After the Close
With second-quarter earnings season warming up, the U.S. stock market experienced a slight, broad-based pullback with select pockets of growth today. Though the Dow and S&P 500 both spent most of the day in the red, both pared losses as the afternoon rolled on. The S&P, in fact, worked its way back near the breakeven line by the close, even though market breadth favored the bears from bell to bell.
But there were silver linings to today’s downturn. Mainly, financial and technology issues rose steadily during the second half of the day. The latter’s strength is evidenced by the NASDAQ’s afternoon rally, which saw the tech-laden index reach new highs. Investors are awaiting earnings from Alphabet (GOOG), Facebook (FB), and Amazon.com (AMZN), which have been three of the best-performing stocks so far in 2017. The former’s release is expected after today’s closing bell, with the tech behemoth expected to post lower profits.
Meanwhile, U.S. crude oil edged 1.3% higher, as Saudi Arabia attempted to instill some confidence in the recently challenged commodity market. Last week’s hearty run up was all but erased on Friday, on the heels of an announcement that indicated output increased from OPEC’s member and allied nations during the prior month. The leading cartel member assured that it would reduce exports by almost 1 million barrels-per-day, compared to last year’s August production rate. Many hope this move will influence other nations to step up their efforts at addressing the global supply glut.
Looking forward, the rest of the week’s fortune will largely continue to be decided by earnings. But with the initial GDP reading for last quarter due out on Friday morning, and the Federal Reserve’s two-day summit beginning tomorrow, traders will have a lot to digest in the coming few days. So far, with roughly three quarters of the S&P 500 index’s reporting components having beaten sales and earnings estimates, we expect the seasonal financial updates to provide enough of a tailwind to sustain the market’s momentum over the coming weeks. – Robert Harrington
As of this article’s writing, the author did not hold positions in any of the companies mentioned.
Mid-Day Update - 12:25 PM EDT
The U.S. stock market opened lower this morning, but seems to be recovering somewhat. At just past noon in New York, the Dow Jones Industrial Average is down roughly 52 points; the S&P 500 Index is off three points; and the NASDAQ is ahead nominally. Market breadth is slightly negative, as decliners are still outnumbering advancers on the NYSE. Most of the market sectors are trading in negative territory, with notable weakness in the utility and basic materials issues. In contrast, the financial names are bucking the downtrend.
Meanwhile, there was just one economic report released this morning. Specifically, existing home sales dipped to an annualized rate of 5.52 million units during the month of June, which was a somewhat softer reading than had been anticipated. Tomorrow, we receive additional information about the broader real estate sector, with the release of the latest monthly S&P Case-Shiller Home Price Index. Further, the Conference Board will deliver its consumer confidence report for the month of June.
Elsewhere, the second-quarter earnings season is now in full swing. This morning we heard from a few widely watched companies. Specifically, shares of Hasbro (HAS) are trading lower on concerns about soft demand for some product lines. In the energy area, shares of Halliburton (HAL) are under pressure, too, even though the oil services company delivered decent results. After the market closes today, technology giant Alphabet (GOOG) will weigh in with its numbers. That report will likely command some attention.
Technically, equities are starting off the week with a lackluster performance. However, the market has made considerable progress over the past couple of weeks, so a brief pause here may be warranted. In addition, equities are still trading at elevated valuations, so investors may be a bit wary. – 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 once again favored the bulls. The second-quarter earnings season, which kicked into gear last week, has thus far proven constructive for equities, but the results have not been as strong as the figures produced by Corporate America during the March period. Meantime, the only significant report that we received from the business beat was very uplifting, as theCommerce Department reported a sizable increase in residential construction activity in June, which alleviated some concerns that the recovering housing market is showing signs of slowing. Against this backdrop, the Dow Jones Industrials, the tech-heavy NASDAQ, and the S&P 500 Index forged ahead, with the latter two indexes once again setting all-time highs in the process.
The trading session on Friday saw some profit taking, as a couple of earnings reports disappointed. The setback, though, was pared into the closing bell. Also hurting stocks on the final day of last week was a drop in oil prices both here and on the Continent. The price of West Texas Intermediate contracts fell sharply, finishing the week in the vicinity of $45 a barrel, a level that will make it hard for the oil and gas companies to deliver solid earnings results. This comes ahead of some meetings this week among OPEC and non-OPEC leaders looking to find a solution to work down the glut of oil presently in the market. Not surprisingly, the energy sector was the biggest laggard among the 10 major equity groups. There also was weakness in the basic materials and technology areas. Conversely, there was interest in the higher-yielding consumer staples, telecommunications, and utilities sectors.
Last week may prove to be the appetizer before the main course for the investment community. Indeed, the volume of quarterly results scheduled to be released over the next five days will far exceed last week, with data due on 12 Dow-30 companies, highlighted by the latest figures from the oil giants Exxon Mobil (XOM - Free Exxon Mobil Stock Report) and Chevron (CVX - Free Chevron Stock Report) on Friday. Too, the news on the economy will be much heavier this week, including the first reading on second-quarter GDP from the Commerce Department on Friday. Further, the Federal Reserve will hold its two-day monetary meeting beginning tomorrow, with a rate decision coming at 2:00 P.M. EDT on Wednesday. These three events will keep investors busy and will play a big role in whether the bulls will be able to keep the party going,
Meantime, the trading so far today overseas has been mixed. Overnight, the main indexes in Asia finished modestly higher, but the bears are out on the Continent, as some disappointing economic data from the euro zone and a jump in the value of the euro have taken a toll on trading so far today. The euro hit a nearly two-year high against an U.S. dollar this morning. The strength of the local currency is weighing on the stocks of the major European exporting companies, most notably the automakers. In general, the euro has risen in recent weeks on expectations the European Central Bank will begin to scale back its bond-buying monetary stimulus scheme, possibly as early as this fall.
With less than an hour to go before the commencement of trading stateside, the futures are indicating some modest profit taking when the U.S. equity market opens for business. As noted, it looks to be a big week for Wall Street, as investors will have to digest a slew of earnings reports, important data on the economy, and the central bank’s latest monetary policy decision. Stay tuned. – Harvey S. Katz
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
