After The Close - The equity market put in a largely constructive session today. At the close of the day, the Dow Jones Industrial Average was ahead roughly 93 points; while the S&P 500 Index was up 11 points; and the NASDAQ was higher by 45 points. Market breadth showed broad-based support for equities, as winners outnumbered losers by a comfortable margin on the NYSE. Most of the major equity sectors made progress today. Specifically, the technology issues logged solid gains, which was encouraging given that many of these stocks have experienced considerable selling over the past few days. The energy names also moved up, possibly on hopes that the price of oil will firm up and soon move back to the $50-a-barrel mark. In contrast, the telecom names lagged the broader market.
Meanwhile, traders received just one notable economic news item this morning. Specifically, the Producer Price Index was unchanged during the month of May, which was largely in line with analyst expectations. Further, this measure suggests that inflation is not yet a problem. On a related note, tomorrow we will get a look at the Consumer Price Index for the month of May. Further, in the early afternoon the Federal Reserve will conclude its two-day FOMC meeting and issue an interest-rate decision. The central bank will also likely provide some remarks, which will be examined at closely. Most traders expect that a small rate hike will be approved, so the news may not come as a surprise.
Elsewhere, investors did not receive too many major corporate profit reports over the past 24 hours. However, there was some M&A news to report. Of note, Verizon (VZ – Free Verizon Stock Report) completed its acquisition of Yahoo! (YHOO) today. Shares of both companies moved modestly lower on the news.
Technically, stocks continue to show some resilience, as many of the major averages return to high ground. - Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
12:30 PM EDT - In the wake of yesterday’s down session, the U.S. equity markets opened to the upside today, and have largely kept within a fairly narrow band. Notably, the Dow Industrials briefly touched upon a new intra-day high, while the S&P 500 and NASDAQ are not too far off from record levels.
Altogether, we don’t expect any significant price swings today, as traders await the conclusion of the Federal Open Market Committee’s two-day meeting which wraps up tomorrow. The general consensus is calling for a 25-basis-point hike in the Fed funds rate, and we don’t expect it to deviate from that mark. However, market participants will be closely parsing the content of Chairwoman Janet Yellen’s press conference (scheduled for 2:30 p.m. Eastern time) for any sense of a change in direction for monetary policy.
On the economic news front, the U.S. Labor Department reported that producer (wholesale) prices came in flat for the Month of May, compared to a 0.5% increase in April, with lower prices for gasoline and other fuels offsetting increases in other parts of the economy. However, the 12 month figure came in at 2.4%, which is close to its five-year high.
As we passed the noon hour of trading in New York, the major U.S. indexes were all on the plus side. The Dow Jones Industrials and the S&P 500 were both up a little over a quarter of a percentage point. The tech-laden NASDAQ, meanwhile, was up just over half a percent, regaining some lost ground from its two-day losing streak.
In terms of sector performance, most have kept to the green led by consumer cyclicals, basic materials, energy, and technology, each up over half a percentage point. Bringing up the rear were telecommunication and consumer non-cyclicals with modest declines.
Taking a look at overseas activity, trading was a bit more mixed. Germany’s DAX and France’s CAC-40 never strayed from the plus side and were ahead by about half a percent each as the closing bell approached.
Meanwhile, after spending most of the day in positive territory, London’s FTSE ended the session slightly below the breakeven mark. - Mario Ferro
At the time of this article's writing, the author did not have positions inany of the companies mentioned.
Before The Bell - The first day of the new trading week went to the bears. On a day that was light on both earnings and economic news, traders appeared to be looking a few days ahead—and questioning what effect Wednesday afternoon’s monetary policy decision and accompanying statement will have on the U.S. equity market. Perhaps, we saw some profit taking ahead of the FOMC decision that will likely result in a 25-basis-point interest rate hike. A deviation from the consensus could bring buyers back to the market, while a more hawkish stance could prompt some more profit taking in the days following the announcement. Yesterday, the primary culprit behind the selling was weakness in the technology sector.
Indeed, it was a winning day for the bears, but it was far from a lopsided one. The Dow Jones Industrial Average, the NASDAQ Composite, and the broader S&P 500 Index fell 36, 32, and two points, respectively. However, the broader Russell 2000 and the S&P Mid-Cap 400 Index were little changed on the day, and market fundamentals painted a mixed picture. Declining issues led advancers on the NASDAQ, but there were actually more winning than losing issues on the Big Board.
From a sector perspective, the technology stocks, as noted above, struggled again, and we saw some notable selling in the basic materials group. In the technology space, the stocks of the computer hardware companies were again under heavy selling pressure. In general, we think it may be a case of taking some profits off the table in a sector that has been white hot in recent months. Conversely, we saw some modest buying in the energy, industrial, and telecom groups.
Meantime, after the noted quiet day on the economy yesterday, the data begins flowing in today. Just moments ago, the Labor Department reported that producer (wholesale) prices were flat in May, after final demand prices rose 0.5% in April and edged down 0.1% in March. The benign inflation data in itself would put little pressure on the central back to tighten the monetary reins, but our expectation is that with low unemployment, gains in factory output and solid nonmanufacturing data, the Fed will decide to lift rates.
Looking overseas, international traders are shrugging off yesterday’s selloff in the U.S. equity market. Overnight, the main indexes in Asia finished mostly higher, with the move upward led by gains in China and Korea. Likewise, the major European bourses are in positive territory, as trading moves into the second half of the session on the Continent.
With less than an hour to go before the commencement of trading stateside, the equity futures are presaging a modestly higher opening for the U.S. stock market. We would not be overly surprised if the trading remains in a tight band around the neutral line for much of the session today, as investors will likely not want to make any major moves ahead of tomorrow afternoon’s Federal Reserve monetary policy news. Stay tuned. - William G. Ferguson