The futures market is trading in the red this morning, following a positive day in the stock market yesterday. Semiconductor stocks have fallen in premarket action, as news broke that the United States is considering new export restrictions to China. This news impacted stocks like NVIDIA (NVDA) and Advanced Micro Devices (AMD) among others. Additionally, a few equities are trading lower due to weaker reported results and guidance, such as food-processor General Mills (GIS), which recorded lower revenues in its fiscal fourth quarter. Overall, these moves suggest a lackluster start to the trading day.
The stock market got off to a good start yesterday, recording the first positive session in the last seven, as markets became oversold on a technical basis. The major indices started yesterday’s session in the green, and trended higher through most of the day. Overall, the S&P 500 rose 50 points (up 1.15%), the NASDAQ increased 220 points (up 1.65%), and the Dow Jones Industrial Average finished higher by 212 points (up 0.63%). Market breadth was quite positive, with advancers outpacing decliners by a 2.6-to-1.0 ratio. Consumer discretionary stocks were among the best performers on the day. However, healthcare stocks were some of the worst performers, and the sector was the only group to finish in the red. Dow-30 component Walgreens Boots Alliance (WBA) was a weak performer yesterday after the company reduced guidance, citing lower customer spending and slower demand for coronavirus-related products and services.
In commodity news, oil prices declined yesterday as concerns about sluggish demand started to creep in. U.S. Treasury bond yields were mostly lower yesterday, though a few short-term issues had much higher yields. The bond market remains heavily inverted, with short-term rates trading well above those with longer durations, which usually portends a coming recession. The Chicago Board Options Exchange Volatility Index, or VIX, also known as the fear index, fell yesterday as traders demanded less options protection.
Several economic reports will be released in the days ahead. These include initial jobless claims and pending home sales on Thursday. On Friday, the Bureau of Economic Analysis will release its core- and non-core personal consumption expenditures (PCE) price indexes and the University of Michigan will report the consumer sentiment index for June. Additionally, Federal Reserve Chairman Powell will participate in a series of policy discussions in Europe, which could give further insight into future interest rate policy. On the earnings front, several dozen companies will release quarterly results, though activity is expected to pick up considerably in the weeks ahead after the second calendar quarter ends. Overall, we think most eyes will be on the inflationary data due later this week. - John E. Seibert III
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
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