After the Close
The major U.S. indexes rose early, before staving off a midday bout of selling pressure and spending the afternoon range-bound, mostly above their respective breakeven lines. Of the large-cap indicators, the S&P 500 and Dow Jones Industrial Average kept steadily in positive territory from bell to bell. The tech-laden NASDAQ was more mixed, in tandem with the broader technology sector on the NYSE. Overall, market breadth favored advancing stocks by a 2.5-to-1.0 ratio, with a bullish tilt evident in large- and small-cap issues alike. Save technology stocks, each of the market sectors rose in aggregate value, with basic material, energy, and financials leading the way.
The business beat offered an update on durable goods orders, which were revealed to have declined 6.8% in July. Excluding the lagging transportation component, however, consolidated activity actually grew 0.5%. And, of course, traders spent most of the day digesting Federal Reserve Chair Janet Yellen’s remarks in Wyoming. In what could be her final speech as Chair, Ms. Yellen reiterated her belief in a gradual tightening of monetary policy. The reaction on the market was decidedly mixed, as the dovish tone lacked the direction of the Fed as it relates to interest rates and contrasted somewhat with Kansas City Fed President Esther George’s belief that the economy could withstand an accelerated pace of hikes.
On the political front, it appears Congress is set to undertake corporate tax reform when its August recess concludes. This is a boon for bullish investors, who have bought into the market at historically high rates following the installation of the Trump Administration. Though infrastructure and regulatory policies also played a large role in catalyzing the prolonged rally, the prospect of lower corporate taxes has been the primary driver.
Meanwhile, oil prices closed nearly 1% higher on Friday, in response to a lower domestic rig count and the impending, potentially devastating landfall of Hurricane Harvey in the Gulf Coast. Since Wednesday, U.S. crude per-barrel has advanced roughly 10% as refineries in the region suspend operations indefinitely. Further spiking is likely if these facilities shutter their doors for several weeks, in which case the barrel price could stoke even higher in coming periods.
As the closing bell neared, the S&P 500 and Dow were holding on to gains of more-than four and 30 points, respectively. The NASDAQ finished a shade in the red, shedding two points while still holding on to a solid weeklong gain. Trading in the coming week, which will likely be characterized by low volume as the Labor Day holiday approaches, will probably center on political developments as Congress works to implement tangible policies before focus on The Hill turns to next year’s midterm election season. As always, stay tuned. – Robert Harrington
As of this article’s writing, the author did not hold positions in any of the companies mentioned.
Mid-Day Update - 12:15 PM EDT
The stock market got off to a strong start this morning, but has since softened. At roughly noon in New York, the Dow Jones Industrial Average is ahead about 40 points; the broader S&P 500 Index is up five points; while the NASDAQ is lower by four points. Market breadth is still favorable, with winners ahead of losers on the NYSE. Most equity groups are in positive territory, with strength in select consumer and basic materials issues. Meanwhile, the technology stocks are losing some ground.
Meanwhile, there was just one economic report posted this morning. Specifically, durable goods orders declined 6.8% in the month of July. However, it should be noted that orders, excluding transportation, actually rose 0.5% for the month, which was encouraging. Elsewhere, Federal Reserve Chair Janet Yellen delivered some remarks this morning, and that likely influenced traders. While the speech defended many of the banking regulations put in place after the financial crisis, it offered little insight into the central bank’s current interest-rate policy. It should also be noted that traders may be reacting to some political news. According to media reports, the Trump Administration will likely be working more diligently to advance tax-reform measures in the weeks ahead.
Finally, a number of corporations weighed in with their financial results over the past 24 hours. Once again, we heard from a batch of retails. Specifically, shares of Ulta Beauty (ULTA) are trading lower today, on concerns about a challenging business outlook. In addition, shares of Big Lots (BIG) are also slipping, even though that operator delivered a respectable report.
Technically, stocks have been struggling to press meaningfully higher lately. However, it is not clear if the recent softness will persist, or if the bulls can regain their strength, in the weeks ahead. – 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 seesaw week is continuing on Wall Street. To wit, after an unimposing, albeit not very damaging initial session on Monday, the bulls really grabbed control of the reins on Tuesday with a 192-point sprint in the Dow Jones Industrial Average. That impressive run, which was largely based on optimism that we will eventually get the Administration-backed tax cuts, then was partly reversed on Wednesday, as stocks faltered moderately. Then, yesterday, one more change in direction took hold, as stocks gained at the open, eased back shortly thereafter, but renewed their climb by mid-morning before faltering down the stretch.
The latest goings on, which affected trading, were headlined by the central bankers' meeting in Jackson Hole, Wyoming now taking place. That annual gathering will influence monetary policy internationally, as Federal Reserve Chair Janet Yellen and European Central Bank President Mario Draghi are in attendance. The pair are expected to speak about global monetary policy. In other news, stocks were little affected by a report from the National Association of Realtors issued early on, showing that existing home sales had eased back slightly in July to an annualized rate of 5.44 million dwellings. That followed a weak report on new home sales.
Also of some influence, was the fact that Kansas City Fed President Esther George indicated that she thought the nation's economy now was strong enough to handle more interest rate hikes, even with recent low readings on inflation. She opined as being in favor of a gradual upward rate path due to consistent growth in the economy. Meantime, the equity market continued to move forward as the early part of the day progressed. In all, the leading averages showed modest gains for most of the rest of the morning, before some selling surfaced just before noon in New York.
Breaking the midday market down, we were seeing gains from a succession of retailers on better earnings, while among the Dow issues, IBM (IBM - Free IBM Stock Report), a notable laggard in recent months, was ahead by more than $1.00 a share. That gain would fade some later on. Further, in addition to the listless existing home sales data, the government noted that those filing for unemployment benefits had fallen in the past seven days, pointing to a further strengthening in the labor market. In all, claims totaled 234,000; expectations had been for a tally of 238,000. Here, too, there was little impact on the stock market.
The market then went in and out of positive territory for the next couple of hours, with the Dow, more often than not, a little above the breakeven line, while the other averages mostly edged lower on some skittishness about monetary policy, but we suspect more so due to the discordant political backdrop in Washington. The averages remained in the minus column, but not alarmingly so, in the middle and latter stages of the afternoon, with the bias tilted just slightly to the downside as we moved through the final hour of trading. An exception to this downward drift was the Russell 2000, which showed some rare recent strength.
The close then saw all of the averages in minus territory, save for the Russell 2000, with the Dow off 29 points, the S&P 500 down by five points, and the NASDAQ weaker by seven points. Also, six of the 10 leading sectors closed lower, led down by the consumer stocks on softness in some food issues, namely General Mills (GIS). Gaining and losing stocks, meantime, were about in balance on the Big Board, after the former had held an edge through most of the day. Still, based on the big Tuesday gains, the market still is ahead on the week, overall.
Looking out at the final trading day of the week, we see that the major indexes traded higher in Asia in overnight dealings, while in Europe, the bourses are moving along in a positive mode. At the same time, oil, off sharply yesterday, is steady so far this morning, while gold is up nominally, and interest rates, up a bit yesterday, are trending slightly higher at this time. Finally, our futures are climbing a little so far today after yesterday's weaker close. – Harvey S. Katz
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
