After The Close - The stock market opened nicely higher this morning, and extended these gains into the afternoon. At the close of the session, the Dow Jones Industrial Average was ahead 123 points, taking the blue chip index near record-high ground. The S&P 500 Index was up 18 points; and the technology-heavy NASDAQ was higher by 68 points. Market breadth was quite favorable, with winners well ahead of losers on the NYSE. All the major equity groups participated, with solid gains in the technology and consumer names. While there were no weak sectors today, some of the financials lagged the broader market a bit.
Meanwhile, The Federal Reserve was the main area of concentration. Early this morning, central bank Chair Janet Yellen offered prepared remarks to Congress. Few were surprised by the speech. The Fed will likely continue to lift rates incrementally, as the economy slowly strengthens and the nation’s employment situation improves. However, the tone of the remarks suggests that the Fed will remain supportive, too. Many traders on Wall Street now anticipate just on more interest rate hike this year, probably at the December meeting. Tomorrow, Ms. Yellen will deliver further remarks, which will likely be closely examined by traders. In addition, we will get a look at the latest weekly unemployment claims.
Elsewhere, it was a relatively light day for corporate reports. However, shares of Fastenal (FAST) moved lower, even though the industrial equipment company posted solid results. Meanwhile, the second-quarter earnings season will soon be ramping up, with several major banks set to deliver their numbers in a couple of days.
Technically, the stock market continues to show resilience, despite various areas of concern. As the economy in the United States has improved, some of the strength in the stock market lately may suggest that there will be improvements in other economies across the globe, too. - Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
12:10 PM EDT - Wednesday’s market has thus far been dominated by the bulls, with the Dow Jones Industrial Average hitting intraday highs on the heels of Federal Reserve Chair Janet Yellen’s dovish testimony. The central bank’s highest ranking official indicated that it will begin paring its massive $4.5 trillion balance sheet by the end of the year. Also of note was her apparent indication that the rate-hike strategy would be more gradual than the more-hawkish tone over the past several months. This news has also served to appease investors who are growingly concerned about delays in implementing key reform initiatives on Capitol Hill, and healthcare has been the best performer of the market sectors so far in the day.
The political landscape has been active in the past two days. Though traders shrugged off the most recent development related to an ongoing investigation involving the Trump Administration and the Russian government during yesterday’s session, the overarching concern hanging over this still-bullish market is the potential delay of tax, regulation, and infrastructure policies. Senate Majority Leader Mitch McConnell pushed back the summer recess to early August in hopes of giving his Senate colleagues time to iron out disagreements over the GOP’s healthcare proposal. Once passed, investors hope, lawmakers will be able to focus on the very policy initiatives that have propelled stock prices to historically high levels since November’s election.
Meanwhile, on the energy front, U.S. crude oil enjoyed a modest rally after a government report showed domestic stockpiles fell by 7.6 million barrels last week. The decrease was considerably more pronounced than the anticipated 2.9 million decline, and was a welcome bit of good news for a sector that has been under pressure for several months. Still, the morning run-up somewhat faded as the midday hour approached, as investors processed other data that showed U.S. production ticked higher. Overseas, OPEC saw output rise nearly 400,000 barrels per day, spurred by ramped up activity in Nigeria and Libya. At noon, U.S. crude was holding on to a $0.39 gain.
Each of the three major indexes remained steadily in positive territory as the noon hour approached with the NASDAQ posting the widest improvement this morning. Market breadth favored the bulls by a convincing five-to-one margin, while all ten of the major market sectors showed aggregate gains.
Looking forward, the rest of the week will be a little more active on the business beat. Starting this afternoon, when the Federal Reserve releases its Beige Book summation, investors will be offered a steady stream of updates on the economic outlook. New data on inflation, retail, jobless claims, industrial production, and factory utilization figure to play a role in trading in the week’s final two trading days, as will earnings releases from JPMorgan Chase (JPM – Free JPMorgan Stock Report) and other major financial institutions. - Robert Harrington
As of this article’s writing, the author did not hold positions in any of the companies mentioned.
Before The Bell - It was expected to be a quiet mid-summer session on Wall Street yesterday. After all, there were few news items of note on the business calendar, as also had been the case on Monday, when the stock market had marked time. And, indeed, yesterday's trading began in uneventful and rather flattish fashion, with the averages moving back and forth and achieving little. Whatever suspense there was would likely come later in the week when we would get metrics on inflation, at both the producer and consumer levels, on retail spending for June, and on today's issuance of the Beige Book.
Then, as the morning rolled along, the calm was broken, with the Dow Jones Industrial Average tumbling to a session-worst decline of about 130 points. The reason for that sudden reversal were the e-mails released by Donald Trump Jr. The Dow's plunge reflected renewed concerns about the Russia controversies that have plagued Mr. Trump's Presidency from the outset. Traders lamented that each time there is a flare-up of this sort, the potential for policy reform--the main cog in the stock market's steep climb since last November--lessens somewhat. And with health care reform hanging in the balance, this was the last thing the market needed.
However, after Wall Street sold off, the dollar fell to its lowest level of the day, and gold futures spiked, the stock market regained its footing and by noon in New York, calm was restored and trading had more of a mixed look to it. In fact, by mid-afternoon, the Dow was back on the plus side of the ledger, as was the NASDAQ, the Russell 2000, and the S&P Mid-Cap 400. The large-cap S&P 500 Index, though, retained a small loss on the political concerns. The likely reason for the later comeback was the announcement by Senate Majority Leader Mitch McConnell that the Senate's planned August recess would be delayed.
The reason for the delay was to give the Republicans more time to repeal and possibly replace the Affordable Care Act, which still is on the books. There is plenty of intra-party opposition to such efforts recently undertaken by the Republicans in the Senate and unanimity among the Democrats in the senior chamber in opposing any GOP efforts. Meanwhile, the higher volatility likely reflected the weaker volume in place on these normally calm summer sessions. Also, traders were concerned about testimony today and tomorrow by Federal Reserve Chair Janet Yellen to the two houses in Congress.
The market's comeback then continued on and off over the balance of the afternoon, so that as the closing bell sounded, the Dow had managed to hold near the breakeven line. That was some weakening from mid-afternoon into the close, but it was a mighty comeback from the late-morning slide of 130 points. At the same time, the S&P eased slightly, but the NASDAQ, benefiting from some technology strength, added 17 points. Increases also were tabulated by the small- and mid-cap composites. In the end, the market shrugged off the political events, at least for now, but nerves were frayed for a time and that is worrisome to a degree.
Looking ahead to a new day, we once more will see limited economic news, save for the weekly report on crude oil inventories and this afternoon's release of the Beige Book economic summation by the Federal Reserve. Both the energy inventories and the Beige Book can be market-moving events--especially the former. As to coming events on the economic scene, tomorrow and Friday, as noted, will bring data on inflation, retailing, jobless claims, industrial production and factory utilization. We also will be getting some bank earnings later this week, notably from Dow component JPMorgan Chase (JPM - Free JPMorgan Stock Report).
As for the market, the early action in Asia was weaker overnight, while on the Continent, the bourses are showing early gains ahead of the Yellen testimony. Also, oil is up now; the dollar is little changed; Treasury yields are down; and metals prices are up a little. Finally, our futures, following a pair of undistinguished sessions to start the new week, are gaining some early ground. - Harvey S. Katz