After The Close
The last day in July found traders in an up mood, with the three major U.S. indexes spending most of the session firmly on the positive side of the ledger.
Optimism on the trade front was likely a key factor behind the market’s push today. Reports that the U.S. and China were trying to re-engage in negotiations apparently temporarily eased concerns over the potential negative impact of a tariff war between the two super powers. Also, earnings season remains in full swing, with most companies continuing to top Wall Street expectations.
Elsewhere, the Commerce Department reported that U.S. consumer spending in June marked a fourth-straight increase. Purchases increased 0.4%, matching the gain in personal income. Meanwhile, the Conference Board’s consumer confidence index for June increased to 127.4 in July, up from a revised 127.1 reading for June. Finally, the S&P/Case-Shiller national index of single-family home prices showed a seasonally adjusted sequential increase of 0.4% for the month of May.
At the closing bell, the Dow 30 was up 108 points, or 0.4%, the S&P 500 was ahead by 14 points (0.5%), and the NASDAQ had tacked on 42 points (0.6%). The upswing was widespread, with advancing issues outnumbering decliners by more than two-to-one. Most of the 10 major market sectors were solidly in the green, with the biggest gains coming from industrial issues, which climbed 1.5%. Basic materials and healthcare stocks also put in a solid showing, each gaining about 1%. On the other side of the ledger, telecommunications shed about a quarter percent, while financials ended just below breakeven.
Elsewhere, oil prices took a hit, with light sweet crude falling 2.1%, to around $68.70 a barrel. The drop followed yesterday’s reports that Donald Trump was open to a meeting with Iran’s President. However, there was no indication that the Administration’s proposed sanctions against that nation’s oil business were up for negotiation.
Trading on the European bourses also ended on an up note, with Britain’s FTSE 100 advancing two-thirds of a percentage point, while France’s CAC-40 moved up by about a third. Germany’s DAX closed out just above breakeven.
Looking ahead, the Federal Reserve is widely expected to hold the line on interest rates when it ends its two-day meeting tomorrow afternoon. And Friday’s jobs report is likely to continue to show a favorable trend in employment figures.
– Mario Ferro
At the time of this article's writing, the author did not have positions in any of the companies mentioned.
Before The Bell
Wall Street opened on a mixed note yesterday, with the Dow Jones Industrial Average pushing modestly higher on good earnings from heavy machinery maker Caterpillar (CAT – Free Caterpillar Stock Report). That blue chip company beat on its second-quarter bottom-line and raised its forecast for the full year, lifting prices in the process on concerns about the mounting costs of the President's tariff program. Caterpillar shares rose about 2% early on. But the NASDAQ, a casualty late last week, fell further on worries about technology sector earnings.
However, that mixed tone would not persist, and while the NASDAQ continued its losing ways, it was soon joined by the Dow, so that as the noon hour arrived in New York, both of those composites were off by about 100 points each on those tariff concerns and some jitters about earnings. Also, there was skittishness ahead of the two-day FOMC meeting about to begin now. Expectations are heavily weighted in favor of the Federal Reserve deciding to leave interest rates unchanged this month.
Most economists believe that the Fed will raise rates twice more this year. Our guessing is that such hikes will come in September and December. Of course, investors will be focusing tomorrow afternoon on just what the central bank will say in its monetary statement issued just after the meeting concludes at 2:00 PM (EST) tomorrow. In the meantime, the focus will be on earnings, which continue to be issued in large numbers. For the most part, these reports are making for good reading. But there have been some outliers.
The market would then drift lower as the afternoon wound down, with both the Dow and the NASDAQ showing material losses. This pattern would continue over the balance of the second half of the session. There then would be some last-minute selling, so as the final bell sounded, the market would be near the worst levels of the day. Our sense is that worries about a few high-profile tech names were some of the reasons for the selling. Concerns about trade, however, would seem to have been the main issue with traders.
In all, the Dow would fall 144 points; the S&P 500 would shed 16 points; and the NASDAQ would tumble 107 by points. Losses would be sustained by eight of the ten major equity sectors, while the Big Board would see losing stocks overtake winners by about a six-to-five margin at the close. Individually, Caterpillar would lose its nice early advantage and wind then up closing down by nearly three points. American Express (AXP –Free American Express Stock Report) would also falter among the Dow stalwarts.
Looking out at a new day now, and as the Fed readies itself for its FOMC meeting, we see that stocks were higher in Asia overnight, while in Europe, the major bourses are now showing mostly nominal gains. Also, oil, a big gainer yesterday, with the energy stocks being among the few winners on the day, showing modest losses in early action. Also, yields on the 10-year Treasury note, which closed yesterday at 2.98%, are now trading at 2.95%. Finally, U.S. equity futures are posting gains at this early hour.
– Harvey S. Katz, CFA
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
