After The Close
The stock market started out positively today, as Dow-30 components Coca-Cola (KO – Free Coca-Cola Stock Report) and United Technologies (UTX – Free United Tech. Stock Report) registered strong earnings. Specifically, the Dow Jones Industrial Average rose around 120 points, while the S&P 500 was up by about 12 points in the early portion of the session. However, sentiment tapered off and the markets started to move back toward breakeven levels in a choppy manner during the middle portion of the trading day. Then, news broke that the U.S. and China would be holding in-person trade talks next week, helping sentiment to rise about the likelihood of an eventual deal. The Dow and S&P 500 rebounded to prior highs and continued to trend upward in the final portion of trading, closing near all-time highs. All told, the Dow closed up by 177 points, the S&P 500 rose by around 20 points, and NASDAQ climbed 47 points.
Additionally, market breadth was rather positive, as advancers outpaced decliners by a 1.8-to-1.0 ratio. Materials stocks were among the best performers on the day. On the other hand, utilities equities were among the poorer performers on the day, likely hurt by increasing interest rates.
In commodity news, oil prices were higher as improved investor sentiment likely increased demand expectations. Meantime, U.S. Treasury bond yields were higher across the board, as a flight from the safe-haven asset occurred. Too, a steepening of the yield curve occurred, which is a positive for financial company’s earnings. The VIX Volatility Indicator was lower today, as demand for options protection fell a bit.
Looking ahead to tomorrow, there will be a good amount of economic data slated for release. These include the Energy Information Administration’s weekly status report on crude oil inventories. Additionally, new-home sales for June are expected to expand to 659,000 on an annualized basis. Meantime, a good number of companies are slated to report quarterly results tomorrow. These include Dow-component Boeing (BA – Free Boeing Stock Report) before the opening bell, while other large companies are slated to report after the closing bell. Too, trading tomorrow will likely be affected by a few key earnings issuances slated for after the close today, including Dow-component Visa (V – Free Visa Stock Report).
– John E. Seibert III
Before The Bell
The stock market started out the new week and the final full five-trading day span of July generally to the upside with solid early session gains in the S&P 500 Index and the NASDAQ yesterday. The Dow Jones Industrial Average weighed on performance somewhat, especially in the morning, falling by as much as 65 points after an hour or so of trading. The small-cap Russell 2000 also lagged early in the session. The major influence in yesterday's dealings were earnings, as second-quarter reporting season is now in high gear.
Regarding the stock market, trading was rather range-bound in the morning and into the afternoon, with the Dow finally moving into the plus column just after the noon hour on the East Coast. But the comeback in the blue chips was not very convincing early in the afternoon, with selective issues on that composite holding things back. Helping the market during the day were shares of oilfield services giant Halliburton (HAL), which soared by more than 6% after reporting strong results.
Another stock doing well yesterday was Applied Materials (AMAT), with the capital goods and semiconductor giant gaining on a brokerage house upgrade. Also on the minds of traders was next week's FOMC meeting. A reduction of 25 basis points in the federal funds rate seems to be almost a given. However, a more aggressive move of 50 basis points appears increasingly unlikely and that is concerning some investors. As to earnings, 15% of the companies in the S&P 500 have reported and nearly 79% have beaten expectations.
Meanwhile, stocks refused to extend the rally by much as the afternoon proceeded, with the Dow going back and forth into and out of the plus column, while the small-cap Russell 2000 generally strayed marginally below water. But it was a different story for the S&P 500 and especially the NASDAQ, which surged in afternoon dealings, finally closing up closer to session highs than not. As before during the past number of sessions, the gains, which were harder to come by in the last week, were driven by earnings hopes and expectations.
At the close, the Dow did manage to end matters in the black, albeit grudgingly, ending ahead by 18 points. The S&P 500 Index and the NASDAQ were up by eight and 57 points, respectively, while the Russell 2000 faded slightly. The major beneficiaries were the tech stocks, especially the chipmakers and Apple (AAPL - Free Apple Stock Report), while interest rates eased slightly. Expectations for an aggressive monetary policy easing by the Fed appear to be falling, with those expecting a 25-basis point reduction easily outdistancing those forecasting a 50-point drop.
Looking ahead to a new day now, we see that the indexes were strongly higher overnight in Asia, while in Europe, the key composites are thus far climbing, as well, in early trading. At the same time, Treasury note yields are up a little and oil prices are fairly flat. Finally, on this busy week for reporting, in which about a quarter of the S&P 500 companies will issues their profit releases, the equity futures are pointing to a nicely higher opening when live trading resumes later on this morning.
– Harvey S. Katz, CFA
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
