Before The Bell
The stock market, up for several days in succession, sought to add to that enviable winning streak yesterday and did so, fashioning a wire-to-wire advance by the major averages. Behind this persisting optimism is the promise of further economic reopening efforts, notwithstanding the selective pauses now in effect due to the accelerating rise in COVID-19 cases, the often less-ominous tone of earnings, and growing hopes for a vaccine to combat this pandemic.
Let's look at these issues. The economy is under some renewed pressures that are not yet reflected in the major business reports, some of which reflect conditions in effect only through mid-to-late June when the coronavirus was not yet advancing at its current hectic pace. Then, there is the consequent pause being placed on some economic reopening plans, especially in states such as California and Texas. Finally, there is the push to come up with a successful vaccine. Here companies such as Moderna (MRNA) and Pfizer (PFE) are in the lead.
As to the economy, following some uneven inflation data on both the producer (wholesale) and consumer levels, the Commerce Department issued data yesterday on industrial production and factory utilization. Specifically, the government reported that such output rose by 5.4% in June following a 1.4% uptick in May. However, such output remained 10.9% below its pre-pandemic February level. Capacity utilization also rose last month following a small gain in May. Here, too, the level of activity is down from early in the year.
Meanwhile, after yesterday's quick start by the market, in which the Dow Jones Industrial Average would break out of its 25,000-to-27,000 trading range for a time, climbing to a session-best 27,071 within the first hour of trading, the blue chips and the other indexes would settle back. In fact, as we hit the noon hour in New York, the averages would pare most of their gains. But this is a hard market to keep down, and the Dow and the other indexes would climb back up during the afternoon hours, with the blue-chip composite leading the charge higher.
This uptrend would continue into the close, despite some intermittent backing and filling, leaving the Dow and the S&P 500 up by 227 and 29 points, respectively. The NASDAQ, under some pressure early owing to losses in big tech names, also would right the ship into the close, as that composite would close at a record high adding more than 60 points. Looking ahead, and following some issuances this morning, the government will release housing starts figures tomorrow morning. Next week, we will see reports on existing and new home sales.
Finally, following another winning day on Wall Street, the U.S. equity futures moved back and forth after the close yesterday and into the evening. At present, the futures are suggesting a lower opening to the new trading day later this morning.
- Harvey S. Katz, CFA
At the time of this article's writing, the author had positions in PFE.
