After the Close
The stock market edged higher this morning, reversed course dramatically in the afternoon, but managed to end on a mixed note. At the close of trading, the Dow Jones Industrial Average was ahead roughly 85 points; while the S&P 500 Index was off slightly; and the NASDAQ, which encountered considerable selling, was lower by 114 points (a nearly 2% decline). Meanwhile, market breadth suggested some underlying support for equities, as advancers were about even with decliners on the NYSE. From a sector perspective, the energy, financial, and basic materials made some progress, while the technology issues weighed heavily on the market.
Meanwhile, it was a quiet day for economic news, with just one item reported. Specifically, wholesale inventories declined 0.5% during the month of April, while analysts had been looking for a slightly better showing. Next week, the FOMC begins its two-day meeting on Tuesday, and will conclude on Wednesday afternoon with an interest-rate decision and some prepared remarks. While most traders anticipate another rate hike will be approved, they may exercise some caution before the meeting.
Elsewhere, investors did not receive many major corporate profit reports over the past 24 hours. However, shares of VeriFone Systems (PAY) traded lower today, after the business equipment company posted disappointing bottom-line results. Elsewhere, it should be noted that shares of Apple (AAPL – Free Apple Stock Report) moved lower on reports that its new phones will be equipped with chips that some fear will be slower than those used by competitors. Given Apple’s massive market capitalization, weakness in the stock likely contributed to the broader technology selloff.
Technically, stocks have been advancing for some time now, and fatigue may be starting to set in. While pullbacks are not enjoyable for most traders, a pause in the action may be needed, and might even be healthy at this point, especially given the current valuations. – Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Mid-Day Update - 12:00 PM EDT
Stocks are broadly higher today as the bulls maintain their grip on Wall Street. Right around the noon hour on the East Coast, the Dow Jones Industrial Average is up about 100 points; the NASDAQ is six points higher; and the S&P 500 is showing a ten-point gain. Market breadth is firmly positive, with advancing issues doubling up decliners on both the Big Board and the NASDAQ.
Investors are clearly shrugging off potentially harmful developments in Washington, such as yesterday’s hearings by former FBI Director Comey, as unsightly but, for now, immaterial. In the U.K., as well, the failure of Prime Minister May’s Conservative party to win an outright majority in Parliament has not rocked the boat much, at least in terms of equity valuations.
Things could change, of course, possibly if Congress is not able before too long to pass legislation enabling President Trump’s growth agenda. The prospect of tax reduction and a faster pace of economic expansion have supported stocks since the November elections.
There is some risk that if Congress is tied up with other matters, including budget and debt-ceiling negotiations, health care legislation, and possible confirmation hearings, it may not get to the economic measures investors are looking for to boost corporate earnings. The next couple of months could prove telling in that regard.
In the meantime, the uptrend in stocks remains in place so far today. This session’s leading sectors include financial and energy. Financial stocks may be benefiting from the view that next week’s Federal Reserve policy meeting will result in another quarter-point hike in the Fed funds rate.
Recent economic data have a mixed tone, including a disappointing reading this morning on wholesale trade, but the Fed nevertheless seems on track for a rate hike next week.
Elsewhere, energy-related shares are benefiting from a slight uptick in crude oil prices. Oil quotations tumbled earlier in the week as the Energy Department reported a three million barrel increase in domestic inventories. A similar-sized decline had been the expectation.
Among individual names, in the tech space, shares of Hong Kong-based Alibaba Group (BABA) are moving higher following a strong 2018 sales forecast by the company. Alibaba’s business model is similar to that of Amazon.com (AMZN) in this country.
Overall, shares are in good shape heading into afternoon trading. – Robert Mitkowski
At the time of this writing, the author did not have positions in any of the companies mentioned.
Before the Bell
Stocks broke from the starting gate rather quickly yesterday, even though uncertainty remained the order of the day as former FBI Director James Comey testified before the Senate Intelligence Committee, eventually disputing White House contentions about the accuracy of past statements about the FBI and its performance. However, as there were no major breakthroughs and no so-called smoking gun apparent in his testimony, the market retained a positive bias for much of the session, eventually ending matters with mostly higher prices, particularly on the small- and mid-cap end of the spectrum.
Meanwhile, Mr. Comey's testimony, albeit the headline event, was not the only thing on Wall Street's mind, as the investment community also was focused on the European Central Bank meeting, which concluded with no change in interest rates, and the general election in the United Kingdom, in which Prime Minister Theresa May was trying to secure a majority of seats in Parliament and thus solidify her position as head of the ruling Conservative Party. Results there had not been finalized as the market session ended on our shores. Expectations had been that she would be triumphant, but results now suggest she will fall short of a majority of seats in Parliament.
As to our trading, the market began the session modestly higher and extended its gains into the early afternoon, with the 30-stock Dow Jones Industrial Average jumping some 90 points to a record intraday high of 21,265. The Standard and Poor's 500 Index also tracked higher, coming to within a fraction of a point of a record. The NASDAQ secured an all-time high, too, as the afternoon progressed. But it was not all smooth sailing, as stocks faltered in mid-afternoon, with the Dow and the S&P 500 giving back their gains and turning negative, while the S&P 400 and the Russell 2000, early big winners, stayed in the black, but less so.
The market's overall calm in the face of critical remarks by Mr. Comey regarding President Trump reflects the fact that little overly damaging appeared to come out of the testimony. If that is, indeed, the eventual case, then the timeframe for the adoption of business-friendly tax and infrastructure programs, which appeal to Wall Street, may not be delayed beyond what's already the case, as the Administration continues to try and put out one fire after another. As to the later-day action, after this backing down by the market as we moved inside the final 90 minutes, stocks soon steadied somewhat.
In fact, as the final minutes of trading ticked down, the bullish action resumed, with the Dow and the S&P 500 Index joining the NASDAQ, the S&P 400, and the Russell 2000 in the plus column, although the final results still left all of the indexes well below their respective highs for the day. All told, trading ended with the Dow, once up 90 points, then down some 35 points clinging to just a nine-point win. The S&P 500, meantime, was ahead less than a point at the close, while the NASDAQ was better by 24 points, which was only nominally below session highs. The smaller averages continued to outperform.
So, the latest chapter in the Washington drama is apparently in the books for now, though ongoing interpretations will continue for some time, in all likelihood. As to the day ahead, with little economic news to digest, stocks were trading mostly higher in Asia in the overnight hours, while in Europe this morning, Theresa May's lead in seats, but lack of a majority in Parliament is sparking some buying in the major bourses. Also, oil is up; gold is off; and Treasury yields, up yesterday, are now mixed. Finally, U.S. equity futures are trading in a pattern that suggests a higher opening when live trading resumes at 9:30 AM (EDT). – Harvey S. Katz
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
