After The Close - The equity markets remain quite volatile. While stocks took a step backwards yesterday, they managed to firm up considerably today, making up all of the prior day’s losses and then some. At the end of today’s session, the Dow Jones Industrial Average was ahead 225 points; the broader S&P 500 Index was up 24 points; and the NASDAQ was higher by 107 points. Market breadth was favorable, with winners leading losers on the NYSE. From a sector perspective, the technology and healthcare issues displayed leadership, while the non-cyclical consumer names posted more modest gains.
In broader economic news, the Consumer Price Index (CPI) rose 0.1% during the month of June, where a higher figure had been expected. Meanwhile, initial jobless claims dipped to 214,000 for the week of July 6th, which was a healthy reading. Tomorrow we get a look at import and export prices for the month of June. Also, the University of Michigan will report its preliminary consumer sentiment figure for the month of July.
In the corporate sector, shares of Delta Air Lines (DAL) advanced slightly today, even though the company tempered its outlook due to higher fuel costs. Tomorrow the second-quarter earnings season kicks off in earnest, and some large banks, including JPMorgan Chase (JPM – Free JPMorgan Stock Report), will weigh in with their numbers. Meanwhile, in M&A news, shares of CA, Inc. (CA) surged today after the technology company agreed to be purchased by Broadcom (AVGO).
Technically, stocks remain choppy, as traders look for direction. If second-quarter earnings season progresses well, perhaps that will provide some clarity, and offset fears about tariffs and possible trade disputes. - 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 - News overnight that the trade war between the United States and China was heating up again sent a shudder through Wall Street yesterday morning, sending the Dow Jones Industrial Average to an initial loss of more than 170 points. To wit, the Administration slapped on new tariffs on an array of goods made in China. The new total of $200 billion is well over the earlier tab of $34 billion that each had placed on the other. However, the tariffs will not come into effect immediately, but rather will undergo an extensive review process, with hearings set for later this summer. Still, that news was sufficient to send stocks reeling.
The early selloff followed a better performance on Friday and again on Monday. On Tuesday, stocks had put in a mixed showing, with the large cap issues rising, but the smaller caps falling back. It seems that neither the United States nor China appears willing to bend at this point, so periodic selloffs can be expected, such as we encountered yesterday morning. Overall, though, the market enters earnings reporting season in good shape, with the Dow, the weakest performer so far this year among the major composites, now putting some distance between itself and an earlier correction.
The industrials, with heavy exposure overseas, meantime, were the hardest stocks hit initially. Offsetting the troubling trade news was the continuing optimism about economic growth, where recent days saw upbeat news on manufacturing, non-manufacturing, and employment. Also, there is confidence that corporate earnings season, where expectations are high, will not disappoint. All told the consensus calls for a 20% increase in second-quarter earnings. Meantime, in other news, the Labor Department reported that the Producer Price Index rose by 0.3% in June, down from a 0.5% rise in May. The gain without food and energy was 0.3%, too.
So, for now, at least, inflation is not a major issue on the agenda and, therefore, is having little aggregate effect on stock market performance. The key items, as we have noted, are trade, economic growth, and earnings. As to the market, stocks continued at lower levels throughout the morning, falling by as much as 200 points before noon. The downturn then persisted into the afternoon, and as we entered the final two hours of the trading day, that 30-stock composite was still off by 200 points. Somewhat lesser declines were suffered by the S&P 500 and the NASDAQ, but a clearly bearish tone was definitely in place.
The decline worsened for a brief time, with the Dow skidding by 250 points. As noted, though, the selling squall was fairly brief and the market would go on to pare its deficit after a time. Still, the worsening trade war remained in the minds of investors as the session wound down. Caterpillar (CAT –Free Caterpillar Stock Report) and Dow DuPont (DWDP – Free Dow DuPont Stock Report) were among the day's biggest Dow losers. The selloff in these two industrial giants and some other internationally focused corporations, resulted from fears that the trade standoff would exact a toll on these companies and others in their field.
The stock market stayed comparatively stable as the final minutes ticked down, with the Dow deficit staying in a 175-200-point range, for the most part, while the NASDAQ's loss, once more than 60 points was halved for a time. The market's tone, however, was sharply negative, with nearly all of the ten leading equity groups lower on the day. The energy and basic materials categories led the way down with losses of more than 2% each, while losing stocks held more than a two-to-one lead on gaining issues on the Big Board. This latest session ate into the confident tone exhibited earlier this month.
In the end, the blue chip composite would fall by 219 points, while the NASDAQ would shed 43 points. Now, a new day is under way, and for a hint of where the action will be on our shores, we look at Asia where the indexes were higher overnight. In Europe, meantime, the indexes are thus far trading with solid gains. Moreover, Treasury note yields, which eased yesterday are now up modestly, while oil prices are moving higher, thus far. As to our markets, the early read on the U.S. equity futures is suggestive of a positive opening when trading resumes later this morning. – Harvey S. Katz, CFA