After The Close
Despite opening the session lower, the major U.S. indexes enjoyed a solid day of trading on Tuesday. The tech-laden NASDAQ composite fared particularly well, rising to all-time highs. The advance was led by Amazon’s (AMZN) surge and strong recoveries by Facebook (FB) and Google-parent Alphabet (GOOG). The S&P 500 and Dow Jones Industrial Average delivered largely positive performances. The former benefited from rampant buying in the basic materials sector, while the latter (discussed below) experienced more mixed fortunes through the midday hours. But, highlighting the improving sentiment, each of the large-cap indexes saw their gains expand in the final hour of trading.
Meanwhile, corporate earnings season got off to a mixed start as far as the Dow 30 companies went. Of the blue chips, Johnson & Johnson (JNJ – Free Johnson & Johnson Stock Report) was the strongest performer due to its solid quarterly performance. At the same time, shares of UnitedHealth Group (UNH – Free UnitedHealth Group Stock Report) and Goldman Sachs (GS – Free Goldman Sachs Stock Report) faltered following their respective releases (subscribers ought to refer to our Supplementary Reports tab for more in-depth analysis). Also moving sharply lower, before recovering somewhat as the day wore on, was Netflix (NFLX) stock. Investors were disappointed by lower-than-expected subscriber growth in the June interim, which is underscoring broader concerns about the streaming titan’s reliance on original programming.
Turning elsewhere, U.S. crude oil bounced back after an early-in-the-day selloff, finishing the day roughly flat. Ongoing worries over the trade dispute between the U.S. and China, as well as intermittent supply disruptions overseas, were the primary factors today. Volatility in Libya and Venezuela likely helped domestic crude to recover by the end of the day.
Overall, it was a mostly positive Tuesday session, with advancing shares outnumbering declining issues. We expect earnings updates to remain the dominant influence in the coming weeks, though economic releases and unexpected geopolitical developments could also emerge as factors. As ever, stay tuned.
– Robert Harrington
At the time of this article’s writing, the author did not hold positions in any of the companies mentioned.
Before The Bell
Overall, the market was mixed at the first hour's conclusion, with the S&P 500 Index the poorest performer among the large caps. In general, there was little overall movement in either direction, save for the smaller indexes, which were moderately into the red at that point. A little profit taking after last week's run seemed to be at play here. However, after that point, we did see some positive action in the Dow, while the other indexes stayed lower at that juncture. The focus, in the meantime, remained on earnings, global trade, and the economy--the first and last of those items being positive, the middle one being negative.
As to the U.S. economy, the Commerce Department reported that retail sales had advanced by a solid 0.5% last month, matching expectations, on solid gains in sales of autos, at health care and personal care stores, at restaurants, and over the Internet. In the meantime, business inventories rose in line with forecasts, as well, business sales jumped 1.4% in May. That was the best gain since last September. Regarding the market, that move forward by the Dow proved to be brief, with that index soon falling back in step with the lower market, in general. The weakness remained most pronounced in the S&P Mid-Cap 400.
Little would change as we moved toward, although the Dow would edge into the black again. However, the other indexes remained lower. The market's weakness could be seen in the fact that every sector was lower to that time, save for the financials, which were still basking in some good earnings releases. Also losing stocks were ahead of gaining issues on the Big Board to the tune of two to one. Such a strong plurality was obvious from the weakness shown in both the mid-and smaller-cap indexes, which were decisively underperforming the market, as a whole.
Things would then change little into the middle of the afternoon in this uncharacteristically stable session to begin the trading week. As during the late morning, the Dow held nominally in the green, while the other indexes stayed a little below the neutral line. This pattern would then continue into the close, with little, if any variance. Earnings releases will heat up beginning today, with the results to date being highly favorable to the bulls. Strong earnings have been keeping the bulls in line and the bears at bay. That pattern is likely to continue going forward.
Meanwhile, at the close, the Dow, with some late buying, managed to end matters ahead by 45 points. However, the late-strength in the blue chips was not reflected in the other indexes, each of which fell into the minus column earlier and stayed there, with losses of three and 20 points, respectively, tallied by the S&P 500 Index and the NASDAQ. Meantime, eight of the 10 leading equity sectors finished with losses, with only the financial groups escaping the red arrows. Finally, losing stocks retained the two-to-one advantage they had held onto earlier. So, it was a generally weaker day for the Street.
Now, a new day is on tap, and for a hint of our action, we look to Asia, where the leading indexes were lower in the overnight hours. In Europe, meantime, the leading bourses are tracking a bit to the downside at this hour. Elsewhere, oil, a loser yesterday, is moving lower again, while yields on the 10-year Treasury note, which is just incrementally ahead of the two-year note is yielding 2.86% currently, after a 2.86% close yesterday. Finally, the futures are now suggesting an uninspiring opening when equity trading resumes on our shores later this morning.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
