After The Close
The stock market started off the new week on Wall Street with a somewhat constructive performance. At the close of the session, the Dow Jones Industrial Average was ahead roughly 89 points; the broader S&P 500 Index was up seven points; and the NASDAQ was higher by five points. Market breadth was positive, with advancers outpacing decliners on the NYSE. Most of the major stock sectors made progress, helped by gains in the energy and basic materials issues. In contrast, the high-yield utility stocks lost some ground.
Meanwhile, there were no major economic news items posted this morning. Tomorrow will be a light day for reports, as well. However, the pace should pick up on Wednesday, as existing home sales for the month of July, the minutes from the FOMC’s latest meeting, and a weekly crude oil inventory report are all due out.
In the corporate arena, a few widely watched companies delivered quarterly profit reports today. However, there was some M&A news worth mentioning. Specifically, shares of SodaStream International (SODA) moved sharply higher on news that that consumer goods company has agreed to be acquired by beverage giant PepsiCo (PEP) in a deal valued at roughly $3.2 billion.
Technically, stocks have been quite volatile during the month of August, but have displayed some resilience, as well. With the second-quarter earnings season largely over, traders will likely be concentrating on larger matters, such as the global trade situation. Negotiations with China will likely take center stage.
– 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
The most recent five-day stretch of trading on Wall Street saw the major equity averages seesaw back and forth, with the swings in trading—at least when looking at the headline figures—somewhat pronounced. The week started out to the downside, then rallied, before falling anew midweek when worries about a financial crisis in Turkey roiled the global equity markets. But the final two days of trading saw the bulls flex their muscles again and the major equity indexes came roaring back. In the end it was a volatile, but winning week for those long equities.
The strong rally to end last week was fueled by reports that the United States and China will meet in the coming days to try to work out their differences with regard to trade. There was some optimism that a meeting may ease some of the trade tensions that have emerged since March 1st between the world’s two largest economies. The market rallied forcefully on Thursday on this news.
Also giving a boost to stocks was some encouraging earnings data from Corporate America. Of note, was a strong quarterly report from retailing giant Walmart Inc. (WMT –Free Walmart Stock Report). The investment community cheered strong sales growth from the retailing behemoth. The Walmart report came on the heels of another good quarterly release from fellow Dow-30 component and home-improvement titan The Home Depot (HD – Free Home Depot Stock Report) on Tuesday. The strong data from these industry leaders overshadowed some disappointing results from some of the department stores, like Macy’s (M) and J.C. Penney (JCP).
On Friday, the U.S. equity market started the session on a slow note, but as the morning progressed, the buying picked up and the major indexes were solidly in positive territory. The gains, for the most part, were held to the closing bell. For the day, the Dow Jones Industrial Average, the tech-heavy NASDAQ, and the broader S&P 500 Index were up 111, 10, and nine points, respectively. The buying was rather broadbased, with winning issues leading losers by more than two to one on the New York Stock Exchange. The advance/decline ratio was a bit narrower on the NASDAQ Exchange, but positive nonetheless. Among the 10 major equity groups, there were all up arrows, with the leadership coming from the economically sensitive sectors, including the basic materials, energy, and industrial areas.
Looking at the week at hand, with second-quarter earnings season, save for some reports from the retailers, nearly in the books, the attention of Wall Street will likely be on the international trade front. Specifically, the United States is set to impose tariffs on another $16 billion of Chinese goods this Thursday, and China has promised to respond with their own measures. This comes, as noted above, when Chinese and U.S. officials are set to meet in Washington this week for talks. Our sense is that the performance of the equity market will be driven by the news that emanates from these talks. From a data perspective, we will also receive a few important reports on the housing market, including figures on existing and new home sales.
In addition to the trade talks, investors will be looking to Friday morning when Federal Reserve Chairman Jay Powell speaks at the annual Jackson Hole economic policy symposium, the year’s most significant meeting for economic and monetary policy discussions. Mr. Powell’s speech, which is scheduled for 10:00 A.M. (EDT), will address the topic of monetary policy in a changing economy. With regard to monetary policy, the market seems to be factoring into its valuation two more 25-basis-point interest-rate hikes this year.
With less than a half hour to go before the commencement of trading stateside, the equity futures are pointing to a modestly higher opening for the U.S. stock market. Overseas, the trading has been mostly positive to start the week with both the indexes in China and on the Continent in the black. Meantime, the new week has brought some M&A news from the corporate world, with beverage giant PepsiCo (PEP) agreeing to acquire industry niche player SodaStream International (SODA) in a deal valued at north of $3 billion. 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.
