After The Close
The stock market started the session in the red today, as trader optimism waned concerning a potential trade deal with China. A report stated that the United States was unlikely to continue granting waivers for U.S. companies to work with Huawei, a large telecom supplier in China. This news was perceived as an escalation in tensions that may harm trade negotiations. The Dow Jones Industrial Average fell by as many as 166 points in the early session, while the other composites were lower in tandem. However, an oversold condition occurred, and the market started to rebound, gaining back a portion of the losses. This move continued for a while, and Dow and the S&P 500 eventually reached the green. However, this only lasted several moments. The market sold off in the final portion of the session. All told, the Dow closed down 80 points, while the S&P 500 was off seven points, and the NASDAQ shed 47 points.
Moreover, market breadth was rather neutral, favoring neither the advancers nor decliners by a significant amount. REITs are among the best performers on the day, while energy issues were among the weakest.
In commodity news, oil prices were flat on the day, as changes in sentiment for global trade caused some volatility but in the end amounted to very little. Meantime, U.S. Treasury bond yields fell across the board today, as demand for the safe-haven asset grew. Too, the yield curve flattened a bit, which is negative for financial company’s earnings. The VIX Volatility Indicator was higher, meantime, as demand for options protection rose.
Looking ahead, tomorrow will be full of economic news, which will include the University of Michigan Consumer Sentiment Index for September, as well as durable goods orders and personal income for August. On the other hand, the earnings slate is bereft of releases. Overall, we think that trading tomorrow will hinge on any changes in sentiment regarding U.S. trade negotiations with China or the political situation at home.
– 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
After a late setback on Tuesday, with the heating up of impeachment talk, as an inquiry was started by the House Democrats, sent the Dow Jones Industrial Average down to a closing loss of 142 points that day, the stock market came back strongly at the outset of trading yesterday, and retained gains into the close. To be sure, the possibility of impeachment is still there, as partisan strife persists, but for a day at least upbeat talk on a possible trade breakthrough with China became the headline event and stocks reacted strongly to the upside, with the Dow quickly going out to a 185-point advance.
The market, buoyed by that early buying, continued to forge ahead, generally holding gains in the 130-180-point range on the Dow, with solid improvement also being fashioned by the S&P 500 and the NASDAQ. Meanwhile, the occasion for this trade optimism were comments from the President that a U.S.-China trade deal could come sooner than you think. The ongoing trade standoff has been going on for some time and has rattled the financial markets during that span. The market's strength also was helped by a nice gain in shares of NIKE (NKE – Free NIKE Stock Report) as that company responded to good profit news.
In other news on this upbeat Wednesday, the government reported that sales of new homes had increased by 7.1% in August from the July tally and was 18.0% ahead of the year earlier tally. Moreover, with housing supply down at just 5.5 months, there should be further improvement in this important, but volatile, category in the months to come. As to the impeachment scenario. An inquiry is under way and an actual impeachment could well follow. But even if it does, conviction is currently unlikely. Still, stocks went down sharply when President Clinton was impeached two decades ago only to rebound after his acquittal.
Meanwhile, the afternoon would not see the market fade, but rather strengthen, with many big names participating in the day's upsurge that would continue into the close. As the final bell sounded, the Dow, boosted by the optimism on trade, rising bond yields, and some confidence that the better-than-expected new home sales data would lead to further strength in this sector, added 163 points on the day. Gains of 18 points and 84 points were tallied, respectively, by the S&P 500 and the NASDAQ. All in all, it was a good day for the market's bulls.
Looking ahead to a new day now, we see that stocks were mixed in dealings overnight in Asia and are now pushing higher in Europe so far this morning. At the same time, oil prices are rising a bit; Treasury yields are narrowly lower on the 10-year instrument; and the U.S. equity futures are poised for a higher opening when trading resumes on our shores. Trade issues and the latest in the political arena will likely dictate where the equity market closes. Stay tuned.
– Harvey S. Katz, CFA
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
