Before The Bell
After a topsy-turvy equity market session on Monday in which the major indexes roared out to a strong first half of the day before wilting near the close on new coronavirus fears, the stock market came back to push forward nicely yesterday morning. Once more it was optimism about corporate earnings and some hopes that despite the difficult news on the COVID-19 front that the recent reopening of the economy would continue with few interruptions. Unlike Monday, though, stocks did not falter late in the day.
In fact, after a hesitant start, the Dow Jones Industrial Average, benefiting from rising hopes for a vaccine to treat the rampant coronavirus pandemic, which now has claimed more than 136,000 U.S. lives, started a session-long uptrend that pushed the blue chips well past the 26,500 mark as the morning ended and the afternoon began. The upturn then received an additional boost when one of the Federal Reserve Board governors said that more support from the lead bank was needed in the form of asset purchases.
According to the Fed's official, the U.S. economy is showing signs of slowing down after a slight recovery signaling the need for more monetary assistance. A major reason for the recent weakening in the economy is the surge in COVID-19 infections and the need for some economic help and increased social distancing. Armed with this suggestion for new moves on the monetary side, the market rocketed into the close, with the Dow soaring to a near-session-best advance of 557 points at the conclusion of trading.
Aside from the Fed and new coronavirus concerns, there was the start of second-quarter earnings season with reports from several high-profile financial institutions, including Dow-30 component JPMorgan Chase (JPM), which posted a better-than-expected quarter bottom-line figure and saw its shares nudge slightly higher. On the other hand, struggling banking concern Wells Fargo (WFC) disappointed holders by reporting poor results and a larger-than-expected cut in its quarterly dividend. That issue dipped in price.
Meanwhile, on the economic front, the U.S. Labor Department reported that the Consumer Price Index had jumped by a greater-than-forecast 0.6% in June, largely on soaring gasoline prices. Excluding the rise in that commodity, prices were up just modestly and, overall, the impact of this report on trading was minimal and the equity market then went on its merry way for much of the session. As indicated, stocks ended the day on a high note.
Finally, after the close of trading and in the afterhours, biotechnology company Moderna, Inc. (MRNA) said it had very positive news on a vaccine to treat the coronavirus. That stock, one of the leading equity market performers this year, shot up in price during the evening hours giving the entire futures market a nice lift that continues so far this morning. In all, we would expect another solid opening to the equity market today.
– Harvey S. Katz, CFA
At the time of this article's writing, the author did not have positions in any of the companies mentioned.
