After The Close
It was a running of the bulls on Friday, as reassuring comments on the economy from Federal Reserve Chair Jerome Powell and a Netflix-driven (NFLX) rally for technology stocks propelled a broad-based uptick that saw both the S&P 500 and NASDAQ set record highs. The Dow was no slouch, either. Leaps from industrial components DowDuPont (DWDP – Free DowDuPont Stock Report), 3M(MMM – Free 3M Stock Report), and Caterpillar (CAT – Free Caterpillar Stock Report) solidified a solid advance for the blue chip index. Underscoring the all-inclusive nature of the buying spree were solid gains by mid- and small-cap equities, which helped support a more-than two-to-one ratio of advancing to declining issues.
Generally speaking, traders appeared eager to overlook budding legal anxieties related to several former Trump associates in favor of today’s positive influences. Speaking from Jackson Hole, Wyoming, Fed Chair Jerome Powell indicated he anticipated “further, gradual” rate hikes going forward as the central bank continues to view the economy as being “strong.” We believe this offset somewhat mixed updates on the business beat on Thursday. While updates on the Cohen investigations and machinations of the Special Counsel may well grow to be more than an intermittent hindrance on equity prices, there appeared to be cautious optimism in recent sessions that a strong economy and resilient Corporate America can continue driving sentiment into the future.
Elsewhere, U.S. crude oil exhibited notable strength to wrap up the week. In fact, the domestic commodity snapped a streak of weekly losses that spans back to early July. The buying activity is probably being bolstered by optimism stemming from an auspicious decline in weekly inventory levels and signs that Iran’s production is being hindered by sanctions. These two factors helped to largely mute concerns over a U.S.-China trade way, a potentially hugely consequential development that has, at least in recent periods, cooled off a bit. U.S. crude finished Friday up nearly a full percentage point in per-barrel value.
Looking ahead, we anticipate the typical wave of low-volume trading to persist through the end of August, which may end up leaving an opening for the bulls to further drive valuations higher in the near term. However, yet unforeseen developments in the legal and geopolitical spheres are always liable to stir some profit taking, especially given this week’s impressive performance. Stay tuned.
– Robert Harrington
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before The Bell
The ability of the market to remain resilient reflects the material differences between now and 1974. On point, the fundamentals were much worse back in the Watergate days. Back then, the economy was in recession; oil prices were surging; and there were accompanying supply shortages and rationing. Now, the economy is prospering, with a 4.1% rise in the second-quarter GDP, while corporate earnings, then in retreat, are advancing strongly. So, with the economy and earnings doing well, and with interest rates still historically low, the equity market is able to cope successfully, at least for now.
Meantime, there are other concerns, namely trade matters with China. So, while talks between our country and Beijing are ongoing, there is little hope being held out for a reasonable solution of the differences at this point. As to the rest of the economy, in news out yesterday morning, the Labor Department reported that weekly jobless claims had fallen by 2,000 to 210,000 persons. That was some 5,000 fewer individuals than forecast. Also, on the heels of Wednesday's report that existing home sales had eased slightly in July, the government reported that sales of new homes had eased nominally, as well, last month.
Specifically, the Census Bureau reported that new single-family houses came in at a seasonally adjusted rate of 627,000 homes in July; that was down from the revised 638,000 properties sold in June. Still, the latest tally was well ahead of the July, 2017 posting. As to the market, the Dow would climb back into the back as we passed the first hour of trading, while the NASDAQ, boosted by a nice gain in the shares of Apple (AAPL – Free Apple Stock Report) rose further. Now, the next immediate hurdle for the Street is today's global economic get together in Jackson Hole, Wyoming.
Meanwhile, the market started to weaken somewhat as we hit the lunch hour, with the Dow descending to a deficit of some 130 points before quickly regaining its footing. The consequent comeback, while partial did pare the blue chip composite's loss in half, while the NASDAQ remained in the black for the most part, if gingerly. Deficits, meantime, were tabulated by the S&P 500, the S&P Mid-Cap 400, and the small-cap weighted Russell 2000. The market then would move in place over the balance of the session, with only the NASDAQ remaining in the plus column until late in the day.
In all, at the close, the Dow, which would falter somewhat further down the stretch, ended off by 77 points, while the S&P 500 (off five points and the NASDAQ , down 11 points) held up a little better. The smaller-cap indexes, meantime, performed in line with the Dow, in what was the first clear setback for the market this week. Now, the final session of the week begins, and for a sense of what we can expect in our trading, we see that shares were generally higher in Asia overnight, while in Europe, the bourses are thus far tracking upward, as well. Also, interest rates, off a bit yesterday, are trending higher so far this morning, while our futures are gaining too.
At the time of this article’s writing, the author held positions in one or more of the companies mentioned.
