After The Close
The stock market started the day in the red, as a further yield inversion hurt investor sentiment. Traders thought this signaled the increased odds of a recession, and the Dow Jones Industrial Average fell by as many 140 points in the early portion of trading. The other indices were down in tandem. However, sentiment soon started to improve, and the markets began to rally. They moved into the green, aided by stronger energy stock performances, and this trend continued throughout the morning. The Dow eventually was higher by 263 points at one point. The rest of the day could be marked by sideways action until the close, and the composites ended not far off the highs. All told, the Dow finished higher by 258 points, the S&P 500 was up by 19 points, and the NASDAQ added 30 points.
Moreover, market breadth was very positive, as advancers outpaced decliners by a 2.4-to-1.0 ratio. Energy stocks were among the best performers on the day, aided by a move in the related commodities. On the other hand, utility equities were among the weakest performers. This outcome marks a reversal of yesterday’s trading.
In commodity news, oil prices were higher today, as the Energy Information Administration reported a bigger-than-expected drawdown in reserves. Meantime, U.S. Treasury bond yields were lower across the board, as demand for the safe-haven asset increased. Still, the yield curve remains inverted, though it did flatten out a bit today. The VIX Volatility Index was lower a bit, as demand for options protection fell a bit.
Looking ahead to tomorrow, a notable amount of economic data will be released. This includes a second estimate for second-quarter GDP, while the Energy Information Administration will report natural gas inventories. Too, several retailers are slated to report quarterly results. Overall, we expect trading to hinge on any developments in the U.S. trade negotiations with China, and any potential change in sentiment on interest-rate policy from the U.S. Federal Reserve.
– John E. Seibert III
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before The Bell
Following a solid recovery on Monday, in which the stock market retraced almost half of a sharp meltdown the past Friday, stocks began the latest session yesterday strongly to the upside. Specifically, after the Dow Jones Industrial Average plunged by 623 points on Friday and recouped 270 points of that setback to start the week on Monday, equities began yesterday's session notably to the upside. In all, after a few minutes of trading, the blue chip composite was ahead by 155 points. But that strong opening would not last, and the bears kept chipping away at this initial gain, finally sending the market lower by late morning.
All the while, Wall Street was monitoring the escalating U.S.-China trade war. Also, investors were not convinced that China was ready to reignite trade discussions, despite words to the contrary by the White House. Further, trading volume had been low on Monday, likewise feeding into the belief that this comeback may well have been premature. So, stocks wilted after that early surge, and as we hit the noon hour in New York, the Dow was off 85 points, while the S&P 500 and the NASDAQ were down by eight and 25 points, respectively.
Additionally moving lower were Treasury note yields, with the 10-year note descending in yield to 1.48%.The yield on the 30-year bond, meanwhile, sank below 2.00%. In other news, we saw that Johnson & Johnson (JNJ – Free Johnson and Johnson Stock Report) shares rose nicely in dealings after the medical supplies and drug giant, and Dow component was forced to pay $572 million in an opioid case in Oklahoma. The stock's gain reflected the fact that the court settlement was significantly below expectations, most of which had stretched into the billions of dollars. Overall, the news back ground was fairly constructive.
Meanwhile, on the economic front, the Conference Board reported its Consumer Confidence Index eased ever so slightly in August, totaling a still formidable reading of 135.1 down from 135.8 in July. The Present situations Index rose strongly, however, but the Expectations Index slid back some based on consumers' suddenly less optimistic outlook for income, business, and labor market conditions. This report seemed to have little to do with the showing on Wall Street, as the equity market stayed range-bound until the early afternoon, when a selloff ensued that carried the Dow to a loss of 175 points before some new buying surfaced.
That comeback would falter again as we moved inside the final two hours of trading, as trade war fears and recession concerns continued to take center stage. That selloff again would push the Dow's loss into the low triple digits before another comeback ensued. As before, that recovery, which brought all of the averages to either near breakeven or into the plus column, likewise did not last all that long and the losses soon were restored across the board. The losses then would continue into the close, as trade fears overcame the cautious optimism exhibited on Monday.
Thus, when all the numbers were in, we see that the Dow had lost 121 points; the S&P 500 Index was lower by nine points; and the NASADAQ was in the minus column to the tune of 27 points. All told, it was a day of modest setbacks for a market that has been somewhat on the defensive in recent weeks. Looking ahead to the middle session of the trading week, we see that stocks were mixed in Asia overnight, while in Europe, the bourses are generally lower so far this morning. Also, Treasury note yields, which dipped below 1.50% yesterday, are down to 1.47%, with the yield further inverting, and the U.S. equity futures are pointing to a higher start when trading resumes.
– Harvey S. Katz, CFA
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
