Before The Bell
The U.S. stock market moved nicely higher yesterday, commencing the new week on Wall Street with a constructive session. Overnight, the international markets showed some weakness. In Asia, the Nikkei moved lower, and in Europe, the FTSE 100 has lost some ground. On our shores, the S&P 500 futures are hinting at a soft opening.
While the economy and the corporate sector remain under pressure, Wall Street seems to be maintaining a forward-looking perspective. It is encouraging that many states across the nation are starting to ease restrictions and are allowing businesses to reopen. However, it remains to be seen how quickly business will recover. Also, there is a risk that the pandemic will flare up again, as some health professionals have warned. Meanwhile, some better-than-expected economic news helped spur on the bulls recently. Last Friday, the government’s employment report showed that 2.5 million jobs were added to the economy during the month of May. This figure stood in sharp contrast to the consensus forecast, which called for a loss of nine million jobs. In addition, the unemployment rate came in lower than expected, which was a pleasant surprise. Today, the FOMC begins its two-day meeting, which will conclude tomorrow afternoon with an interest-rate decision and some prepared remarks.
In the corporate arena, the first-quarter earnings season is now over. However, we have been hearing from some retailers, many of which follow a different fiscal year. Among the widely held names, Tiffany & Co. (TIF) weighed in with a report earlier this morning, posting weak top-and bottom-line numbers. The retailer’s stock has been in the spotlight lately, amidst news that its merger with LVHM has run into complications.
Technically, the stock market managed to make progress in the month of May, despite some volatility. In addition, the month of June has started on a positive note. The broader S&P 500 Index has moved back above its 200-day moving average, and is now about 5% below the level reached in February, just before the market plunged and the coronavirus took hold. The NASDAQ is back at high ground. Sentiment remains bullish, and many investors who sold stocks several weeks ago may now be buying back into the market. Notably, institutional investors that are measured against benchmarks may need to reposition their portfolios.
From a sector perspective, the energy issues displayed leadership yesterday. In the past, the energy stocks have served as an indicator for the global economic outlook. Of note, the price of crude oil, now over $38 a barrel, has marched higher over the past month, after sinking to an extreme low in April. Over the weekend, major energy producers agreed to production cuts and that is likely a positive development.
— Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
