After The Close
The major large-cap stock averages mostly rose on the first full day of trading in the second half of 2017, but the broader market showed a downward bias. At the close, the Dow Jones Industrial Average was little changed; but the NASDAQ rose 41 points; and the S&P 500 gained a few points. The number of declining stocks easily surpassed advancing issues on both the New York Stock Exchange and the NASDAQ, though.
Investors had a lot to deal with coming back after the Fourth of July holiday on Tuesday, with much of the news posing hurdles. First and foremost was the perception of an escalated military threat from North Korea, following a missile test yesterday by that isolated Asian nation. The increased geopolitical tensions kept a lid on sentiment, given that security concerns came to the forefront.
Defense stocks did well for the session with the news on North Korea, with shares of Boeing (BA - Free Boeing Stock Report) and Lockheed Martin (LMT) posting nice gains.
Falling oil quotations also hemmed in the bulls. The price of oil in New York trading dropped nearly $2 a barrel, to just over $45. Oil had enjoyed a mini-rally over the past couple of weeks, but the tide turned as evidence suggested OPEC was increasing exports. It didn’t help that Russia is not seen as supporting further production curtailments. That undercut the view that oil producers would do ``whatever it takes’’ to support prices.
Tomorrow, the Energy Department is expected to report that U.S. oil stockpiles fell 2.8 million barrels in the latest week. The data are delayed by a day because of the holiday this week.
Adding to the uncertainty posed by tensions with North Korea and a weak oil market, Wall Street was tentative ahead of the release of the minutes of the last Federal Reserve policy meeting at 2:00 p.m. Eastern time. As it turned out, the Fed minutes showed a divided camp at the central bank, in terms of where inflation is headed and how quickly the Fed should unwind its balance sheet. But there was a consensus that interest rates should continue to gradually rise.
As to the market’s major sectors, technology stocks were winners today after some recent bouts of selling. Energy shares were laggards with the sharp decline in the price of crude oil.
– Robert Mitkowski
At the time of this article's writing, the author did not have positions in any of the companies mentioned.
Mid-Day Update - 12:10 PM EDT
U.S. equity markets started off the day with modest gains, but that proved to be short lived as trading became mixed to lower as the morning session wore on.
North Korea’s successful test launch of an intercontinental ballistic missile on Tuesday was likely still weighing on traders’ minds. Meanwhile, earlier this morning we learned that U.S. factory orders fell 0.8% in May, marking a second consecutive decline. Meanwhile, energy also weighed on the broad market, as crude-oil prices dipped following word that Russia was against any further production cuts. Light sweet crude was down 3.4%, at $45.45 a barrel, threatening to break an eight-day winning streak.
Later today, the market’s attention will turn to the Federal Reserve, as it releases the minutes from the June FOMC meeting at 2:00 PM EDT. Traders will be looking for any clues as to what the lead bank’s next steps might be. Friday’s jobs data from the U.S. Labor Department will also be closely watched.
As we reach the noon hour of trading in New York, all three of the major indexes had bounced off their lows from earlier in the morning. By the numbers, the Dow Industrials, after falling as much as 100 points from its peak, was only down by 14 points. The broader S&P 500 Index, following a similar arc, was fractionally above breakeven. Meanwhile, the tech-heavy NASDAQ was faring the best of the lot, having spent most of the session in the green, was showing a gain of 22 points.
In terms of sector performance, most segments of the market were in the red. The notable exception were technology shares, which were up nearly three-quarters of a percent. On the other side of the ledger, energy shares were off by 1.5%, reflecting the aforementioned dip in petroleum prices.
Meanwhile, trading in the European bourses was upbeat, with the key bourses spending most of the day in positive territory. London’s FTSE, Germany’s DAX and France’s CAC-40 were all showing modest gains as the closing bell approached.
– 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
The second half may have started out with a scheduled half day of trading, as the exchanges concluded activity at 1:00 PM (EDT) ahead of the July 4th Independence Day break, but it was a full-fledged rally that greeted traders to begin the week. On point, not only did the Dow Jones Industrial Average fashion a wire-to-wire win, but that blue chip composite surged to yet one more all-time high in the process. Joining in the festivities was the Standard and Poor's 500 Index, which posted a perky advance, but did not rise to a record high.
Boosting sentiment and stock prices on Monday was another breakout in the financial group, as Dow component Goldman Sachs (GS - Free Goldman Sachs Stock Report) led the blue chip charge. That stock surged by more than $5.00 a share. But although this was a broad-based win for the bulls, it was not a total triumph, as the encumbered technology group suffered once more, pushing the NASDAQ, following some early bullish fireworks, into the red for the session. There really appears to be some clear sector rotation, with the bulls exiting the tech group in favor of the banking issues.
In addition to sector rotation, the pre-July 4th bullish run also was helped by a much stronger-than-expected rise in manufacturing activity in June. On point, the Institute for Supply management reported that its survey on manufacturing rose to 57.8 last month. That was up notably from May's 54.9 reading and was also nicely ahead of the flattish 55.0 survey result generally predicted for the latest month. The gain was boosted by strength in new orders, production, backlogs, employment, and supplier deliveries.
So, buoyed by this strong showing, which offset some of the more dour figures released recently, the Dow and the S&P 500 Index rallied into the close, although some of the bloom did come off of the rose late in the session, as a little profit taking wound its way into the closing results. The good manufacturing results, however, gave the Street some confidence that the upcoming second-quarter GDP survey, which is due out late this month, will show a nice bounce from the disheartening 1.4% advance logged for the first quarter.
As noted, though, the market's strong early rise did falter somewhat near the close, so that as the final numbers came in, we saw that the Dow, once up some 210 points, ended higher by a more moderate, but still appreciable 130 points. The S&P 500 Index managed to retain a six-point gain, but the NASDAQ, under pressure from some notable reversals in technology, lost 30 points. Earlier, that composite had been ahead by some 37 points. The Russell 2000, though, held onto most of its gains, closing higher by 11 points.
After Monday's solid overall win for the bulls, we peek out at a new day and following what we hope was a happy and safe Independence Day holiday, a day in which we can give thanks for the meaningful freedoms we have enjoyed for nearly 250 years, we find that stocks were mostly higher in overnight trading in Asia, in spite of the increased nuclear threat from North Korea. Also, equities are thus far mixed in Europe early this morning. In other trading, we see that oil is lower on a supply build at OPEC; gold is little changed; and Treasury note yields are flat. Finally, in early dealings, U.S. equity futures are mixed, with further weakness on the NASDAQ.
— Harvey S. Katz
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
