After The Close - The markets started out positively this morning, with the indices trending slightly higher. The Dow Jones Industrial Average was up by more than 70 points in early action, while the S&P 500 rose some five points. Then, the composites trended sideways for a time, before falling in a quick move lower. This was caused partially by a notable slide in healthcare and energy stocks. The former continued its selloff from the early portion of the day, while the latter dropped alongside a rapid descent in the related commodities. The Dow fell by roughly 85 points in a span of some ten minutes, and the other indices followed suite. However, the market quickly settled at the new level, and returned to trading in a sideways fashion for much of the day. In the final portion of the session, the market moved much closer to breakeven levels. All told, the Dow ended the day lower by 14 points, the S&P 500 was about flat, and NASDAQ slipped 17 points.
Additionally, market breadth was rather neutral, not favoring the advancers nor decliners by a notable margin. Industrial stocks were among the strongest performers today, while the aforementioned healthcare equities were weak.
In commodity news, oil prices fell today, as concerns rose about a possible supply increase from OPEC nations. Meantime, U.S. Treasury bond yields were higher, as a flight from the safe-haven assets occurred. Too, the VIX Volatility Index fell just below breakeven, which is surprising given the negative price action for much of the day. This suggests that traders were unafraid of the market action that transpired.
Looking ahead to tomorrow, economic data are expected to be released, including the April’s preliminary Consumer Sentiment Index from the University of Michigan. In addition, several large financial companies are slated to report first-quarter results, including Dow component JPMorgan Chase (JPM – Free JPMorgan Stock Report). These will give the earliest glimpse into how the earnings season will develop, and will likely drive trading tomorrow. – 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 - The stock market, which fell broadly on Tuesday on understandable jitters ahead of the imminent start of first-quarter earnings season, attempted to stage a modest comeback at the open yesterday. And, initially, the bulls met with some success, as the Dow Jones Industrial Average quickly sped out to about a 60-point gain. However, that modest advance would soon fade on continuing nervousness about earnings and some profit taking. The S&P 500 Index and the NASDAQ, also up early in the morning, however, would retain their diminished advances as the morning progressed.
Meanwhile, the smaller-cap indexes, major casualties on Tuesday, would press ahead on this middle day of the week, on some sector rotation. All the while, investors were awaiting the release of the minutes from the last FOMC meeting. Last month, the Federal Reserve voted to hold interest rates at current levels and suggested rather strongly that there would be no further rate hikes this year. In fact, there is every possibility that a rate reduction could be forthcoming either later this year or in 2019. In the meantime, inflation data were released earlier in the day, with a heftier-than-expected headline increase.
But the inflation news did little to unnerve the Street as few pundits expect inflation to become a problem in the coming months. Also, core inflation barely moved. A bigger problem are the economic headwinds globally, especially in Europe. Then, there is trade. Here, tensions are escalating between the United States and the European Union, while ongoing trade disputes with China are yet to be resolved. Even so, the market remains resilient, and even with a few nicks and dents along the way, the bulls remain in charge. As to the rest of the morning, the market split with the Dow down and the other indexes up modestly.
Encouragingly, as we hit the noon hour in New York, the Dow's loss nearly disappeared, while the gain in the NASDAQ increased nicely, with the advance surpassing 40 points at that juncture. The afternoon would begin in similar fashion with the Dow staying in the red but with the rest of the market gaining. All in all, it was a positive backdrop that would not change once the Fed minutes came out at 2:00 PM (EDT). There, a majority of the Fed suggested that there would be no further rate increases this year, but the bank's members did hold out the possibility of a rate hike if the economy's growth unexpectedly quickened.
Meanwhile, as has often been the case this year, the market strengthened down the homestretch, with the Dow finally edging into the plus column, as the NASDAQ soared to a gain north of 50 points. The S&P Mid-Cap 400 and the small-cap Russell 2000 also surged ahead, giving the market a decidedly bullish tilt to it in late dealings. The final numbers, in fact, would show a decent day for the bulls, with the Dow up seven points; the S&P 500 Index better by 10 points; and the NASDAQ in the win column by 55 points. The overall tone was upbeat as we moved closer to the start of reporting season.
Looking out at the penultimate session of the week, we see that shares were mostly lower in Asia overnight; they are edging higher in Europe so far this morning, as a delay in the Brexit deadline was extended. Also, oil prices, up at a five-month high yesterday, are easing back on a jump in U.S. crude supplies in early dealings this morning, while yields on the 10-year Treasury note, which ended yesterday at 2.48%, a drop on the day, are still at 2.48%. As to our equity markets, the futures are now suggesting a higher start to the new day. – Harvey S. Katz, CFA