After The Close
The stock market delivered a generally strong performance today. Of note, traders were busy digesting the latest batch of corporate profit reports, while hoping that the U.S. and China may be getting closer to reaching a trade deal. At the end of today’s session, the Dow Jones Industrial Average was down 79 points; but the broader S&P 500 Index was ahead 14 points; and the NASDAQ was higher by 70 points.
Market breadth showed broad support for equities, as advancing issues were well ahead of decliners on the NYSE. From a sector perspective, the technology stocks and services issues staged a solid advance, offsetting weakness in the consumer and basic materials issues.
Meanwhile, in economic news, new home sales rose to an annualized rate of 646,000 units during the month of June. This reading was somewhat softer than had been anticipated. Tomorrow we will get a look at several items. Specifically, the weekly initial jobless claims figures are due out. The latest monthly durable goods report also will be released. On Friday, the advanced estimate for second-quarter GDP will be the main highlight, and that issuance will be closely followed by the investment community. Of note, a 1.8% increase in GDP is currently expected.
Elsewhere, in the corporate sector, second-quarter earnings season is now well under way. In the technology sector, shares of Texas Instruments (TXN) moved nicely higher, after that company released a good report. Disappointing news from Boeing (BA – Free Boeing Stock Report) and Caterpillar (CAT – Free Caterpillar Stock Report) weighed on those issues, putting the aforementioned downward pressure on the Dow Jones Industrial Average.
Technically, stocks have done quite well lately. It is probably a bit early to say just how the second-quarter earnings season will unfold in the coming weeks, but so far the results are fairly good.
– 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 stock market, following an unimposing performance to start out the new week on Monday, hit the ground running yesterday morning, with the major averages, most notably the Dow Jones Industrial Average, pushing ahead strongly. The primary catalyst for the early gains, which reached the low triple digits in the Dow on a point basis, was a succession of better-than-expected earnings reports, including a welcome issuance from Coca-Cola (KO - Free Coca-Cola Stock Report). Also, overseas stocks got an early boost, which helped our markets, on expectations that the European Central Bank will soon cut interest rates.
Meanwhile, that same expectation in regards to the Federal Reserve also is helping our stock market. As for the Fed, forecasts are almost unanimous that our nation's central bank will pare borrowing costs when it meets next week, with the lone question being whether the reduction will be 25 or 50 basis points. The latest forecast is that the Fed will not be overly aggressive, in that it will opt for the lesser rate cut. Some pundits have been speculating on a larger reduction. As to the market, after that initial sharp bounce, things settled back somewhat, although the market still was higher as the first hour passed.
The market then entered the first part of the afternoon clinging to modest aggregate gains, mostly in the 50-point area on the Dow, as earnings continued to offer a measured amount of help. Then, after the advance was seemingly stuck in a near-neutral position, word came out that trade talks between the United States and China were about to start up again within days, although the timeline for any possible trade deal still could be months away. In any event, this modicum of good news helped stocks to rally sharply, with the Dow surging to a gain of 180 points in the mid-afternoon.
In addition to earnings, the Fed, and trade, there also was the economy to consider yesterday, and shortly after the market opened, the National Association of Realtors reported that existing home sales weakened in June, as total sales saw a small decline after a previous month of gains. All told, the East and Midwest edged higher, while two larger regions, the South and West experienced greater declines. In all, sales totaled 5.27 million homes on an annualized basis last month, down 1.7% from May. They also were off 2.2% on a year-to-year basis.
That sluggish existing home sales metrics (sales also were lower than forecast), however, had little impact on the market, certainly in comparison to the upbeat outlook on trade with China. In fact, the market strengthened still further as the afternoon wound down, with the Dow rising close to an all-time high amidst optimism over the pending trade meetings. The other indexes also forged ahead concluding matters at the session's highs. Overall, it was another strong day, following the ho-hum start to the week and last week's series of setbacks that led to the worst showing since May.
Looking out at a new day now and following yesterday's 177-point win in the Dow and the 47-point advance in the NASDAQ, we see that stocks were higher in Asia overnight, while in Europe, the major bourses are lower in early dealings on weak economic data. Elsewhere in action so far this morning, oil prices are up a bit and Treasury note yields, which gained nicely yesterday on the possibly upbeat trade news, are backing off thus far in the early hours today. Finally, with earnings continuing to be released en masse, the early read on our equity futures is lower.
– Harvey S. Katz, CFA
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
