Before The Bell
After an up-and-down Monday and Tuesday, in which the stock market surged on the first day of the new week and then dropped rather sharply--especially the Dow Jones Industrial Average--on Tuesday, equities began the middle session of the current five-day span nicely to the upside, boosted by another move higher in some large technology issues. At the morning peak, the blue chips were up more than 200 points, while the NASDAQ, led by another big gain in the shares of Apple (AAPL), was up by close to 130 points.
As before this week, and during the past several hectic weeks, the stock market appeared to be balancing the positives of an improving economy with the negatives borne of a rapid surge in COVID-19 cases across more than 30 states. One cautionary note is that data from the aforementioned Apple, which tracks changes in the volume of directions requests, show that such requests had fallen in late winter as the virus spread rapidly. They then picked up though the spring, but are down again, suggesting greater caution regarding the taking of road trips.
Meanwhile, after that early spurt, the Dow started to backtrack and would give up all of its gains by the early afternoon, even going in and out of the plus column for a stretch. The NASDAQ, though, which continues to be underpinned by larger tech issues, such as Apple and Microsoft (MSFT), held onto most of its early advance. The S&P 500 Index also held in the green, but to just a modest degree, while the Russell 2000, the key small-cap composite, moved little from the breakeven line.
All of this was happening on a sparse day for economic news. That will be the case for much of the balance of the week, although tomorrow we will get the release of the Producer Price Index. As for the stock market, after pausing for much of the afternoon, there was another buying spree during the last hour of trading , which would lift the Dow back up fairly close to session highs and back above 26,000. In all, the Dow would gain 177 points. The NASDAQ would add 149 points on strength of the increases in tech.
As to influences to look for the day ahead, Federal Reserve officials suggested yesterday that there were some air pockets facing the economy. One such was businesses exhausting existing order books without refilling them. All the while, the economy is facing the continuing surge in COVID-19 cases. So, while the equity market is doing quite well, there are concerns around that could derail the upturn, at least for a while. We thus will likely need to look at the disease track as the summer moves along.
In the meantime, after some early strength in the futures last evening, the equity market appears set to open the penultimate session of the week with modest upward bias, as the Street seeks to make it three out of four days this trading week with gains.
– Harvey S. Katz, CFA
At the time of this article's writing, the author had positions in AAPL.
