After The Close - The equity market opened lower this morning, and was unable to recover any ground in the afternoon. In fact, some late-day selling made matters quite a bit worse. Traders were likely concerned that the second-quarter earnings season may show some signs of weakness forming in the corporate sector. At the close of trading today, the Dow Jones Industrial Average was down 116 points; the S&P 500 Index was off 20 points; and the NASDAQ was lower by 38 points. Market breadth was slightly negative today, as decliners outnumbered advancers on the NYSE. From a sector perspective, the industrial and basic materials issues lost ground, while the healthcare names and utilities managed to make some progress.
Meanwhile, it was an important day for economic reports. For example, housing starts dipped to an annualized rate of 1.25 million units for the month of June, falling short of analyst expectations. Building permits for the month also declined. In the afternoon, the Federal Reserve released its Beige Book summation for the month of July. While the report was generally positive, international trade difficulties were seen as a concern. Tomorrow will be a busier day. We get a look at the weekly initial jobless claims figures, a report on conditions in the greater Philadelphia region, as well as the Conference Board’s leading indicators issuance.
In the corporate sector, the second-quarter earnings season is just getting started. Today we heard from a few large names. One item that stood out was a weak report from CSX (CSX). That stock lost considerable ground after the company tempered its outlook on trade-related weakness. Of note, this report likely stoked investor fears and may have impacted many related companies.
Technically, equities pressed ahead in the first part of July, but have been a bit lackluster for the past few sessions. Much will depend on the numerous reports released over the coming weeks. – 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 stock market, following a ho-hum session to start the new week on Monday, began yesterday's trading in unimposing fashion, as well, with the major averages doing little at the outset. Influencing activity at the day's opening was the start of second-quarter earnings season which saw profit beats at Goldman Sachs (GS – Free Goldman Stock Report) and Johnson & Johnson (JNJ – Free J&J Stock Report), but only the former issue was doing well in early trading. Overall, some 5% of S&P Index 500 companies have reported their results to this point, with a big majority of that group outperforming net expectations.
Meanwhile, in addition to second-quarter earnings and the upcoming Federal Reserve FOMC meeting (on July 30th and July 31st), which had been occupying much of the Street's attention heading into this week, there also is the economy. Here, the latest data were mixed. On point, just before the market opened yesterday, the Commerce Department reported that the nation's industrial output had been unchanged in June, following a nice gain in May, but a sharp drop in April. Also, capacity utilization at the nation's factories slipped a little last month, from 78.1% to 77.9%.
In another report, Commerce noted that retail spending had increased by 0.4% in June. A rise of just 0.1% had been the consensus forecast. Breaking this critical issuance down, we note that sales, excluding the volatile auto sector, also gained 0.4% last month. Among the prime contributors to this decent aggregate performance were sales at furniture shops, food and beverage stores, health and personal care outlets, and over the Internet, where volume really surged in June, jumping 1.7%. On the other hand, sales fell sharply, 1.1% in all, at the nation's department stores.
Meanwhile, the stock market continued to ebb and flow near or just above the breakeven line until the morning ended, when a rush to the exits occurred that saw the major indexes turn notably lower for a comparatively brief stretch. What was seemingly behind this mid-session correction, which at its nadir quickly pulled the Dow down by nearly 70 points, were remarks from the President that new tariffs might yet be imposed on China, as he speculated that it would be a while before a trade package was secured. Since China and the United States had brokered a truce at the recent G-20 meetings, this issue had retreated to the back burners.
Now, however, for one hour, at least, trade was back in the forefront. But this concern did not last long, and as traders returned from lunch, the market had stabilized, although with a slight edge to the downside, especially on the NASDAQ. However, the smaller indexes held fairly strong. This uneven showing would continue into the afternoon, with the Dow going back and forth into and out of the green, but with the S&P 500 Index and the NASDAQ remaining in the loss column throughout the day. One consistent gainer on the day, though, were bond yields, which ticked up to 2.12% on the 10-year Treasury note.
The close would see little in the way of dramatic movement, with the Dow finally giving up the battle to close down by 25 points. Losses of 10 points and 35 points, respectively, were tallied by S&P 500 Index and the tech-driven NASDAQ. It was a day to mark time, as investors awaited an almost certain Federal Reserve move in two weeks, the further onslaught of earnings releases, and more occasional tidings on trade. As for the economy, the trend is somewhat slower for most business categories, with GDP growth, which totaled more than 3% in the opening period, likely to just about average 2% for the recently concluded second quarter.
Looking out to a new day, now, and checking the markets overseas, we see that the principal indexes in Asia were weaker in dealings overnight on U.S.-China trade concerns, while in Europe, the major bourses now are pressing a bit lower. Also, oil prices, off yesterday, are rising, and Treasury note yields, which climbed in the latest session, now are down somewhat. Finally, ahead of a slew of earnings reports and key economic releases, the U.S. equity futures are pointing to a flattish start to the trading day. - Harvey S. Katz, CFA