After the Close
The bulls bounced back on Monday, with small- and large-cap issues registering gains across the board. Breadth favored advancing stocks by a roughly three-to-one ratio, with financials, industrials, and technology sectors being particularly responsible for the uptick. Traders took advantage of reduced entry levels following last week’s skittishness, which saw each of the major indexes dropping during one the weakest weeks of trading in 2017. In fact, only the energy sector, on softness in the oil market, failed to produce an aggregate gain on the day.
The primary catalyst for last week’s bout of selling pressure was mounting tension with North Korea. But the U.S. has since assuaged those geopolitical concerns, which we believe set the stage for today’s rally. Though investor desire for more clarity on key economic reform policies related to tax, regulation, and infrastructure will grow in the coming weeks, today’s rebound is a sigh of relief from the abatement of this international headwind. With a strong earnings season largely in the rear view mirror, and a dearth of economic releases on tap, the bulls went largely unchallenged as we approach the middle of the typically quiet month of August.
Meanwhile, U.S. crude oil slid 2.5%, hitting its lowest price point in three weeks. A stronger dollar and weakened demand trends in China contributed to the downturn. Previously, tepid optimism characterized recent trading. Domestic supply trends have improved, albeit slowly, while overtures by several of OPEC’s more prominent member nations, such as Iran, signaled a growing devotion to reducing the international glut that has hampered oil prices for some time. There has been some concern, though, that the cartel will have problems attempting to convince non-members to pursue broader production cuts.
The bullish tilt to today’s trading remained intact as the closing bell rang. The NASDAQ rode the aforementioned momentum in the technology sector and boasted the widest single-day advance of the large-cap composites. The S&P 500 and Dow Jones Industrial Average were both strong in their own right, with the latter being helped by notable strength by Apple (AAPL - Free Apple Stock Report), Goldman Sachs Group (GS - Free Goldman Sachs Stock Report), and Visa (V - Free Visa Stock Report). – Robert Harrington
As of this article’s writing, the author did not hold positions in any of the companies mentioned.
Mid-Day Update - 12:10 PM EDT
Stocks are moving nicely higher today, as we embark on a new trading week. Of note, traders are likely pleased that geopolitical tensions seem to be easing. At just past noon in New York, the Dow Jones Industrial Average is up roughly 147 points; the broader S&P 500 Index is ahead 25 points; and the NASDAQ is higher by 73 points. Market breadth shows broad based support for stocks, as winners are well ahead of losers on the NYSE. From a sector view, leadership can be found in the technology and financial issues. Meanwhile, the energy stocks, while still ahead, are logging more moderate gains.
Elsewhere, traders received no major economic news items this morning. However, tomorrow should be a busier day for reports. Specifically, retail sales for the month of July, the latest monthly import and export prices, the Empire Manufacturing Survey, and a business inventories report, will all be released. These items won’t likely go unnoticed by traders.
Finally, although the second-quarter corporate reporting season has largely concluded, we are still receiving some profit announcements. Specifically, Sysco (SYY) stock is trading lower today, even though the food services company delivered a respectable quarterly report. In addition, shares of JD.com (JD) are lower, after the China-based Internet operator posted weaker-than-anticipated numbers.
Technically, stocks are recovering some ground today, after a pulling back in price over the past week, or so. It remains to be seen, if the bulls can push the market higher from here, or if some consolidation will be in order. Traders will be looking at the corporate outlook, and also will likely be turning their attention to the domestic and international political arenas. – 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
After a strong start to the month of August, with stocks rising on solid manufacturing and employment data, the major equity averages pulled back a bit off of their record highs during the first full-trading week of August. Until last week, the major indexes were getting a boost from a good second-quarter earnings season, which is nearly in the record books, sentiment that the Federal Reserve will be cautious with regard to tightening the monetary reins in the coming months, and the aforementioned encouraging economic reports.
However, the mood changed a bit on Wall Street last week, with escalating geopolitical tensions between the United States and North Korea (more below), some poor, but not unexpected earnings reports from the retailing companies, and a pullback for the technology stocks weighing on equities. That said, the major equity averages did stage a partial recovery on the final day of the bearish week, on a rebound in some of the aforementioned weaker areas. In particular, the consumer discretionary and technology sectors ended the five-day trading stretch on a positive note. Overall, the Dow Jones Industrials, the NASDAQ, and the broader S&P 500 Index rebounded by 14, 40, and three points, respectively, though the buying only modestly retraced Thursday’s outsized losses.
Looking to the week ahead, the investment community will be keeping close tabs on the business beat, with some important data due, including reports on retail sales, housing starts, and industrial production. And on Wednesday afternoon (at 2:00 EDT), the minutes from the latest FOMC meeting will be released, with investors looking for clues as to how the central bank will proceed with regard to interest-rate hikes over the remainder of 2017. Recent benign producer and consumer pricing data have investors thinking that the lead bank will be very measured with regard to tightening the monetary reins. This has given a boost to the major indexes, which, as noted above, began the month at or near record highs.
Meantime, with earnings season now nearly in the rearview mirror, investors will be looking at other areas with more scrutiny, though investors should note that we will get the latest quarterly figures from three Dow-30 companies this week: Home Depot (HD - Free Home Depot Stock Report), Cisco Systems (CSCO - Free Cisco Stock Report), and Wal-Mart (WMT - Free Wal-Mart Stock Report). Last week, the slight turn of the eye away from the earnings news proved troublesome for stocks, as escalating geopolitical tensions between the United States and rogue nation North Korea over nuclear missile testing unnerved investors. That situation continues to be a hot-button topic for traders, although it seems to have taken a turn for the better this morning, as concerns about a potential conflict between the United States and North Korea eased following an intervention by China. Specifically, China's decision to place additional sanctions on North Korea-produced products, such as coal, iron ore and fish, was viewed as an attempt to bring the country into line over its nuclear and missile programs. China is North Korea’s main trading partner.
So, with less than an hour to go before the start of the new trading week on Wall Street, the futures are presaging a higher opening for the U.S. stock market. The aforementioned China/North Korea news is easing concerns about a potential military conflict between the United States and North Korea, and giving a boost to the world equity markets. Overnight, the main indexes in China finished higher, while the major European bourses are currently in positive territory. Conversely, the price of gold, which rose last week on the fears of a conflict, is retreating this morning. Stay tuned. – William G. Ferguson
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
