After the Close
The major stock averages fell today, failing to build on yesterday’s nice gains. At the close, the Dow Jones Industrial Average dropped 88 points; the NASDAQ dipped 19 points; and the S&P 500 gave back eight points. However, market breadth to some degree diverged from the major indexes, as advancers topped declining issues on the New York Stock Exchange.
Discouraging news regarding the possibility of an upcoming government shutdown combined with potential rollback of the NAFTA trade agreement contributed to a poor tone for trading today. The unwinding of NAFTA would create uncertainty, and Wall Street does not like uncertainty.
The morning’s business data wasn’t very helpful, either. Word that newly built home sales fell by 9.4% in August created some questions about the long-running bull market in housing. One line of thinking is that a relatively steep 6.3% rise in the median home price of a new home, to $313,700, put a damper on sales.
The good news with respect to housing is that interest rates have been falling steadily since March. The average rate on a 30-year fixed-rate mortgage was 3.89%, as last reported by mortgage-buyer Freddie Mac. That points to continued support for the housing industry, in combination with healthy employment levels.
More broadly in terms of interest rates, the Federal Reserve begins its annual meeting in Jackson Hole, Wyoming tomorrow, with Fed Chair Janet Yellen expected to deliver a speech later this week. Policy makers have not been able to normalize interest rates nearly as quickly as they would have liked, with inflation showing few signs of picking up in a big way. It will be interesting to see if the Fed sticks to its view that inflation will eventually pick up.
Elsewhere, weekly data on oil inventories from the Energy Department showed declines in both crude oil and gasoline that were in line with expectations. That helped oil quotations turn in a gain of about $0.50 a barrel, to around $48.39 in NYMEX trading.
Higher oil prices appeared to help the energy sector, which was the best performer among the market’s ten major sectors. Utilities also gained on a further drop in interest rates. The benchmark 10-year Treasury note fell to 2.17% today, after having reached 2.64% last December. There is speculation that interest rates will fall further, which could help stocks.
- Robert Mitkowski
At the time of this report, the analyst did not own any of the companies mentioned.
Mid-Day Update - 12:15 PM EDT
Equities opened lower this morning, and are still in negative territory at roughly noon in New York. Specifically, the Dow Jones Industrial Average is down 46 points; the broader S&P 500 Index is off four points; and the NASDAQ is lower by 10 points. Market breadth shows a slightly favorable bias to today’s session, as advancers are just ahead of decliners on the NYSE. The major equity groups are still mixed. The energy and basic materials issues are pressing ahead, while the consumer stocks are weighing in the market.
Elsewhere, there were a few economic reports released this morning. Of note, new home sales slipped to an annualized rate of 571,000 units in the month of July. A somewhat better number had been expected. In the energy area, crude oil inventories declined by 3.3 million barrels during the latest reported week, according to the EIA. Of note, oil inventories have been easing steadily for the past few months, and that may be a plus for energy prices. Tomorrow, existing home sales for the month of July are due out. We will also get a look at the latest weekly initial jobless claims.
Finally, a few corporations delivered profit reports over the past 24 hours. Specifically, shares of Lowe’s Companies (LOW) are slipping in price today, after the building supplies retailer delivered a weaker-than-expected release. In the retail space, both shares of American Eagle (AEO) and Express (EXPR) are advancing, after those companies managed to show some progress.
Technically, stocks managed to firm up yesterday. However, we will need to see some further buying over the next few days.
- 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
Following an unimposing session to begin the trading week on Monday, Wall Street rallied from the opening bell yesterday and managed to fashion a wire-to-wire win, with the Dow Jones Industrial Average gaining more than 100 points at the outset. What's more, the equity market continued to gain traction as the morning progressed, with the market heading into the lunch hour on a high note, with advances spread all across the board. Helping the strong early gains was a solid showing by aerospace and defense giant Boeing (BA), a Dow-30 component, as well as renewed hopes for tax reform.
The advance by Boeing stock, meantime, which surpassed $4 a share on the day, reflected its receipt of a government contract for intercontinental ballistic missile systems replacements. Boeing stock rallied along with shares of other defense contractors in the wake of the President's speech on the Afghanistan War on Monday night. Also helping the market was its late comeback on the week's first trading session, thus enabling there to be some carryover from that earlier recovery. Moreover, it was a day in which the NASDAQ outperformed, jumping better than 1.1% in the late morning, well ahead of the gains in the Dow and the S&P 500.
As to the market's overall showing, just about all of the 10 leading equity sectors advanced, with just the utility group showing a little sloppiness early in the day, as investor appetite for risk clearly gained. That tolerance for greater risk was underscored by the strong showing on the NASDAQ, as well as by progressive improvement on the small-cap Russell 2000 and the S&P Mid-Cap 400. Meetings among the respective heads of the world's central banks later this week are expected to have some impact on the market, but at this point, things remain calm and the market's rebound continued into the afternoon.
The market's advance intensified as the day rolled along, with the Dow's advance crossing the 160-point line as we passed the noon hour on the East Coast. The gains then would increase further as we moved deeply into the afternoon, with Wall Street fashioning its best gain since April, with the Dow climbing by almost 200 points. The technology and financial stocks continued to lead the way. Meantime, as the session persisted, it became apparent that a good chunk of the gains was tied to speculation that the Republicans and the White House were finding some areas of support on tax cutting.
This is a crucial point, as the hopes for tax reform have been critical in pushing stocks higher since the election. If this is a false hope and if Congress and the White House cannot reach a viable tax deal, the market could reverse itself in the months to come. For now, though, the bulls are having their way and stocks performed strongly from start to finish yesterday. In fact, as the session wound down, the stock market reached its high point of the day, with the Dow closing in on a 200-point plus gain for the session. The NASDAQ, meantime, continued to outperform, as did the small-cap Russell 2000.
When the final bell sounded, the Dow had retained nearly all of its advance, ending higher by 192 points. The S&P 500 Index gained 24 points and the NASDAQ was higher by 84 points. Gains, meantime, were spread all around, with each of the 10 equity groups ending higher, led by technology and basic materials. Also, gaining stocks easily outdistanced declining issues on the Big Board by more than a two-and-a-half to one ration. It was a full-fledged rout of the bears, helping the Dow to come to within 100 points of the 22,000 level again.
Now, a new day begins, and one that the bulls hope will see an extension of yesterday's dramatic rally. For some hint about today's action, we look to Asia and see that stocks were mixed in overnight dealings, while in Europe, the bourses are trading modestly lower at this hour. Elsewhere, oil, a comeback story yesterday, is now off a bit; gold is edging upward, moving closer to $1,300 an ounce; and Treasury yields, up yesterday, are gaining again thus far this morning. Finally, our futures are now pressing lower at this hour on political concerns.
- Harvey S. Katz
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
