After The Close - The stock market opened lower this morning, selectively pared its losses, and ended on a mixed note, thanks to some late-day buying. Earlier in the session, investors seemed concerned that second-quarter corporate profits may have been hurt by the ongoing trade dispute with China. Further, a sense that the Federal Reserve may not lower interest rates aggressively in the immediate future likely weighed on the market, as well. At the close of trading today, the Dow Jones Industrial Average was down almost 23 points; the S&P 500 Index was up four points; and the NASDAQ was higher by 43 points. Market breadth showed a divided session, with losers about even with winners on the NYSE. From a sector perspective, the technology and healthcare stocks managed to make some progress, while the industrial names and consumer issues retreated.
Meanwhile, there were no major economic news items released this morning. However, tomorrow the Federal Reserve will take the spotlight. In the morning, the FOMC will release the minutes from its latest meeting. In the afternoon, Federal Reserve Chairman Jerome Powell will offer testimony to Congress. These issuances will be closely dissected by traders, as they speculate about any possible changes to the Fed’s position.
In the corporate sector, it was a light day for company profit reports. However, we did hear from PepsiCo. (PEP). Shares of the beverage manufacturer moved slightly lower today, even though the company delivered a respectable release. Looking ahead, the pace of reports should pick up, as the second-quarter earnings season gets started.
Technically, the stock market has pulled back over the past few sessions, as traders seem to be in need of some direction. In the weeks ahead, the corporate profit outlook, developments overseas, and the Fed’s monetary policy, will likely be the main areas of concentration. - 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 - Concerns about the technology sector, worries about Federal Reserve interest-rate policies, and anticipation ahead of this week's testimony by the central bank Chair, Jerome Powell combined to send stocks markedly lower in the morning yesterday. In all, the Dow Jones Industrial Average, down nearly 200 points early in the session, was still off by some 140 points after 90 minutes of trading. This setback came after a generally strong showing in the holiday-shortened sessions last week.
The weaker activity then would continue through the balance of the morning, with worries persisting about the upcoming FOMC meeting. Until last Friday, there had been a general consensus that the Fed would lower interest rates when it meets at the end of this month. Then, on Friday, the government reported a strong gain in non-farm payrolls for June. That increase, which was an above-expectations 224,000 somewhat reduced the near-universal sentiment that the Fed would cut rates at that time.
Still, even with the stellar rise in payrolls (a gain of 160,000 had been the forecast), our sense remains that the central bank will lower borrowing costs when it convenes July 30th and July 31st. Whatever the case, the market held in the loss column into the early and mid-afternoon, with the Dow still off by just over 140 points as we entered the session's final two hours. The NASDAQ, meanwhile, was off by nearly 75 points, a larger percentage on the aforementioned slippage in technology, especially the shares of Apple (AAPL – Free Apple Stock Report).
Stocks then would continue in the loss column as the afternoon progressed, with the Dow's triple-digit point loss persisting through the rest of the afternoon and into the close. It was not a major selloff, but rather a continuation of the uninspiring trading ahead of the start of earnings season and the testimony by the Fed Chair. Also, in addition to weakness in technology, the Street saw some modest selling in the health care space. As for the Fed, most investors still expect a rate cut on July 31st, but by a quarter rather than a half-point reduction.
All told, the Dow ended off by 116 points, while the S&P 500 ended off 14 points. The NASDAQ, under pressure from technology losses, fell 63 points. Now, as we look ahead to a new day and more Fed watching, attention will naturally turn to the semi-annual testimony before the House and the Senate by Jerome Powell tomorrow and Thursday to see whether or not a rate reduction is on the way. For our part, we think one is, but a quarter of a percentage point move--not a half.
Looking ahead to a new day now, we see that the principal indexes were generally weaker in Asia in the overnight hours, while in Europe, the major bourses are off fairly sharply thus far in early dealings this morning. Moreover, Treasury note yields, off slightly yesterday, are trading up ahead of the Powell testimony this far this morning, and U.S. equity futures are pressing downward at this hour, as traders and investors await the remarks later this week by the Fed Chair and additional economic news releases. – Harvey S. Katz, CFA