The futures markets started in the red this morning, following the July 4th trading holiday. Fears have increased about the state of the global economy, as survey data showed slowing services growth in China and Japan. Moreover, June Eurozone Purchasing Managers Index data showed that business contracted. Additionally, trade tensions with China have increased after that nation’s government imposed export restrictions on germanium and gallium, which are key components in semiconductors and solar equipment. Overall, these factors suggest a weak start to the trading day. Still, investors should note that the Federal Open Market Committee will release the minutes of its June meeting during the trading session, giving some insight on the Fed’s decision-making process.
The market started weakly on Monday, pulling back following the release of the June Manufacturing PMI (Purchasing Managers Index) reading of 46.3, which showed contracting manufacturing activity for a second-straight month. After the initial price drop, the markets recovered throughout the day on Monday, reaching just above breakeven levels. Altogether, the S&P 500 rose five points (up 0.12%), the Dow Jones Industrial Average increased 11 points (up 0.03%), and the NASDAQ climbed 29 points (up 0.21%). Advancers outpaced decliners on Monday by a 2.3-to-1.0 ratio. Consumer discretionary stocks were among the best performers, while healthcare stocks were among the weakest.
In commodity news, oil prices have increased over the past few days as traders have priced in supply cuts from Russia and Saudi Arabia. Meantime, U.S. Treasury bond yields have been mixed, with short-term rates rising and long-term ones falling. The yield curve remains heavily inverted, which usually portends a coming recession. Most traders have been pricing in another interest rate increase at the late-July Federal Open Market Committee meeting. The Chicago Board Options Exchange Volatility Index, or VIX, also known as the fear gauge, was up slightly Monday.
Several economic reports will be released in the days ahead. These include the ADP payroll report for June, initial jobless claims, S&P’s flash U.S. Services Purchasing Managers Index, and the Institute for Supply Management’s Services Index on Thursday. On Friday, U.S. nonfarm payrolls, hourly wages, and the unemployment rate will be reported. Additionally, several dozen mostly-smaller companies will release quarterly results in the coming days. Still, the second-quarter earnings season won’t kick off in earnest until next week. Overall, we think most eyes will be on the economic data and the release of the Fed’s minutes later today. - John E. Seibert III
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
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