After The Close - Equities opened lower this morning, and remained under pressure for most of the session. The weakness today likely reflected investor concerns surrounding interest rates. Some believe that the Federal Reserve may not opt to lower rates as fast as some had hoped. Of note, at the end of last week, a strong monthly employment report showed that economy was still in good shape, as things stand. By the end of trading today, the Dow Jones Industrial Average was down 116 points; the S&P 500 Index was off 14 points; and the NASDAQ was lower by 63 points.
Market breadth was negative, with decliners easily ahead of advancers on the NYSE. From a sector perspective, the healthcare and technology stocks weighed on the market, while the defensive utility issues displayed a degree of relative strength.
Meanwhile, traders received few important economic reports this morning. Tomorrow will be a light day for economic news, as well. On Wednesday, we will get a look at wholesale inventories for the month of May, and the FOMC will release the minutes from its latest meeting. In addition, Federal Reserve Chairman Jerome Powell will provide testimony to Congress.
In the corporate sector, there were a few quarterly profit announcements issued today. However, among the big names, shares of Boeing (BA – Free Boeing Stock Report) headed lower on news that a major airline has chosen to award some of its business to competitor Airbus. Meanwhile, as the second quarter has now concluded, the pace of reports should soon intensify, and that could help move the markets.
Technically, the stock market put in a solid performance in June. It is too early to tell how the month of July will shape up. The second-quarter earnings season will be an area of concentration, as will developments overseas. – 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 most recent week of trading, which was shortened to three-and-a-half sessions due to the celebration of the Independence Day holiday last Thursday, was a winning one for Wall Street. In fact, all three of the major U.S equity indexes hit all-time highs on Wednesday afternoon, as traders broke away for the holiday. Pushing equities higher was growing sentiment that the United States and China were making some progress with regard to trade negotiations. The decision by President Trump, after his meeting with China’s President Xi Jinping, not to place tariffs on another $300 billion of Chinese goods and to loosen the restrictions on U.S.-based companies doing business with China-based technology giant Huawei Technologies raised hopes that the bickering nations were moving a bit closer to a trade deal.
The major U.S. equity averages pulled back nominally Friday, though, with some good news from the business beat actually leading to some profit taking during the week’s final session. Specifically, the Labor Department reported that nonfarm payrolls expanded by 224,000 positions in June, far exceeding the consensus expectation of 160,000 to 170,000, and the unemployment rate held rather steady at 3.7%. The good news on the job front, though, brought sentiment that the Federal Reserve may reconsider its stance on monetary policy; the growing consensus was that the central bank would cut interest rates at its FOMC meeting later this month. The growing uncertainty brought about by the strong labor figures weighed a bit on an equity market that has moved higher this year after the lead bank changed its commentary on monetary policy (from hawkish to dovish). For the session, the Dow Jones Industrial Average, the technology-laden NASDAQ, and the broader S&P 500 Index were down 44, eight, and five points, respectively, with some late buying paring a good portion of the early session deficits. The small-cap Russell finished modestly higher. Overall, the day was quite mixed, with more losing than winning issues on the Big Board, but slightly more advancers than decliners on the NASDAQ.
Still, the jobs data were an encouraging sign for the U.S. economy after some mixed reports late last month, including somewhat uninspiring figures from the housing market. With earnings season still about a week away from commencing with the release of the latest quarterly results from banking giant JPMorgan Chase (JPM – Free JPMorgan Chase Stock Report) on July 16th, the investment community’s focus is likely to be on international trade, the business beat, and the Federal Reserve. On the latter front, investors will be focused on testimony from Federal Reserve Chairman Jerome Powell this week and the minutes from the June FOMC meeting. As noted, Friday’s much stronger-than-expected June jobs report dampened hopes for a July rate cut by the Federal Reserve. We will also get the latest figures on producer and consumer prices from the Labor Department, which is likely to be scrutinized by the central bank for signs about inflation. Recent monthly reports on pricing have been benign, which has fed into the narrative that the central bank will probably cut interest rates this year. Now investors are expecting that cut to come later this year, maybe at the September FOMC meeting.
With less than an hour to go before the commencement of the new trading week stateside, the equity futures are presaging a modestly lower opening for the U.S. stock market. So far overseas, the main indexes in Asia finished sharply lower overnight on Friday’s U.S. employment data, while the major European bourses are in negative territory as trading moves into the second half of the session on the Continent. Our sense is that the direction trading takes into the start of earnings season early next week will be driven by two events: Fed Chairman Powell's testimony on monetary policy before Congress this week and the ongoing trade negotiations between the United States and China. Stay tuned. – William G. Ferguson