After The Close
The stock market managed to advance earlier today, but weakened as the session progressed. At the close of trading, the Dow Jones Industrial Average was down 77 points; the broader S&P 500 Index was off five points; and the NASDAQ was lower by 11 points. Market breadth was negative, with losers well ahead of winners on the NYSE. Most equity groups surrendered ground today, with steep declines in the energy and basic materials issues. In contrast, the technology group displayed some relative strength.
Meanwhile, there were a couple of economic items posted this morning. Initial jobless claims moved lower, to 210,000 during the week of August 18th. This was a strong reading and suggests that the nation’s employment situation is still in good shape. Elsewhere, new home sales came in at 627,000 for the month of July, where a higher figure had been anticipated. Tomorrow will be a relatively quiet day. Although, we will get a look at durable goods orders for the month of July.
In the corporate arena, we heard from Williams-Sonoma (WSM). Shares of the home goods retailer moved nicely higher in response to an encouraging report. Elsewhere, shares of Alibaba Group (BABA) retreated after the China-based Internet operator delivered a mixed report.
Technically, stocks have softened over the past couple of sessions. It remains to be seen if this will develop in to a larger pullback, or if the bulls can mount another advance. With the second-quarter earnings season over, traders will probably be watching the political arena, which seems a bit tumultuous at this point. Of note, officials from the U.S. and China are currently meeting to discuss the trade situation.
- 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 narrative on Wall Street continues to change, and the adjustments are coming in rapid fire these days. To wit, last week, it was all about Turkey and that nation's mounting financial and economic ills. Then, late in the week and early in the current five-day span, the story was about China and the possibility that talks between our nation and the world's second largest economy would lessen the recent trade headwinds. That subject is still with us. Then, after a large dose of political news on Tuesday night, the stock market started to be affected by new concerns, most notably about the Administration in Washington.
This time, as was the case with Turkey, but not with China, the reaction on the Street was initially negative, albeit mildly so. Thus, as we concluded the first hour of trading, the Dow Jones Industrial Average was off about 50 points, while the NASDAQ was down just incrementally. The political concerns following the conviction of Paul Manafort in a Virginia-based trial and a guilty plea by the President's former lawyer, Michael Cohen, were behind much of the selling. Offsetting these negatives was a better-than-expected quarterly earnings performance from retailer Target (TGT), sending that stock nicely higher.
Also on Wall Street's agenda was a possible deal, according to some reports, between the United States and Mexico on vexing trade issues, specifically NAFTA. Finally, there was anticipation ahead of the early afternoon release of the minutes from the last FOMC meeting on July 31st to August 1st. But the big story, aside from politics, remained the trade question with China, as talks with a nine-member delegation from Beijing were set to begin with U.S. officials in Washington. Meantime, the market started to firm up after the first hour, an over the ensuing 30 minutes of trading the averages came all the way back.
The aforementioned comeback was most evident in the NASDAQ, which moved out to a gain of some 30 points as the noon hour arrived in New York, although the Dow backed off somewhat, easing to a deficit of about 20 points on selective weakness in some consumer stocks, such as Procter & Gamble (PG – Free Procter & Gamble Stock Report). The bifurcated market then would remain in place as we moved up to the release of the minutes. In all, as we neared 2:00 PM (EDT) hour, the Dow was off more than 60 points, but the NASDAQ was ahead 25 points. Minimal change was recorded by the S&P 500 and the S&P 400.
The Fed minutes, meantime, caused nary a ripple in the market, with the averages changing rather little. In fact, while the Dow sold off a bit more, the NASDAQ strengthened modestly. Overall, though, there was little aggregate adjustment. Essentially, the minutes intoned that the bank senses that it likely would soon be appropriate to take another step in removing policy accommodation. That is so even though it sees the ongoing global trade tensions as being injurious to the orderly progression of the business expansion. At the same time, the Federal Open Market Committee remains generally bullish on the economy in the near term.
Meantime, in other news of note, the National Association of Realtors reported that existing home sales had eased for the fourth month in a row in July, coming in at an annualized sales rate of 5.34 million homes. That was down both from June's 5.38 million properties and the forecast total for July of 5.40 million homes. According to the NAR, the continuing rise in home prices is serving to dampen demand somewhat. The Northeast, one of the four key regions for sales, saw its total number of properties sold last month fall to their lowest level since February 2016.
The slippage in home sales had little impact on the market, it would seem, as stocks continued to change little as we headed toward the close. There still were concerns about the global backdrop, apparently, as the Dow continued to languish in negative territory, while the other indexes held narrowly in the plus column, save for the NASDAQ, which retained a healthy gain on the day. At the close, meanwhile, the Dow would end off by 89 points, while the NASDAQ would retain 30 points of its earlier solid increase for the session. All told, it was a mixed session, with oil up, interest rates down, and a split between gaining and losing stocks on the NYSE.
Looking ahead to a new day now, we see that shares in Asia were mixed in overnight dealings, while in Europe the leading bourses are thus far trading with little aggregate change. At the same time, oil, up sharply yesterday and declining supplies, are now fairly flat; yields on the 10-year U.S. Treasury note, which ended matters yesterday at 2.82%, now are at 2.83%; and the U.S. futures are showing little movement so far this morning ahead of the release of additional housing data, as we await the 10:00 AM (EDT) release of figures on new home sales for July.
– Harvey S. Katz, CFA
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
