After the Close
The major U.S. indexes climbed higher for most of Wednesday, with the tech-laden NASDAQ once again leading the way. Shares of Netflix (NFLX) helped to spur the index higher, as traders again warm up to the streaming giant’s long-term prospects following several weeks of softness related to its expiring licensing agreement with Disney (DIS – Free Disney Stock Report). Gains there and in the Dow Jones Industrial Average and S&P 500 were also stoked by positive economic news and a stabilized outlook on the geopolitical front. Strength in small- and mid-cap trading was also notable, and contributed to a 1.5-to-1.0 edge achieved by advancing shares.
The market sectors exhibited a similarly positive tone, with most industry groupings adding aggregate value on the day. Though energy, telecommunications, and utilities stocks remained solidly in negative territory for the most part, gains in the tech, healthcare, and cyclical consumer goods composites more-than offset the select softness. Of the indexes, the Dow was least resilient, falling briefly below its breakeven line during a late-day surge in profit taking.
The business beat was headlined by a positive private-sector job release from Automatic Data Processing (ADP). The August report revealed the U.S. economy added 237,000 positions during the month, well ahead of the July figure and surpassing consensus expectations. Also furthering the confident undertone in trading was the second GDP estimate for the second quarter. The 3.0% rate came in higher than analysts’ predictions. Tomorrow and Friday, initial jobless claims and the Labor Department’s August employment report ought to hold an outsized influence over trading. The bulls are hoping today’s update from ADP is a harbinger for more positivity on the economic front.
Meanwhile, oil continued its downward trend as refinery shutdowns in the Gulf of Mexico weigh on investor sentiment. U.S. crude oil fell to a six-week low, shedding 1% in market value. Still, though the tragic fallout from Hurricane Harvey’s unprecedented rainfalls will linger for some time, the economic impact is not expected to be significant.
As the closing bell neared, the Dow joined the NASDAQ and S&P 500 in positive territory, albeit barely. Looking forward, we believe the recent bullishness will be sustained, barring any surprises in the upcoming employment and unemployment figures or from the political or geopolitical spheres. – Robert Harrington
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Mid-Day Update - 12:05 PM EDT
The U.S. stock market is delivering a somewhat lackluster performance today, as traders worry about the mounting costs, and business disruptions, caused by Hurricane Harvey. At roughly noon in New York, the Dow Jones Industrial Average, which had been lower earlier, is now just slightly below the breakeven mark; the broader S&P 500 Index is ahead six points; and the NASDAQ is higher by 38 points. Market breadth is slightly favorable, as advancers are just ahead of decliners on the NYSE. From a sector perspective, the technology names are pressing ahead, while the energy and utility issues remain weak. Of note, many energy companies conduct business in the Gulf of Mexico, and may well experience setbacks due to the severe weather there.
Meanwhile, today’s economic news was encouraging. Specifically, according to Automatic Data Processing (ADP), 237,000 private sector jobs were added to the economy in the month of August. This reading easily surpassed the consensus forecast, and was also well ahead of the July figure. Elsewhere, the second estimate for second-quarter GDP showed the nation’s economy expanding at an annualized rate of 3.0%, where analysts had been looking for lower figure. Meanwhile, for the remainder of the week traders will likely be concentrating on the nation’s employment situation. Tomorrow we will get a look at the initial jobless claims for the week of August 26th, and on Friday the government will release its August employment report.
Even though the second-quarter reporting season is now over, a few corporations weighed in with their results over the past 24 hours. Specifically, shares of Analog Devices (ADI) are trading higher today, in response to a solid release. Meanwhile, shares of H&R Block (HRB) are sinking as investors were not impressed with that company’s quarterly numbers.
Technically, stocks have been looking to regain their footing, after pulling back in early August. The S&P 500 Index is now just at its 50-day moving average, located at the 2,450 mark. However, it remains to be seen if the bulls can drive stocks beyond this technical level in the coming days. – 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
It seems as though Wall Street is having to grapple with one challenge after another these days. On Monday, for example, it was the fallout from the devastating hurricane that struck much of the eastern half of Texas. Then, yesterday, at least early on, it was concerns in the wake of North Korea's launching of a missile over Japan. Still, notwithstanding these disarming occurrences, the Street's overall strength remains intact, if with a few wrinkles along the way. Thus, yesterday morning, news out of North Korea caused the Dow Jones Industrial Average to quickly fall by more than 130 points.
But cooler heads soon prevailed. Indeed, as we approached the latter stages of the morning, the early selloff had all but abated, with the Dow erasing all of that initial deficit and moving into the black. An equally sharp early descent in the NASDAQ, meantime, was largely corrected. Elsewhere, as stocks faltered initially, investors moved into traditionally safe havens like gold and Treasury noted, with yields on the latter falling back notably. As this was going on, the CBOE Volatility Index, or the VIX, was gaining some 20%, attesting to the elevated level of risk and uncertainty at that time.
Meanwhile, in other news, the Case-Shiller home price index rose slightly in the latest report, while in an even more closely tracked issuance, the Conference Board reported that its consumer confidence survey increased further in August, rising to a level of 122.9. In July, that survey's tally had been at 120.0. As such, save for jitters about North Korea, the backdrop on Wall Street was largely positive. Later on this week, we are scheduled to get reports on manufacturing activity and non-farm payrolls, with the latter potentially being a major market mover.
The market's mid-session comeback persisted into the afternoon, with both the Dow and the NASDAQ moving cautiously higher as we moved inside the final two hours of trading, with even the small-cap weighted Russell 2000, off notably in the morning, turning slightly positive. Breaking the day's trading down to that point, there was an even divide between gaining and losing equity groups, while the advance-decline line showed a few more stocks falling in price than gaining. Two Dow stocks that saw gains in the wake of the latest rise in tensions with North Korea were Boeing (BA – Free Boeing Stock Report) and fellow aerospace and defense giant United Technologies (UTX – Free United Technologies Stock Report).
Stocks then strengthened further, in large part, because of the revised perception that nothing really has changed with respect to North Korea. That is, the problems there are severe, but no new ground seemingly has been broken. Also, the hurricane, albeit tragic from a human standpoint, probably will not affect the economy all that much. Specifically, the storm damage, while hurting drilling activity and other markets, for a time, also will lead to more constriction activity in the affected areas down the road. Thus, calm quickly returned to Wall Street, even as the torrential rains continued to come down.
The comeback continued into the close, with all three of the major indexes moving comfortably to the plus side of the ledger, with the Dow's gain, for example, briefly edging past 70 points. The NASDAQ, too, went broadly higher, as did sentiment causing an about face from early in the day. Meanwhile, gaining stocks moved ahead of declining issues on the Big Board, as Wall Street shook off its early blues. At the end of the session, the Dow was ahead 57 points; the S&P 500 was better by a pair of points; and the NASDAQ was positive by 19 points.
Now, a new day dawns, and we see that Wall Street's turn positive has extended to Asia, where the major markets were tracking higher at this early hour, as tensions with North Korea appear to be subsiding, while in Europe, so far this morning, the bourses are trending higher. In other markets, oil is down a few pennies; Treasury yields, off some yesterday, are moving up a bit in early dealings; and gold, a recent beneficiary of rising tensions globally, is now off a little. Finally, our futures are signaling a higher start to the trading day on our shores on seemingly reduced tensions. – Harvey S. Katz
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
