After The Close
The stock market started the new week on Wall Street with a mixed-to-weaker performance. Traders seemed to be weighing the corporate profit outlook against the possibility of a larger trade war developing between the United States and China.
At the end of the day, The Dow Jones Industrial Average was ahead 45 points; the broader S&P 500 Index was down three points; and the NASDAQ was lower by 20 points. There was a negative bias to today’s session, with declining issues easily outpacing advancers on the NYSE. From a sector perspective, the energy names weighed heavily on the market, as the price of crude oil dropped almost 4%, to roughly $68.25 a barrel, in New York. On a related note, the basic materials issues also lost some ground. Elsewhere, the market was lent some support from a strong financial sector. The high-yield utilities also managed to hold up relatively well.
In economic news, retail sales advanced 0.5% in the month of June, which more or less met expectations. Furthermore, business inventories increased by 0.4% in May, which came as no real surprise. Finally, the business climate in the greater New York region is holding up nicely, according to the latest monthly Empire State Manufacturing Survey. Tomorrow we get a look at the industrial production report for the month of June.
In the corporate sector, shares of Bank of America (BAC) moved higher today, after the financial giant delivered better-than-anticipated results. On a related note, shares of BlackRock (BLK) slipped a bit, even though the asset manager posted respectable results. Investors may have had concerns about the company’s outlook and the possibility of more challenging market climate. Tomorrow, widely watched companies, Johnson & Johnson (JNJ – Free J&J Stock Report) and UnitedHealth Group (UNH – Free UnitedHealth Stock Report) are slated to weigh in with their numbers.
Technically, stocks have recaptured some ground in the first weeks of July. Looking ahead, much will likely depend on the way the second-quarter earnings season unfolds. Further, global political developments will also likely be important.
- 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 five-day stretch of trading on Wall Street was an encouraging one for the bulls. With the exception of last Wednesday’s setback on the announcement that the Trump Administration was going to implement another $200 million of tariffs on China in the escalating trade war between the world’s two-largest economies, the major large-cap averages were on the rise. Helping sentiment last week on Wall Street was the expectation that the second-quarter earnings season produced bottom-line growth in excess of 20% for the S&P 500 companies, which would mark the best quarterly showing in years. The good tidings about earnings, along with the continued strong performance of the U.S. economy, emboldened investors.
For the week, the Dow Jones Industrial Average, the NASDAQ, and the broader S&P 500 Index finished 1.0%, 1.2%, and 1.0% higher, respectively. Conversely, the small-cap dominated Russell 2000 ended the week with a nominal loss, as there was clearly some rotation out of the smaller-cap companies and into the international names on the earnings expectations. In fact, the Dow 30 was the best performer on Friday, with a record second-quarter earnings report from JPMorgan Chase (JPM – Free JPMorgan Chase Stock Report) and some good results from a couple of the other big banks, getting the earnings season off to a nice start. Overall, on Friday, when looking past the gains for the major indexes, it was a mixed performance for the market. The split between up and down arrows among the major equity groups was even. Likewise, there were slightly more advancing than declining issues on the NYSE, but the opposite was the case on the NASDAQ.
Turning to the week at hand, trading is most likely to again be driven by international news—President Trump is meeting with Russian President Vladimir Putin—and the second-quarter earnings news. On the latter front, we will receive the latest quarterly data from 7 Dow-30 companies in what will be a busy week for Corporate America. As noted, the current consensus is that the second-quarter earnings season will be a good one for the corporate world and provide some support for equities against the volatility created from the ongoing international trade tensions.
Meantime, we will also get some important reports on the U.S. economy, with data due on industrial production, housing starts, and the leading indicators. We also will receive the Federal Reserve’s latest Beige Book summation of economic conditions. And just moments ago, the Commerce Department reported that U.S. retail and food services sales for June 2018, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $506.8 billion, an increase of 0.5% from the previous month, and 6.6% above the June 2017 figure. It was another good report on the domestic economy. For the most part, the U.S. economic data have provided a good deal of support for the equity market in recent months. There is a sense that the nation’s gross domestic product is now expanding by more than 4%, which will likely keep the good tidings about the economy coming. Still, our sense is that with earnings season heating up this week and the trade war on the minds of investors, most of the reports on the economy will have a modest effect on the performance of the U.S. equity market this week.
With less than an hour to go before the commencement of the new trading week stateside, the equity futures are indicating a relatively flat opening for the U.S. equity market. Overseas, the main indexes in Asia were lower overnight, while the major European bourses are modestly lower as trading moves in the second half of the session on the Continent. Weighing on the international indexes was economic data from China that showed the world’s second-largest economy expanded by 6.7% in the June quarter, but weak June industrial production readings suggest second-half could see slowing. Stay tuned.
– William G. Ferguson
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
