After The Close
The stock market got off to a weak start this morning, and was ultimately unable to reverse direction as the day progressed. Today’s pullback may have been due to Wall Street’s concerns that economic relations with China could become strained further. At the close of the session, the Dow Jones Industrial Average was down 138 points; the broader S&P 500 Index was off 13 points; and the NASDAQ was lower by 21 points. Market breadth was negative, with decliners easily outnumbering advancers on the NYSE. All of the major equity groups lost ground, with pronounced weakness in the telecom and basic materials issues. The defensive utility issues, while lower, managed to display some relative strength.
Meanwhile, traders received a couple of economic news items this morning. Specifically, personal incomes rose 0.3%, while spending advanced 0.4%, during the month of July. These figures were in line with the consensus view. Elsewhere, initial jobless claims came in at 213,000 for the week of August 25th, which was a constructive reading. Tomorrow we will get a look at the Chicago PMI and a consumer sentiment report from the University of Michigan.
In corporate news, numerous retailers have been weighing in with quarterly reports. Over the past 24 hours, we heard from a few widely watched names. Specifically, shares of Abercrombie & Fitch (ANF) moved sharply lower today, after the apparel retailer delivered weaker-than-anticipated numbers. In contrast, shares of Guess, Inc. (GES) gained ground, after that company posted a good report and provided an upbeat outlook.
Technically, the stock market took a breather today, which is understandable given the sizable gains achieved over the past couple of weeks.
– 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 set of issues for Wall Street to deal with, and another group of reasons for the buyers and sellers to be busy. To wit, the final week of August started out with the upbeat news that the United States and Mexico were near a deal to amend the NAFTA agreement, with a bilateral accord between the two western nations. Then, Canada, not wishing to be left out in the cold, was striving to get into the act with talks with the United States getting under way. All the while, the trade difficulties with China, a far more formidable opponent, lingered on. Still, there was enough good news to get the buyers on board to a degree.
Then, yesterday, the resumption of talks with Canada helped to lift stocks gingerly early in the session, with strength especially noted in the S&P 500 Index and the NASDAQ. The Dow Jones Industrial Average, the S&P Mid-Cap 400, and the small-cap Russell 2000 initially faltered slightly, however. Expectations are that a deal with Canada might be reached before too long. Meanwhile, shares of Alphabet (GOOG), the parent of Google saw its stock rise smartly on a brokerage house upgrade. Also of note, as profit reporting season concluded, was an upward revision in second-quarter gross domestic product (GDP) growth.
On this latter count, the government reported that growth in the period came to 4.2%. That was higher than the initial estimate of 4.1% and expectations of 4.0%. With this revised GDP estimate, the overall picture of economic growth remains largely the same, with an advance that is strengthening and being driven by consumer spending, exports, nonresidential fixed investment, and federal government outlays. To be sure, there is unlikely to be an encore in the current quarter nor in the final period. Still, we would look for growth to hold in the 3.0%-3.5% range over the next several quarters.
The stock market, meantime, liked what it saw from the GDP issuance, and after that brief early pause, stocks regrouped and the Dow soon joined the parade, but with the S&P 500 and the NASDAQ still in the lead, as we hit the 90-minute mark of trading. The comeback then gathered considerable momentum as the morning wound down, with the Dow's advance heading toward and then through the 100-point gain mark, as the NASDAQ's advance reached to 70-point range, with that composite ascending 8,100 for the first time ever. Optimism on trade and the economy continued to fuel the upturn.
Stocks would then backtrack a little during the middle of the afternoon, as the Dow's gain wilted from just over 100 points to under 50 points by 2:00 (EDT). However, the other indexes continued to retain their edge, with the S&P 500 and the NASDAQ staying comfortably in record-high territory. The advance was broad, meantime, with all 10 of the leading equity sectors higher at that time, although none by as much as one percent. Energy stocks were the best performers through mid-session. Also, advancing stocks led declining issues by some five-to-three on the Big Board.
The gains increased somewhat as we headed toward the close, with the NASDAQ passing the 80-point mark, rising further above 8,100. The S&P 500 also moved up to the day's best levels, adding close to 20 points in late afternoon, while the Dow regained much of the ground given back in the early afternoon. Leading the way on the NASDAQ, in addition to Alphabet, were shares of Apple (AAPL – Free Apple Stock Report), with the tech behemoth passing the $223 mark for the first time ever. The market then stayed nicely higher into the close, although the Dow did edge off of its best levels of the day as the final minutes ticked down.
When all of the numbers were in, the Dow was ahead by 61 points, closing above 26,100; the S&P 500 was better by 17 points; and the NASDAQ, the star of the day, had stormed ahead by 80 points. Small increases also were tallied by the S&P Mid-Cap 400 and the Russell 2000, while advancing issues continued to hold a firm lead on decliners. Now, a new day begins, and this penultimate day of August finds lower prices in the markets in Asia; a pullback in Europe; slight gains in oil; flattish Treasury yields; and a drop in the U.S. equity futures at this hour.
– Harvey S. Katz, CFA
