After the Close
Stocks got off to a tame start this week ahead of the upcoming long Labor Day holiday weekend, and as concerns about hurricane damage in Texas dominated the headlines. At the close, the Dow Jones Industrial Average lost five points; but the NASDAQ gained 17 points; while the broad S&P 500 was about flat. Market breadth was tilted to the downside on both the New York Stock Exchange and the NASDAQ, although more so on the former.
The devastation caused by Hurricane Harvey in Texas was front and center today. Houston is the center of the domestic energy industry, and numerous refineries in the region have been shut down. That had a negative effect on oil prices, since producers temporarily have fewer outlets to take what they pump. Shares of drilling companies broadly fell as a result.
On the other hand, gasoline prices rose on prospects that less product will be available until plant and equipment is back up and running. That boosted the stock prices of refiners, such as Valero Corp. (VLO). Shares of property & casualty insurers were also weak because of the storm and the prospect of hefty payouts. That was exemplified by a drop in Dow-30 component Travelers Corp. (TRV - Free Travelers Corp. Stock Report).
The full effects of the economic problems caused by Hurricane Harvey will not be sorted out for a while, given that more rain is in the near-term forecast. Our thoughts and best wishes go out to all of the people affected by the storm.
Elsewhere, this is shaping up as a relatively quiet week in terms of economic news. The biggest piece of data is slated for Friday, when the closely-watched monthly government employment report is due to be released. Expectations don’t appear to be all that high, with estimates for around 175,000 positions to have been added in August.
The actual number of jobs gained could well influence the outlook for interest rates. The Federal Reserve is looking to raise rates one more time in 2017, most likely near yearend, and the additions to payrolls are a key consideration in the central bank’s thinking. The Fed concluded its annual retreat at Jackson Hole, Wyoming last week, but Chair Janet Yellen in her subsequent speech focused more on preserving regulatory safeguards put in place since the last recession, rather than interest-rate policy. – Robert Mitkowski
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Mid-Day Update: 12:15 PM EDT
The stock market is off to a mixed start today, as we embark on a new trading week. At roughly noon in New York, the Dow Jones Industrial Average is down five points; the broader S&P 500 Index is ahead one point; and the NASDAQ is higher by 22 points. Market breadth suggests a neutral tone to the session, with advancers about even with decliners on the NYSE. The major stock sectors are divided, with gains in the healthcare and basic materials issues, offsetting losses in energy and financial names.
Meanwhile, there was limited economic news to report today, and that may be contributing to the market’s lackluster tone. Tomorrow we will get a look at the Conference Board’s Consumer Confidence Index for the month of August. Finally, it is worth mentioning that at the end of the week, the government will release its latest monthly employment report. That issuance will, no doubt, be carefully followed by Wall Street.
Finally, few leading corporations delivered financial results over the past 24 hours. However, there has been some M&A news to report. Specifically, shares of Kite Pharma (KITE) are soaring today, after that drug company agreed to be purchased by Gilead Sciences (GILD) for $180 a share in cash. Shares of Gilead are also up on the news, as investors are likely optimistic that the deal will result in an expanded product pipeline.
Technically, stocks have been trading in a range for the past few sessions. The S&P 500 Index is sitting just below it 50-day moving average, located at 2,450 mark. Pushing stocks beyond that area, which holds importance with technicians and traders, will likely be the next goal for the bulls. – 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
Another day, another focus on hopes for tax reform. On point, after the stock market had rallied on Tuesday, with the Dow Jones Industrial Average jumping 192 points on speculation that the Administration's much-hyped proposals for lower taxes would become a reality sooner rather than later, Wall Street settled down and a pair of pedestrian sessions ensued. Then, on Friday, in an attempt to close out the up-and-down week on a high note, equities rallied once again out of the gate, with the Dow quickly jumping to a morning-best gain of better than 115 points. And again, it was hopes for tax reform that did it.
But this early strength would soon fade. Indeed, by late morning, the gains were shrinking, with the Dow's initial advance reduced by more than 50%, while the volatile NASDAQ fell into the red after having initially climbed more than 35 points. As noted, hopes for tax reform were in the vanguard of this early strength, as the President is expected to begin campaigning for his package this week. Also helping market were constructive words on the state of the financial system from Federal Reserve Chair Janet Yellen. She was speaking at the bank's annual symposium at Jackson Hole Wyoming.
However, after her reassuring words on the financial outlook, the Fed Chair gave no clue about the Fed’s future monetary policy. Instead, she focused on the history of the monetary crisis that struck the global markets late last decade. As to interest-rate hikes, none is expected until at least December, and even then, the likelihood is that the Federal Reserve will pass on one more tightening at that time, preferring to wait until 2018. Of course, if we get tax reform and somewhat higher rates of gross domestic product growth and inflation, the central bank's timetable for monetary tightening could move up somewhat.
Meanwhile, after the morning's quick start, as noted, stocks lost their edge, though most of the averages stayed in the plus column as we headed into the noon hour in New York. As to other influences on the day's trading, in addition to taxes and the Fed, the government reported a sharp drop in new orders for durable goods in July. That report, issued an hour before trading commenced, showed that such orders had dropped 6.8% last month. However, excluding a steep decline in orders for transportation equipment, demand for durables actually ticked up 0.5%. This mixed showing had little impact on trading.
In all, with earnings in the rearview mirror for the second quarter and the economy likely failing to take center stage again until this Friday's scheduled report on non-farm payrolls and the unemployment rate, the focus could well stay on the Fed and Washington for at least the coming few days. And that could keep things volatile. In the meantime, after that late-morning pause, stocks headed into the afternoon holding generally modest gains, with the Dow up about 45 points, but the NASDAQ a touch lower. The market then renewed its climb after lunch, so that by mid-afternoon, the Dow again was ahead by some 80 points.
The stock market continued to firm up for a time as the afternoon wound down, but there was some last-minute selling that clipped some of the froth off of the averages, leaving the Dow ahead by 30 points and the S&P 500 up by four. The NASDAQ, reflecting weakness in the tech space, gave back six points. Still, gaining stocks continued to overwhelm declining issues on the Big Board, with moderate strength in energy and basic materials issues on a rise in oil prices ahead of the feared hurricane damage in Texas. So, it was a basically quiet end to a volatile week on the Street.
Now, a new day and week dawn and for clues about trading going forward, we look out at the markets in Asia, where we saw generally mixed action overnight, while in Europe, the Continent's bourses are tracking downward at this hour. In other markets, gold is up, crossing the $1,300 an ounce mark; Treasury yields, off in Friday dealings, are now nudging higher; and oil, following late-week gains, are heading lower on concerns about the devastation brought on by Hurricane Harvey. Finally, in a busy week for the economy, U.S. futures are trending a bit lower, on average, at this hour. Politics, the economy, and now the hurricane would seem to be the big items of note for the markets in the days ahead. Stay tuned. – Harvey S. Katz
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
