After The Close
The U.S. equity markets started the day on the plus side, but after peaking around midday, some profit taking took hold in the afternoon. Still, stocks rallied back to snap their losing streak with a positive showing on the final day of the week.
Stocks were up ahead of President Trump’s meeting with China’s President Xi Jinping at the G-20 summit in Japan tomorrow, with investors hoping that the two leaders could make some headway with ongoing trade issues. On the economic front. The Department of Commerce reported that the Personal Consumption Expenditures (PCE) price index was up 1.5% versus a year ago. The core figure, which excludes food and energy, showed a 1.6% gain. This was good news for stocks, as it came in below the Federal Reserve’s 2% inflation target, suggesting the lead bank may cut interest rates next month. Also, in a positive sign for the economy, consumer spending increased for a third consecutive month, rising 0.4% in May, while personal income was up 0.5%.
At the closing bell in New York, all three of the major indexes were in the green. By the numbers, the Dow Jones Industrial Average was up 73 points, the S&P 500 Index was ahead by 16, and the tech-heavy NASDAQ advanced by 38 points. All of the major market sectors finished in positive territory, led by industrials (+1.0%), financials (+0.8%). The latter were buoyed by bank stocks, which rallied after the Fed announced that the nation’s 18 largest banks had passed this year’s stress tests, paving the way for dividend increases and share buybacks. Elsewhere, oil prices fell, with light sweet crude dipping 2.4% on the session, to around $58.00 a barrel. Although the commodity tacked on about half a percentage point for the week, it’s still down more than 20% year over year.
Lastly, the European bourses also had a positive showing. Germany’s DAX leading the charge, tacking on a full percentage point for the day. France’s CAC-40 wasn’t far behind, as it advanced about three-quarters of a percent while London’s FTSE gained about one-third of a percent.
– Mario Ferro
At the time of this article's writing, the author did not have positions in any of the companies mentioned.
Before The Bell
Wall Street looked to break a several-day losing streak yesterday morning, as hopes about the upcoming G-20 summit this weekend between the United States and China would bring some sort of trade truce helped the stock market get off to a generally positive start. That was especially so on the NASDAQ, which led the way higher. All wasn't up to snuff on the Dow Jones Industrial Average, however, as shares of Boeing (BA – Free Boeing Stock Report) were down fairly sharply in the early going and that put the Dow modestly in the loss column as the morning moved along. In all, the market still had a generally favorable look to it as we passed the 90-minute mark of trading.
This split market, with the Dow heading lower and the S&P 500 and the NASDAQ climbing would go on until the lunch hour arrived on the East Coast. At that time, the bulls started to make a statement and we would see the blue chip composite, once off by more than 70 points, turn nicely positive. The NASDAQ, meantime, benefiting from some strength in selective tech names, was proportionately stronger, as was the S&P Mid-Cap 400 and the small-cap Russell 2000. These latter two indexes had been among the weaker components in some recent sessions.
In other news besides trade and Federal Reserve monetary policies, we saw yesterday that the Commerce Department reported revised first-quarter GDP growth of 3.1%. That was the third and final estimate for the period and compared favorably with the fourth-quarter increase of 2.2%. A month ago, in the first revision of the initial quarter GDP, the government posted an increase of 3.1%, as well. It should be noted that although growth held steady at 3.1%. Helping the quarter were a narrowing of the trade deficit and a buildup of inventories. Going forward, we expect growth to slow in the current quarter.
Looking at the market as the afternoon unfolded, we saw the Dow firm up to an advance of some 70 points, before wilting as we entered the last hour of trading. In fact, for a brief spell, the Dow would go negative again before climbing back into the black as we neared the close, only to make one more move lower as the final minutes ticked down. In all, the Dow would finish the day off 10 points. However, the S&P 500 Index (up 11 points) and the NASDAQ (ahead 58 points) would more than make up for the Dow's slight misstep.
Finally, the market would also see a slight increase in weekly jobless claims, a drop in the VIX Volatility Index, a further decline in Treasury yields, and some narrowly positive action in the NYSE ratio of gaining to losing stocks. Looking out to the day ahead, we will get a report on consumer sentiment from the University of Michigan. Aside from that, the early summer will move along with the latest results pointing to a weaker showing in Asia overnight and early gains in Europe by the key indexes, with the G-20 summit looming. All of this suggests a higher opening in New York when equity trading resumes this morning, with eyes on the G-20.
– Harvey S. Katz, CFA
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
