After The Close
The stock market put in a mixed-to-higher session today, closing early in advance of the Independence Day holiday. At the end of trading, the Dow Jones Industrial Average was ahead 130 points; the S&P 500 Index was up six points; while the technology-heavy NASDAQ was lower by 30 points. Market breadth was still favorable, with advancers ahead of losers on the NYSE. From a sector perspective, the energy and financial names advanced, while the technology issues retreated.
Meanwhile, traders received a couple of economic news items this morning. Specifically, the ISM Manufacturing Index edged up to 57.8 for the month of June, which was a higher reading than had been anticipated.
Elsewhere, construction spending remained unchanged during the month of May, where analysts had been looking for a slight increase. There will be no economic reports delivered tomorrow in observance of the holiday. However, on Wednesday we will get a look at factory orders for the month of May. The minutes from the FOMC’s latest meeting will also be released in the early afternoon. In addition, it should be noted that the government will post the June employment figures on Friday morning, and Wall Street will likely be paying close attention.
Elsewhere, it was a quiet day for corporate news. However, as the second quarter has just concluded, the pace of reports should soon pick up dramatically.
Technically, the stock market continues to hold up reasonably well. Despite some areas of concern, the economy has been making progress, and the corporate profit outlook remains encouraging.
— 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
The major U.S. equity indexes ended a rollercoaster week for investors on a slightly positive note on Friday. There were a few catalyst responsible for Friday’s modestly bullish session, including a strong quarterly report from Dow-30 component and shoe and apparel giant NIKE Inc. (NKE - Free Nike Stock Report), a continued recovery in oil prices, and some decent news on the economy. These positive tidings offset a continued rise in bond yields, which has not been well received by equity investors. For the day, the Dow Jones Industrial Average and the broader S&P 500 Index finished 63 and four points higher, respectively, while the NASDAQ, which bounced in and out of positive territory for much of the session, ended four points to the downside. Overall, advancing issues led decliners by a comfortable margin on the Big Board, while the spread was roughly even on the NASDAQ.
The modest gains Friday on Wall Street capped an outstanding first half and second quarter, and constructive month for stocks. Year to date, the Dow 30, the NASDAQ, and the S&P 500 Index are sporting gains 8.0%, 14.1%, and 8.2%. In general, the buying has been rather broadbased, with most of the major sectors contributing to the strong rally. The energy stocks, hurt by weaker oil prices, and financial issues, hurt by low bond yields over much of the six-month stretch, were the notable laggards. The technology group, which has shown some fatigue in recent weeks, provided a great deal of leadership during the first half of the year. It also was a good run for the basic materials stocks. A strong first-quarter earnings season, an improvement in the global economy, mostly supportive news from the business beat, a supportive central bank, and hopes of some forthcoming business friendly polices from the Trump Administration gave a boost to stocks.
That said, the continued buying has pushed market valuations higher. The S&P 500 Volatility Index (or VIX), at 11.18, sits at a level that indicates the market is overheated. Against this backdrop, we think the fast approaching second-quarter earnings will be Important for stocks. The results will probably have to be good for stocks to maintain their levels or even push further higher. The prevailing consensus is for earnings growth of 6%-8% for the S&P 500 companies. There are a few issues that may be making for a wall of worry for Wall Street, including a more hawkish posture with regard to monetary policy from the Federal Reserve; concerns about gridlock in Washington D.C., which will make it difficult for legislation to get passed; and some recent disappointing readings on the U.S. economy. The recent uptick in fixed-income yields has not been greeted kindly by equity investors either.
Looking at the week at hand, we expect trading volume to be light today as investors take a long weekend ahead of the July 4th holiday tomorrow. (Investors should note that the U.S. equity market closes at 1:00 P.M. (EDT) today.) The light trading volume can produce some wide swings in trading, though. However, we do get some important news on the economy today. At 10:00 A.M. (EDT), the Institute for Supply Management, the Tempe, Arizona-based trade group, will release its latest reading on manufacturing activity. With that in mind, investors may want to give the stocks of the industrial and basic materials companies a closer look today, as their performance can be effected by the manufacturing data. The manufacturing report kicks off a busy abbreviated week on the business beat, which will also bring data on nonmanufacturing activity, the trade gap, and employment and unemployment. The latter report, and the minutes from the latest FOMC meeting (released at 2:00 P.M. (EDT) on Wednesday afternoon), could have a significant impact on trading, as each may give more insight as to how the Federal Reserve may proceed with regard to monetary policy in the second half of this year.
With less than an hour to go before the start of today’s abbreviated trading session on Wall Street, the equity futures are indicating a nicely higher opening for the U.S. stock market. Overseas, the news has been good for those long equities, as the main indexes in Asia finished modestly higher overnight, while the major European bourses are up notably as trading moves into the second half of the session on the Continent. The new day has brought some headlines from the corporate world, including a rumor that Verizon (VZ - Free Verizon Stock Report) may be contemplating making a bid to acquire entertainment giant Walt Disney (DIS - Free Disney Stock Report), news that Microsoft (MSFT - Free Microsoft Stock Report) will be laying off workers as it reorganizes its global sales group, and Target (TGT) will begin an overhaul of its apparel and housewares businesses in an attempt to attract more consumers to its stores. Stay tuned.
— William G. Ferguson
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
