After The Close
Stocks started the day mostly to the upside, but trading became more mixed as the session wore on.
On the economic front, the Commerce Department reported that U.S. retail sales were up 0.4% in August, which was above the consensus forecast, with the increase largely driven by car and truck sales. Also, the July figure was revised to a gain of 0.8% from 0.7%. Altogether, sales have been up for six consecutive months. Meanwhile, and more importantly, the two-year trade dispute between China and the U.S. took another step toward a potential resolution. Notably, China announced that it was excluding some agricultural products from import tariffs. This followed reports yesterday of a possible interim agreement, with the U.S. delaying some tariffs in exchange for some concessions from China. The next round of formal talks between the two nations remains scheduled for next month.
At the closing bell, the Dow came out on top with a gain of 37 points. This marked the eighth-straight advance for the Industrial Average, placing it less than 150 points from its all-time high. Meanwhile the broader S&P 500 was down by two points and the tech-heavy NASDAQ shed 18 points.
Decliners edged out advancers among the 10 major market sectors. On the plus side, basic materials finished up 1%, while energy shares gained 0.7%. On the other side of the ledger, consumer non-cyclicals were down 0.7%, while telecommunications were off by 0.6%. Elsewhere, oil prices slipped, with light sweet crude down 0.2% to around $55 a barrel. This made for a 3.1% loss for the week, as oversupply concerns drove prices lower. The commodity is down about 20% year over year.
Lastly, it was an upbeat session for the European bourses. Germany’s DAX led the way with a gain of just under half a percent, while France’s CAC-40 wasn’t far behind with an increase of nearly one-third of a percentage point. Meanwhile, the U.K.’s FTSE 100 ended the session up 0.2%.
– Mario Ferro
At the time of this article's writing, the author did not have positions in any of the companies mentioned.
Before The Bell
So, as we approached the end of the first hour of trading, the Dow was still 100 points, or so, higher, while we saw gains of 12 and 50 points, respectively in the S&P 500 and the NASDAQ. Some recently strong basic industry issues were seeing some modest selling pressure, as the market was rotating back into some growth issues. Meanwhile, the market was being helped by a large bond buying program by the European Central Bank. All told, the ECB was launching a major stimulus package and cutting a key interest rate. Thus, as the morning continued, the market's string of recent increases did not seem to be at risk.
In other news, the Labor Department reported that a key pricing measure, the core Consumer Price Index, had exceeded base forecasts, as medical care costs had jumped in August. In all, the core CPI increased last month at the fastest pace in a year, signaling that inflation already was on the rise ahead of fresh tariffs on goods made in China. Specifically, the core (excluding food and energy costs) CPI. The headline CPI number, by contrast, rose just 0.1% last month and by a benign 1.7% for the past year. Still, this report was something of an outlier, and did not lessen the odds for another Fed interest rate cut next week.
Meanwhile, the rally, after a brief interruption in the morning, resumed and with some additional strength, so that as we reached the middle portion of the afternoon, the Dow had soared to an advance of more than 160 points. True, there was a denial by an Administration source that an interim trade deal was in the works. Still, enough optimism surrounding trade remained that the stock market continued to track higher for the most part. All of the averages were participating, with a late assist from the small-cap Russell 2000, which finally edged gingerly into the plus column.
The rally would wilt as we moved toward the close, although the indexes retained gains throughout. Some doubts remain about any trade deal as we have gone down the road of possible trade deals before only to come up empty handed. In all, the Dow, once up to near an all-time high, and after spending much of the session with a triple-digit advance, closed higher by just 45 points. The S&P 500 would finish ahead nine points and the NASDAQ would tack on 25 points. Also rising on the day were bond yields, with the return on the 10-year Treasury note approaching 1.80% at the close.
Looking ahead to a new day now, and after the early fireworks on Wall Street yesterday, we see that stocks were higher in Asia overnight, while in Europe, after the ECB rate cut yesterday and other fiscal measures, the bourses are showing modest strength thus far this morning. Also, Treasury note yields are up nominally and the U.S. equity market appears in line to open the latest session to the upside.
