After The Close
After shaking off a lackluster start to trading on Wednesday, the S&P 500 and NASDAQ looked poised to maintain their bullish streak while the Dow, more subject to developments from the geopolitical arena, struggled to get on the right footing. But ultimately, the roughly even number of advancing and declining stocks presaged a more-mixed finish to the session for the large-cap indexes. Indeed, despite holding on to decent gains into the afternoon, the S&P 500 moved closer to its breakeven line, even slipping into negative territory for a time. The NASDAQ, meanwhile, exhibited resilience in the face of late-afternoon pressure as it traded near its daylong high well into the final hour.
At odds today, as has been the case for several weeks now, were the competing influences of strong earnings, uncertain trade pacts, and murkiness surrounding the legal and political environment in Washington, D.C. Specifically on the latter, Wall Street had ostensibly shaken off concerns over the recent legal woes of former Trump employees Paul Manafort and Michael Cohen, preferring rather to focus on a solid economic backdrop as another strong earnings season dwindles to a close. But investors anxieties related to other factors revealed themselves as the afternoon matured.
True, the market seemed to turn its attention to the Federal Reserve in the latter half of Wednesday’s session. The central bank’s minutes from its most recent monetary policy meeting were published this afternoon. The release was closely watched, especially as it relates to inflation and future interest hikes (the consensus assumption remains for two additional augmentations in 2018). Still, Friday’s speech by Chair Jerome Powell is likely to draw plenty of attention, as well, given President Trump’s recently broadcasted aversion to additional increases and trade tensions between the country and its biggest trade partner, China.
Elsewhere, U.S. crude oil jumped 3.1% to a two-week high after a report showed U.S. stockpiles fell significantly last week. The Energy Information Administration’s release indicated that domestic inventory levels dropped by 5.8 million barrels, roughly four-fold more than anticipated. A forecasted drop in Iran’s oil exports also helped to stoke the price of U.S. crude higher. Nonetheless, the commodity is unlikely to break out of its $65-to-$70 a barrel range in the near term, as investors wait for the aforementioned developments, and many more, to play out a bit.
Overall, neither the bulls nor bears were able to definitively stake their claim. Going forward, traders will have plenty of information to process on the economic, political, and trade realms over the week’s final two days of trading. Stay tuned.
– Robert Harrington
At the time of this article’s writing, the author did not hold positions in any of the companies mentioned.
Before The Bell
The bull is back and riding high, as August drones on. In all, after some choppiness early last week on mounting concerns about an escalating economic and financial crisis in Turkey, indications that the United States and China could soon be making progress on the trade front, has gotten the ear of traders and sent stocks higher. Specifically, the market turned on a dime last Thursday and added modestly to those on Friday and again this past Monday. Then, yesterday, stocks drove further into the plus column during the morning, with the Dow Jones Industrial Average, the S&P 500 Index, and the NASDAQ all storming higher.
With these latest gains, the venerable bull market was on track to become the longest advance in history. And the gains, which saw the Dow surge by more than 100 points as we hit the noon hour in New York, and the NASDAQ jump 65 points, was exceptionally broad, with nearly all of the equity sectors pressing higher, while gaining stocks led decliners by more than a two-to-one ratio on the Big Board. Meantime, the market, which had risen earlier this summer on encouraging news on the economic and profit fronts, but stalled when attention turned to Turkey and trade, is now back in gear as trade progress with China seems very possible.
In other news, the President and the Federal Reserve are in the news, with the former advocating for no further interest rate hikes, while Fed Chair Jerome Powell prepares for the upcoming monetary conference this week at Jackson Hole WY. The Fed, meantime, will be meeting in September with a third rate increase this year likely high on the agenda. The President's opposition to another increase reflects his concern that too rapid an escalation in borrowing costs in 2018 or in 2019 could serve to slow, or even derail, the long business expansion, which now is nearing a decade in duration.
Still, despite such worries and the likelihood interest rates will head higher this year, stocks continue to climb, with the Dow, the S&P 500, and the NASDAQ all holding near session highs as we moved further into the afternoon. Proportionately greater gains, meanwhile, were being tallied by the S&P Mid-Cap 400 and the small-cap weighted Russell 2000. This strong showing then would continue into the latter stages of the afternoon, with little further change in the indexes, until just before the close when selling ensued, as the Street awaited further news on trade talks with China. Next on the agenda will be the Jackson Hole meeting.
The market then would give back ground at the close, as the Dow surrendered its low triple-digit win, to end matters with a gain of 64 points. The S&P 500 would conclude matters ahead by six points, while the NASDAQ, once up nearly 80 points, closed up by just 38 points. Still, it was a clear win for the bulls. Next up will be the minutes from the July 31st to August 1st FOMC meeting. That issuance is due out tomorrow afternoon. Also, of note, will be this Friday's speech in Jackson Hole, Wyoming by Fed Chair Jerome Powell, especially after the President's recent comments about his aversion in further interest rate increases.
Looking ahead to a new day now, we see that stocks were mixed in Asia overnight, while in Europe, the bourses are following an uneven path, as well, so far today. Also, oil, a gainer yesterday, is now climbing further; yields on the 10-year Treasury note, which ended matters at 2.84% yesterday, are now at 2.83%; and U.S. equity futures are pointing to a small loss at the open when trading resumes later this morning, as we await the release of the Fed minutes and political winds blow in Washington.
- Harvey S. Katz, CFA
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
