock market in June and resulted from comments by the Federal Reserve Chair in which he said the bank was taking a wait-and-see approach.
The bulls, conversely, were hoping for a more definitive monetary statement, in which Fed Chair Powell would seem committed to lowering interest rates and rather soon. As it stands now, the consensus is that the bank will begin reducing borrowing costs in July. We are not arguing with that consensus. Taking all of this in hand, the stock market drifted nicely higher yesterday morning, with the tech-driven NASDASQ in the lead thanks to the aforementioned strength in the semiconductor stocks. The Dow and the S&P 500 also pushed forward, but somewhat more modestly in the early going.
The market then strengthened somewhat into the lunch hour, with the Dow climbing back toward the day's early highs in which the blue chips were ahead by more than 110 points. Optimism on trade with China was the big item of note in the early going, as the sense of looming accomplishment on the mercantile front was aiding the bullish cause to a healthy degree. Meanwhile, in other news on the day, the Commerce Department reported that orders for durable goods decreased by 1.3% in May, making it three down months in the past four for this notoriously volatile series. As with most indicators these days, the impact was muted.
Stocks would then eased back materially in the final hour of trading, with the Dow at one point yielding almost all of its gain for the session before it took on some life as we headed into the home stretch. Helping the market stay in the plus column was a nearly five-point jump in the shares of tech icon Apple (AAPL – Free Apple Stock Report). Otherwise, there was little movement in the market of note as we looked to close out a fairly tight range-bound session. However, there was some last-minute selling of modest proportions, which would give the market a mixed outcome, with the Dow losing 11 points but the NASDAQ still gaining 25 points on the surge in Apple.
Now, a new day begins and following that disappointing close, the markets in Asia moved higher in the overnight hours, while in Europe, the leading bourses are tracking a mixed path thus far this morning. In other news, Treasury note yields, which edged up to 2.05% at yesterday's close on the 10-year instrument, are now passing hands at 2.04%. And oil prices are down ahead of the G-20 and OPEC meetings so far in early dealings. Finally, the U.S. equity futures are posting early gains in the pre-market.
– Harvey S. Katz, CFA
At the time of this article’s writing, the author held positions in one or more of the companies mentioned.
