After The Close
Equities opened lower this morning on global trade concerns, especially with China, but reversed course as the session progressed. At the close of trading, the Dow Jones Industrial Average was down almost eight points; the S&P 500 Index was ahead 14 points; and the NASDAQ, which forged ahead, gained 95 points. Market breadth showed a divided session, with advancers narrowly ahead of decliners on the NYSE. The technology and consumer stocks displayed leadership, while the basic materials issues lost considerable ground.
Meanwhile, the nation’s employment situation has returned to the spotlight. Today, the latest weekly initial jobless claims were reported. Of note, claims came in at 218,000 for the week of July 28th, which was a better-than-anticipated reading. Tomorrow morning, the government releases the nonfarm payroll figures of the month of July. This report will be widely watched by Wall Street, especially since the Federal Reserve seems inclined to lift interest rates, possibly at the September meeting.
In the corporate space, we heard from numerous companies over the past 24 hours. Notably, shares of Tesla (TSLA) surged in price today, reaching nearly $350 a share, after the electric car maker provided an upbeat financial outlook. Strength in this issue likely accounted for much of the gain in the NASDAQ today, and likely helped lift market sentiment.
Technically, stocks have been holding up reasonably well. The second-quarter earnings season has been encouraging, so far. However, it remains to be seen how the market will perform for the rest of August.
- 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 seesaw first two trading days of the week in which the key equity averages initially swooned and then soared on tariff and trade concerns, offset by generally uplifting earnings, the stock market began the middle session of the week, and ahead of the conclusion of the latest Federal Reserve FOMC meeting, to the upside. The strength was especially evident on the NASDAQ, which was underpinned by a near 10-point first-hour surge in the shares of technology behemoth Apple (AAPL – Free Apple Stock Report), which jumped after the company's release late Tuesday of quarterly revenues and earnings that easily topped consensus forecasts.
The stellar rise in Apple shares lifted that issue, which also is domiciled on the Dow Jones Industrial Average, past the $200 level for the first time ever. The Apple gain helped to lift the broad technology sector, which has labored somewhat in recent days, on some less-than-compelling quarterly results from other high-profile tech names. However, if we back out Apple, the Dow and some of the other composites were showing little aggregate strength. As has been the case for weeks, the good news on earnings is being offset by worries over trade, as threats, and counter threats about the imposition of levies on American and foreign goods continue.
One of the problems is that while the United States and China are reportedly edging toward talks on trade, other reports note that our country is contemplating the imposition of new tariffs on that emerging economic powerhouse. So, we are getting reports of progress on the trade front and new threats at the same time. Meantime, in other news yesterday, it was noted that ADP's (ADP) survey on private-sector job growth showed that our nation added 219,000 payrolls in July, which topped the 185,000 estimate. The U.S. government's payroll survey is due out tomorrow morning. Expectations are that 188,000 jobs were added last month.
Still, the big unknown at the time remained the Fed, which would release its interest rate decision yesterday at 2:00 PM (EDT). The consensus view was that the Fed would stand pat, and that forecast would prove correct. Expectations are that the lead bank will lift rates at next month's FOMC meeting. Ahead of that rate decision, and accompanying monetary statement, yields on the 10-year Treasury note crept just above 3.00%. As to the market, the early gains were furthered as the morning moved along, with the Dow rising more than 60 points and Apple, as noted, moving past $200 a share on an early 6% rise.
However, the market's strength would not be sustained, and as the afternoon got under way and the Street awaited the Fed, the Dow, the S&P 500, the S&P Mid-Cap 400, and the small-cap Russell 2000 headed lower. Only the NASDAQ, on the aforementioned gain in Apple, managed to stay in positive territory as the Fed decision neared. This negative tone would persist right into the Fed announcement, with the Dow's deficit moving past the 100-point mark. As before, only the NASDAQ remained in the green. Then, the Fed noted that it would hold the line on rates, but its statement was somewhat more hawkish.
Specifically, the central bank suggested that the labor situation, household spending, and the overall rate of inflation were all stronger than at the previous (June) meeting. That would seem to imply that the Fed was strongly considering a September rate hike and possibly one in December. The market would attempt to recoup some of its losses before the session ended, but there was still a noticeably bearish tone throughout, as worries about monetary policy, tariffs, and trade more than countered generally good news on the profit front.
In all, the session concluded with the Dow giving back 81 points, the S&P 500 surrendering just three points, the S&P 400 shedding six points, and the Russell 2000 easing marginally. The NASDAQ, though, on an 11-point rise in shares of Apple gained 36 points. In breaking the equity market's day down, we see that eight of the top ten groups fell in price, with the largest setbacks in the basic materials, industrials, energy, and utilities sectors. Also, declining stocks led advancing issues by almost two-to-one on the Big Board. All told, it was a modestly bearish session.
Looking ahead to a new day, we see that stocks were off sharply in Asia overnight on intensifying trade concerns, while in Europe, the leading bourses are moving notably lower, as well, as trade rhetoric heats up. Oil prices, meantime, are down; Treasury yields are a tad lower; and the U.S. equity futures are off rather decidedly thus far.
– Harvey S. Katz, CFA
At the time of this article’s writing, the author held positions in one or more of the companies mentioned.
