Before The Bell
The stock market started positively yesterday, as the month of August commenced its first trading session. News broke over the weekend that a bipartisan group of senators had largely agreed on an infrastructure bill. Traders sent the indices higher initially, with the Dow Jones Industrial Average hitting an all-time high in the process. The other indices were not too far from that level. However, the ISM manufacturing index (released a half hour into trading) showed some slowing in July activity (59.5) from the June reading (60.6), which tapered expectations after the initial rise. Meantime, there were increased concerns about a slowdown of China’s economy, given new lockdowns in Beijing. The markets then trended lower throughout the day, ending not too far from the session lows. Overall, the Dow closed lower by 97 points, and the S&P 500 was off eight points. However, the NASDAQ finished barely in the green (up eight points).
Overall, market breadth was slightly negative yesterday, as decliners outpaced advancers by a 1.2-to-1.0 ratio. Utility stocks were among the best performers on the day, aided by demand for safe-haven stocks. On the other hand, materials equities were among the weakest, hurt by a decline in sentiment for U.S. growth.
In commodity news, oil prices fell, as traders thought that demand would fall due to shutdowns of parts of the city of Beijing. Meantime, U.S. Treasury bonds yields were a mixed bag, not moving much in either direction. The CBOE Volatility Index (or VIX) was higher, as demand for options protection increased.
The futures market started strongly after yesterday’s close, as a few key companies recorded earnings gains. Moreover, this positive movement held up through the evening, and the futures were solidly in the green by midnight. This positive price movement continued this morning, suggesting a strong start to today’s trading.
Looking ahead, several economic reports are slated for release today. These include factory orders and motor vehicle sales figures. This Friday, we will get nonfarm payrolls figures and the unemployment rate for July, which should show how the labor situation is unfolding in the United States. Meantime, several hundred companies are slated on the earnings front to report quarterly results both before the opening bell and after the session closes today. Additionally, more companies will report later this week, marking the apex of the earnings season. All told, we think traders will be looking at earnings reports to see how well companies have been faring in the economic recovery.
– John E. Seibert III
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
