After The Close
The U.S. stock market started out a new week on Wall Street with an upbeat performance. At the end of trading today, the Dow Jones Industrial Average was ahead about 178 points; the broader S&P 500 Index was up 12 points, and the technology-heavy NASDAQ was higher by 52 points. Market breadth was quite favorable, as winners were well ahead of losers on the NYSE. From a sector perspective, the consumer and technology stocks led the market higher. In contrast, the energy and utility issues moved notably lower, missing out on today’s gains.
It was a light day for economic news with one notable report released this morning. Specifically, factory orders dipped 0.8% during the month of April, where a slightly better result had been anticipated. Tomorrow will be a relatively quiet day, as well. However, the Institute for Supply Management’s Nonmanufacturing Index for the month of May will be released. The pace of economic news will pick up quite a bit on Wednesday and Thursday.
In corporate news, few companies posted quarterly results today. However, there was some M&A news to report. Specifically, shares of Microsoft (MSFT – Free Microsoft Stock Report) edged higher after the technology giant announced that it would be purchasing GitHub for $7.5 billion. In other news, shares of Nektar Therapeutics (NKTR) sank on drug-related news.
Technically, the stock market has been making some progress lately. Despite the distractions elsewhere, investors seem pleased with the U.S. economy and the corporate outlook, for now.
- 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 most recent holiday-abbreviated trading week on Wall Street (the U.S. market was closed last Monday for Memorial Day) took investors on a roller coaster ride. A busy week of news, some good and some bad, both stateside and overseas was responsible for the wide, and at times pronounced, swings in the major equity averages. For the week, the performance was mixed, with the Dow Jones Industrial Average finishing lower, but the NASDAQ, and the S&P 500 managing to eke out modest advances, with notable buying from start to finish during Friday’s bullish session helping push the latter two indexes into the plus column for the four-day stretch.
The volatile performance of the equity market last week was marked by two pronounced sessions of selling on Tuesday and Thursday. The selling each day was prompted by overseas concerns. Early in the week, the world equity markets sold off on political worries about Italy and Spain, and the impact that possible upheaval in leadership could have on the economies and financial markets of both nations. Then on Thursday, news that the Trump Administration was going to implement tariffs on certain basic materials from allies Mexico, Canada, and the European Union unnerved the market. Investors were worried that new trade disputes, in addition to the ongoing one between the United States and China, would hurt the global economy. The tariff news hurt the Dow 30 the most, as the index is comprised of multinational companies that could suffer from any possible trade wars.
However, on Friday, as noted above, the major U.S. equity indexes rallied on strong economic news stateside. A report from the Labor Department took the sting away from the dour international news. Specifically, the government reported that nonfarm payrolls increased by 223,000 positions in May, far surpassing the consensus expectation of 188,000 jobs. That strong employment and unemployment report, along with a reading earlier in the week that showed that first-quarter GDP expanded by 2.3%, emboldened investors. The only drawback was the higher-than-expected increase in wage growth, which may raise more concerns about inflation. However, a pullback in oil prices on supply concerns late in the week eased some of the inflation concerns from the wage growth.
The major equity averages ended last week on an encouraging note, with respective gains of 219, 112, and 29 points, for the Dow 30, NASDAQ, and S&P 500 Index. The buying was broadbased, with advancers leading decliners by a wide margin on both the New York Stock Exchange and the NASDAQ, and nearly all of the major equity groups, save for the defensive-oriented utilities, finishing nicely in positive territory. Not surprisingly, the leadership came from the economically sensitive sectors, with notable advances for the technology, industrial, and basic materials categories.
Looking at the week at hand, our sense is that the market will eventually take it cues from the overseas dealings, as we are now in a quiet season for earnings and the news from the U.S. business beat is light. With regard to the economy, the main reports will be the latest data on nonmanufacturing activity and the international trade gap. The light news on the economy may also give investors more time to focus on inflation, which thus far this year has played a big role in the uneven performance of the U.S. equity market.
With less than an hour to go before the commencement of the new trading week stateside, the equity futures are presaging a higher opening for the U.S. stock market. So far overseas, the main indexes in Asia finished notably higher overnight, while the major European bourses are comfortably in positive territory, as trading moves into the second half of the session on the Continent. It appears, at least for the moment, the worries over a trade war between the United States and other major economies is taking a back seat to what looks like the easing of political risks in Europe and the aforementioned strong U.S. employment data.
– William G. Ferguson
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
