After The Close
After a brief dip early in the session, stocks moved nicely into positive territory, but trading became mixed late in the afternoon.
Investors probably breathed a sigh of relief this morning after the Federal Reserve, in its semi-annual report to Congress, indicated that it saw no need to step up the pace of interest rate hikes. Despite a strengthening labor market and the threat of tariffs, the lead bank sees inflation remaining near its target rate through at least 2020. The market also put trade issues on the back burner, as earnings season got going in earnest.
Although early results have been mixed, Wall Street is mostly looking for sizable year-over-year gains, with lower taxes being a key driver.
At the closing bell, the Dow Jones Industrials were up 95 points, returning to the 25,000 mark for the first time in several weeks. The broader S&P 500 Index also gained ground, rising three points, and the tech-heavy NASDAQ reversed a mid-afternoon dip into the red to close the day two points to the upside.
In terms of market sectors, performance was evenly split between gainers and decliners. The former were led by industrials, and consumer cyclicals and non-cyclicals, all of which gained about half a percentage point. On the other side of the ledger, telecommunications stocks shed 0.7%, while financials were down 0.2%. Bank stocks were in the spotlight today, with several heavy hitters reporting second-quarter earnings. JPMorgan Chase (JPM – Free JPMorgan Chase Stock Report) and Citigroup (C) both topped analyst forecasts, but Wells Fargo (WFC) disappointed.
Elsewhere, light sweet crude recovered some ground, rising 0.6% to around $70.75 a barrel. However, the commodity was down 4.3% for the week, after Libya announced it could increase output by 700,000 barrels a day.
Meanwhile, the major European bourses also ended the day in the plus column. France’s CAC-40 led the way, rising close to half a percent, while Germany’s DAX tacked on about a third of a percentage point, and Britain’s FTSE 100 posted a more modest gain.
– 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
As far as Wednesday went, generally benign figures on producer or wholesale inflation and continued optimism on the pending start of second-quarter earnings season would not be sufficient to allay fears of a worsening trade rift between the world's two largest economies. However, yesterday was another story, as diminished trade nervousness eased with China slow to tack on retaliatory tariff charges. So, after falling by more than 200 points on Wednesday, the blue-chip composite rose by almost that amount in the early going of the latest session.
As to other influences, there is inflation, as the companion Consumer Price Index was released. Here, as with the Producer Price Index the day before, the news was largely supportive, with the issuance showing a 0.1% rise in retail prices in June. Expectations had been for an advance of 0.2%. However, the 12-month increase of 2.9% was the fastest in six years. Meantime, prices for all items less food and energy increased by 0.2% last month, matching expectations. This latter reading likely further ensures that the Federal Reserve will hold the line on interest rates when it meets on July 31st and August 1st.
Meanwhile, the stock market continued to strengthen right through the lunch hour and into the afternoon, with the Dow ascending the 200-point plateau with room to spare as that composite again neared the 25,000 level on optimism about both the economy and earnings and a lesser fear about the vexing tariff issue, at least for one day. The tech-heavy NASDAQ also sprinted ahead, gaining 100 points in mid-afternoon, and clearly overwhelming the prior session's moderate setback. Meanwhile, in one other item, weekly jobless claims fell to 214,000, thereby keeping that economic focal point near a cyclical low.
The stock market then continued to press forward, with one eye on trade and another on the slew of earnings reports that are in the offing. As to economic reports, the major item of note today will be a consumer sentiment reading, which is due out a bit later this morning. Expectations are for a flattish result, but with that indicator remaining at a high level. However, that report is nowhere near the market mover that we saw last Friday when an upbeat report was released on June job creation. So, the focus in the new day will almost assuredly be on earnings where a number of companies are reporting.
Regarding the late-afternoon stock market, the advance continued into the close, with Wednesday's losses erased in a buying binge throughout the day. At the conclusion of trading, it was a clear win for the bulls, with gains of 225 points (the Dow), 24 points (the S&P 500), and 107 points (the NASDAQ) leading the way. Also, gaining issues swamped losing stocks on the Big Board to the tune of almost two to one, while each of the 10 major equity groups gained on the day. Leading the way higher were health care and technology, with shares of Apple (AAPL – Free Apple Stock Report) adding more than $3.00.
Looking ahead to the new day, and glancing out overseas, we see that stocks were higher in Asia overnight, while in Europe, the principal bourses are posting early gains, as well. Also, oil prices are somewhat lower and Treasury note yields, which edged up to 2.85% on the 10-year instrument yesterday, are now passing hands at 2.84%. Finally, the final session of the trading week is likely to start off with little overall change on our shores if the early read on the futures is sustained, and ahead of U.S. consumer sentiment data.
At the time of this article’s writing, the author held positions in one or more of the companies mentioned.
