After The Close
The major stock indexes moved strongly higher late in the day on reports that President Trump had reached certain trade agreements with European negotiators.
At the closing bell, the Dow Jones Industrial Average was up 172 points; the NASDAQ jumped 91 points; and the S&P 500 added 26 points. Market breadth was favorable, as the number of advancing issues outpaced decliners on the New York Stock Exchange by about a five-to-three margin.
For much of the day, though, the Dow Industrials lagged, owing to weakness in the shares of Boeing (BA – Free Boeing Stock Report), where a reduced defense margin outlook disappointed investors.
Elsewhere, some downbeat news from General Motors (GM) fit in with the broader theme of concerns about rising costs stemming from the recent imposition of tariffs, in this case on imported aluminum and steel. The automaker reduced its guidance for full-year profits by 5%-10% because of more expensive materials, and its shares fell. GM joined a growing list of companies noting that expenses were higher because of the tariffs.
For the most part, though, corporate earnings have been strong midway through reporting season. Most of the major stock market averages are not that far off their all-time highs as a result.
In terms of the economy, Wall Street is awaiting data on Friday that is expected to show that second-quarter domestic GDP rose 4.0%, or more. That would be a very good showing, although there is some thinking it could represent a peak.
Separately, this morning’s data on the housing market proved disappointing, with June new-home sales falling notably more than expected. Higher mortgage rates, along with increased costs for land, labor, and materials, are weighing on sales. Shares of the homebuilders fell in response.
Among actively traded stocks, shares of AT&T (T) declined as the company added fewer wireless customers than expected. The jury is still out as to whether AT&T’s recent $85 billion acquisition of Time Warner will be a winner, too.
In the bond market, the government’s issuance of $36 billion in five-year notes was well received. The notes offered about a 2.82% yield, compared to a 2.96% yield on the benchmark 10-year note, illustrating the flatness of the yield curve. There could be some movement in yields when third-quarter GDP figures are released ahead of the market open on Friday.
In the meantime, earnings are front and center. Stay tuned…
- Robert Mitkowski
At the time of this writing, the author did not have positions in any of the companies mentioned.
Before The Bell
Strong earnings from Google parent Alphabet (GOOG) helped push the stock market out to a selectively strong early gain yesterday morning. In all, the Dow Jones Industrial Average, boosted, as well, by strength on the tech side, sprinted out to a mid-morning advance of better than 225 points, while the NASDAQ, where the aforementioned Google is traded, saw a somewhat more subdued performance. The gains were not universal, however, for while the Dow surged in early trading, the small-cap Russell 2000 and the S&P Mid-Cap 400 fell to modest losses, as sector rotation continued.
Still, the NASDAQ achieved another all-time high, as that index rose above 7,900 for the first time ever, before easing back to a gain a little south of 7,900 in late morning. Also doing well were the industrial stocks, the energy plays, and the basic materials issues.
Meanwhile, seven of the top ten groups were higher, while gaining issues held a modest lead on declining stocks on the Big Board. As for individual stocks, there was notable strength on the multinational front, with United Technologies (UTX - Free United Technologies Stock Report), a Dow issue, beating on the revenue and earnings sides, leading to nice gains for the stock yesterday.
But the star of the morning was Google, which soared to a record high after the tech giant reported stronger-than-forecast quarterly results. Other technology paragons also climbed to all-time highs, as investors again looked beyond the potential damage caused by the myriad tariffs to take advantage of generally strong quarterly earnings. Also faring well were shares of biotech stalwart Biogen (BIIB), which posted better-than-expected revenues and earnings for the latest quarter. It would seem that few companies are worried about the trade situation. Investors, too, seem to be taking all of this in stride.
The stock market would then keep its stride as the noon hour arrived, with the Dow remaining up by about 200 points, even as the smaller-cap-weighted indexes remained lower. The averages would then stay in a split mode as the afternoon got under way, with some technology weakness evolving, even as the basic materials grouping remained strong. It seemed as though optimism about the solid start to earnings season, in which more than 80% of the S&P 500 companies that already have reported have bested profit expectations for the period, were being offset by concerns about tariffs and trade.
Then, as we moved forward into the middle of the afternoon, the Dow's gain eroded somewhat, with the earlier 240-point advance by that narrowly configured composite cut in half as we moved inside the final two hours of trading. The NASDAQ, in the meantime, joined the smaller indexes in the red, falling by over 20 points, as did the Russell 2000 and the S&P Mid-Cap 400. This two-pronged market would remain in place over the balance of the afternoon, with the Dow, after several pauses along the way, regrouping and pushing back to a closing advance just shy of 200 points.
Elsewhere, the S&P 500 Index rose by nearly a half a percentage point, while the NASDAQ, up early and then down late, finally ended the session virtually unchanged. However, large losses were sustained by the small- and mid-cap indexes. Meantime, nine of the ten major groups ended the day higher, with just the consumer cyclical stocks in retreat. Also, gaining and losing stocks were in a virtual tie on the Big Board at the close, but the ratio was unfavorable on the NASDAQ, as Google was unable to carry the NASDAQ higher when all was said and done.
Looking out to a new day, and looking over to Asia, we see that the major indexes were mixed in overnight dealings, while in Europe, the leading bourses now are tracking an uneven path, as well. In other markets, the yield on the 10-year Treasury note, which closed at 2.95% yesterday, is at 2.94% so far this morning, and oil prices are up nominally. Finally, on a day that will see data on new home sales and additional earnings reports, the U.S. equity futures are pointing to a lower opening when trading resumes at 9:30 (EDT) 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.
