After The Close - U.S. indexes exhibited mixed fortunes for most of Thursday, with the small-cap Russell 2000 posting the widest gain. Among the large-cap groupings, the NASDAQ was the sturdiest performer, although it slipped back towards its breakeven line as the closing bell approached. Both the Dow Jones Industrial Average and S&P 500 had fleeting moments of strength, as well, before a late-day selloff dragged each into negative territory. Underscoring the indecisive nature of the session, advancing and declining shares were roughly even in number.
A glance at the major market sectors reveals a similar picture. The cyclical consumer goods and telecommunications industries were two of the strongest groupings, while energy and basic materials mostly offset the rallies. As roughly 90% of S&P 500 components have reported quarterly results, with over three-quarters of them outperforming expectations, the recent spate of earnings-related strength is likely in its waning phase. Thereafter, geopolitical developments ought to take center stage.
As for the global trade picture, yesterday’s news of China’s issuance of tariffs on $15 billion worth of U.S. goods likely weighed on investor sentiment early on today. Specifically, fears over growing trade tensions continued to hurt domestic oil prices. U.S. crude oil slipped to a seven-week low, as traders weighed the potential fallout for commodity demands in the event the world’s two largest economies (U.S. and China) embark further into trade-war territory.
Looking ahead, we expect developments on trade and the business beat to become more influential again as earnings season winds down. Tomorrow, in fact, will feature the latest update from the Consumer Price Index, a key metric for measuring inflation. Given the recent strength in the equity market, it is likely that the uncertain nature of U.S.-China relations will open up a door for some profit taking in the weeks ahead. Stay tuned. – Robert Harrington
At the time of this article’s writing, the author did not hold positions in any of the companies mentioned.
Before The Bell - Fresh off back-to-back wins to start the week and an extended run of winning sessions spanning the past week and a half, the stock market opened modestly to the downside yesterday. Once again, concerns about trade dominated thinking on the Street, as China announced new tariffs on U.S. goods in retaliation for our more aggressive trade approach. The losses, as noted, were modest, with the Dow Jones Industrial Average easing back by just about 40 points as we passed the first half hour of action. Other large- and small-cap indexes pulled back slightly, as well.
Once again, there was little of note to report on the economic front. So, in addition to the trade news, the action was dominated by the latest tidings in the earnings arena. The focus on earnings, meantime, is a positive for the Street, as it has allowed traders to focus a little less on the global developments. As for earnings, the outlook remains quite positive, with about 80% of the companies in the S&P 500 outperforming their forecasts for the latest period. Of course, all good things come to an end, and earnings season is fast wrapping up. And that will logically bring the focus back of trade, which would not be a positive.
As to the stock market, the early action was bearish, but not materially so. This pullback followed a session that brought both the NASDAQ and the S&P 500 to within a percentage point of all-time highs. The Dow was still 4% below peak as the new session commenced. Meantime, the market wilted a little more as the first hour concluded, with the Dow easing off to a 65-point deficit. Breaking things down at that point, nearly all of the 10 leading equity sectors were lower, while the Big Board was seeing losing stocks retain a comfortable lead over gaining issues. So, the underpinnings were somewhat weaker.
The market then started to firm, with the S&P 500 and the NASDAQ turning positive, if narrowly, while the Dow's loss was halved. Still, there were plenty of red arrows as we neared the noon hour in New York, with seven of the top ten equity groups still in the red, while declining stocks continued to lead advancers, but less aggressively so than earlier. It would seem, at the time, that the bulls and bears would be locked in an indecisive tug of war over the duration of the session. The strong upturn fashioned over the preceding half dozen, or so, sessions would seem to have made the equity market ripe for some profit taking.
Stocks then weakened anew, but as had been the case earlier, the damage was contained, with the Dow dropping to a loss of just 70 points, while the other indexes dipped back into the red. There would then be some renewed buying, which lifted the NASDAQ and the S&P 500 back into the black, if nominally, so that as we moved just inside the final two trading hours, the Dow was off by about 40 points and the smaller-cap indexes were still a tad below the neutral line. There was a lot of indecision, as the buy and sell forces continued to hang around with little intent to take the market much higher or lower, it seemed.
This unimposing session would then continue into the close, although there was some late selling that brought the S&P 500 a tad lower at the close. The NASDAQ managed to hold in the green, meantime. The Russell 2000, however, eased back into the red. But there remained weakness in certain sectors, with the food processors especially struggling. Also, Dow component Walt Disney (DIS – Free Disney Stock Report) faltered modestly on an uneven earnings issuance, as the Dow ended lower by 45 points. Overall, it was a session marked more by indecision than by concerted selling. It remains to be seen whether the market will resume its uptrend today.
As to the new day, we see that shares were mostly higher in Asia overnight; on the Continent, Europe's bourses are tracking downward in early dealings this morning. Elsewhere, oil prices are off slightly; yields on the 10-year Treasury note, which held more or less steady yesterday at 2.97%, are now moving a tad lower; and U.S. equity futures are gaining in pre-market dealings. As such, we would expect a higher start to the new day stateside. - Harvey S. Katz, CFA