After The Close
The stock market started positively today, helped by good results from Dow-component NIKE (NKE – Free NIKE Stock Report), which reached an all-time high during the session. Also, new home sales were higher than expected, boosted by lower interest rates. These led to the Dow Jones Industrial Average climbing by 105 points in early action. However, this positive action quickly reversed itself, and the composites found themselves in the red for a spell. Then, news broke that President Trump stated that “it could happen sooner than you think” regarding a potential U.S. trade deal with China. The Dow shot up around 150 points at that time. Shortly after that, an announcement stated that the U.S. and Japan had reached a limited trade deal. The markets positively responded to both of these developments and moved higher throughout the afternoon session. The markets closed not far from the day’s highs. All told, the Dow ended up by 163 points while the S&P 500 rose 18 points.
Moreover, market breadth was slightly positive, as advancers outpaced decliners by a 1.3-to-1.0 ratio. Technology stocks were among the best performers on the day, while healthcare equities were among the weakest.
In commodity news, oil fell today as worries about excess supply drove down the price. Also, the Energy Information Administration reported that oil stocks continued to rise over the past week. Meantime, U.S. Treasury bond yields were higher today, and a steepening of the yield curve occurred, which usually is positive for financials’ earnings. The VIX Volatility Index was lower, as demand for options protection fell a bit.
Looking ahead, tomorrow will be full of economic data, which includes the third estimate for U.S. second-quarter GDP and the Energy Information Administration’s weekly report on natural gas inventories. Additionally, several companies are slated to release quarterly results, including a few large corporations. Overall, we think that trading will likely hinge on any developments between the U.S. trade negotiations with China.
– John E. Seibert III
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before The Bell
Some modest hope and optimism about an eventual trade détente between the United States and China emerged overnight Monday and early yesterday morning and that helped the stock market open higher in the latest session. That was not surprising, given that the ebb and flow of trade news has kept Wall Street in deep focus for more than a year now. So, when there seemed to be a glimmer of new hope emerging, the market quickly rose with the Dow Jones Industrial Average gaining 120 points in the first few minutes of trading.
Also pushing ahead strongly was the tech-laden NASDAQ, which jumped over 40 points in early dealings. One beneficiary of this strong move was Apple (AAPL – Free Apple Stock Report), which has significant dealings with China and which roared ahead by three points in the initial few minutes of trading yesterday. Then, however, the President spoke before the UN and the market's tone changed abruptly and stocks went into reverse and in a hurry. The Dow's advance, once nearly 130 points, evaporated, with that composite going negative by just past noon in New York.
The problem is that the President took a more hawkish tone on trade with China, remarking about that country's violations in that area. The Street did not like that stance at all. But the really big casualty was the NASDAQ, which fell to a mid-session loss of over 125 points. The other big story was Netflix (NFLX), which tumbled on fears that its results would notably disappoint. As to the Dow, as the 1:00 PM (EDT) hour approached, that index was off by 210 points, for a negative turnaround of almost 350 points.
Meanwhile, in other news, the Conference Board issued its Consumer Confidence survey, which showed a notable drop in sentiment during September, with the overall index, the Current Situations score, and the Expectations count all fall back rather sharply, signaling that the trade discord is dampening sentiment across America. Add in the concerns that the market has been unable to break through to record highs on the Dow, despite being close, and there was little surprise that the market would suffer a setback at this time.
The selloff would continue through the afternoon, with, at best, some diminution in the worst losses. Not only was the market upset about trade and consumer confidence, but the call for an impeachment inquiry was made by Speaker Nancy Pelosi after the market closed. Also coming out after trading was an upbeat earnings report from Dow component NIKE (NKE – Free NIKE Stock Report). That apparel and footwear maker easily beat expectations and the stock jumped by nearly $5.00 a share in afterhours trading.
In all, the Dow fell 142 points; the S&P 500 closed down 25 points; and the NASDAQ, which would see Apple drop in piece at the close, would fall 119 points. Losing stocks on the 10-year Treasury notes held a formidable lead, while the small-cap Russell 2000 would end off 25 points. Also falling back would be yields on Treasury notes, with that debt instrument declining to 1.64% at the close. All in all, it was a difficult day for the bulls and left records for the leading equity indexes a bit further from all-time highs.
Now, a new day begins, and following the economic, market, and political headwinds of yesterday the major indexes are trending sharply lower in Europe this morning on worries about the U.S. impeachment inquiry, following a weak close in Asia overnight. Also, of note, Treasury yields are ticking higher on impeachment worries; oil prices are climbing; and U.S. equities are poised for an unimposing opening on those political concerns when trading resumes later this morning.
– Harvey S. Katz, CFA
At the time of this article’s writing, the author held positions in one or more of the companies mentioned.
