After The Close - Stocks moved lower at the start of the session this morning, and were unable to recover in the afternoon. Today, investors seemed less concerned with the corporate outlook here in the United States, but were more worried about global trade issues. At the end of the session, the Dow Jones Industrial Average was down 219 points; the broader S&P 500 Index was off nearly 20 points; and the NASDAQ was lower by about 43 points. Market breadth was clearly negative, with decliners easily outpacing advancers on the NYSE. Almost all of the major equity sectors retreated, with notable weakness in the energy and basic materials issues. In contrast, the high-yielding utilities managed to attract some nominal buying.
In economic news, the Producer Price Index (PPI) rose 0.3% in the month of June, which was slightly more than had been anticipated. However, it is unclear that the report stoked investor fears about rising inflation, and further interest rate hikes. In addition, wholesale inventories increased 0.6% in May, which was a favorable reading. Tomorrow, we will get a look at the monthly Consumer Price Index (CPI) and the weekly initial jobless claims.
In the corporate arena, it was a light day for earnings reports. However, shares of Fastenal (FAST) moved up nicely, in response to a favorable release. In contrast, AngioDynamics (ANGO) stock sank after the medical supplies company posted a disappointing set of numbers. Second-quarter earnings season is set to begin shortly. In fact, at the end of the week, we will hear from quite a few major banks.
Technically, the stock market continues to trade in an erratic fashion, and seems to lack direction. In addition to elevated equity multiples, and interest-rate concerns, developments on the global scene now seem to be creating some worries, as well. - Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before The Bell - The bulls seem to be back. Indeed, following some selling last week on increased trade war fears, stocks came on strongly this past Friday, and then added to those gains as the new week opened on Monday. A concentration on the economy, which received a nice lift on Friday when the U.S. Government reported a sharp (213,000) jump in non-farm payrolls in June, and a focus on the pending flood of second-quarter earnings results, which have begun to trickle in already, have formed a solid one-two punch for equity investors the past few sessions. And those good feelings only increased for the better part of yesterday.
This should not suggest that such global concerns and conflicts are no longer in play. That could not be further from the truth, as many market participants do, indeed, have fears about a dysfunctional international commercial arena. However, with no major new stories on that front, at least yesterday, the Street was able to again focus on the economy, which likely put in a solid showing in the just-completed quarter. In all, we sense that GDP growth crossed the 4% plateau in the latest period, a rare occurrence for this unprepossessing business expansion.
As to the market, after Monday's fireworks, the Dow Jones Industrial Average jumped out to an early advance just north of 165 points, and thereafter managed to retain much of that uptick ending 143 points to the good. Unlike Friday and Monday, however, the market's strength was not broad based, as the S&P 500 Index rose just modestly and the NASDAQ, which had come on strongly on Monday, needed a last-minute buying kick to end in the green. The small-cap Russell 2000, after posting an all-time high early in the day backtracked some late in the day and closed lower, as did the S&P Mid-Cap 400.
Looking at the rest of the day's action, just about all of the 10 major groupings did manage to close higher for the session (the lone outlier was the financial group on weakness in some banking shares ahead of several profit releases later this week) but the gains were generally small. The best performer on the session was the utilities sector, which, ironically, had been the major casualty on Tuesday. Thus, in addition to the economy, earnings, and trade, there also is some sector rotation at work. As to earnings, Wall Street currently is looking at profit growth to surpass 20% for the S&P 500 companies.
As to reporting companies thus far, soft drink and snack foods maker PepsiCo (PEP) posted better-than expected quarterly earnings yesterday, sending the stock up nearly five percent on the day. The company also expects substantially improved results in the next fiscal quarter. Of course, as we get more deeply into the year, profit comparisons may get more difficult to easily surpass. For now, though, it is full speed ahead on the profit front. The bigger tests will come next week and the week thereafter, when most of the Dow-30 companies release their results.
Looking ahead to a new day, however, we see that the mood has changed abruptly, as the leading indexes were off sharply in Asia in the overnight hours, while in Europe, the principal bourses are thus far following a materially lower path. At the same time, oil, a modest gainer yesterday, is seeing its price fall so far this morning on increasing trade fears, and yields on the 10-year Treasury note, which edged up to 2.87% in late dealings yesterday, are now moving about at 2.84%. Finally, U.S. equity are showing early steep losses as the President ramps up his tariff threats against China with a list of new products. So a lower opening would seem at hand later this morning. – Harvey S. Katz, CFA