Before The Bell
Wall Street initially appeared as though it was going to extend its two-day losing streak yesterday. However, continued strong earnings reports from Corporate America helped to quickly turn the tide, and stocks ended the session with solid gains.
The latest resurgence of COVID-19 has picked up momentum in recent weeks, reflecting the rapid spread of the Delta variant. For the week ended July 30th, the CDC reported that the 7-day moving average for new cases was up 64.1% versus the week before, to 66,606. Also, the latest figures indicated that case numbers had more than quadrupled from the low observed on June 19th of this year. Not surprisingly, the virus is spreading the fastest among those who are still unvaccinated.
However, investor apprehension appeared to (at least temporarily) be outweighed by the impressive continued momentum of the second-quarter earnings season. With more than half of the S&P 500 companies already clocked in, results have handily beaten expectations for the most part, resulting in the best showing in more than a decade. Moreover, the strength appears likely to continue, with many companies raising their guidance for the remainder of the year.
After being down more than 100 points early in the session, the Dow Jones Industrials soared back to end the day up 278 points, or .8%. Slightly more than half of the 30 stocks posted gains of 1% or better, led by International Business Machines (IBM), Amgen (AMGN), and 3M (MMM) all advancing close to 2%. Meanwhile, the broader S&P 500 was up 35 points (.8%), carving out a new record, and the tech-heavy NASDAQ added 80 points (.6%). Nearly all of the major market sectors were solidly in the green, with the biggest advances coming from energy (1.8%), healthcare (1.4%), and industrials (1.4%).
Elsewhere oil prices moved slightly lower, with light sweet crude down .9%, to about $70.60 a barrel. Although prices have been strong of late, the recent spike in worldwide COVID-19 cases is stoking worries over another potential dip in the global economy. The commodity is up more than 25% over the past six months, and nearly 75% compared to a year ago. Meanwhile, the European bourses turned in a mixed performance, though mostly positive. France’s CAC-40 gained about three-quarters of a percentage point, the U.K.’s FTSE 100 gained about one-third, but Germany’s DAX ended just below breakeven.
As to today, stocks in Asian markets were mixed but closed mostly higher, and the European bourses are modestly in the green. On our shores, U.S. stock futures are pointing to a down open for the major indexes. This followed ADP’s July employment report, which showed that the private sector added only about half of the 653,000 jobs economists were expecting. Meanwhile, crude oil prices have slipped about 1.7%.
This morning, the Institute for Supply Management is due to come out with its services index for July, where a small gain is expected from June’s reading of 60.1%. Later this week, the Labor Department’s jobs report on Friday, along with the latest on the national unemployment rate, should provide some clues to the economic growth outlook.
– Mario Ferro
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
