After The Close - The U.S. equity markets opened today’s session to the upside, and largely added to their gains as the day wore on. At the end of trading day, the Dow Jones Industrial Average was ahead by nearly 145 points, or 0.68 percentage points. The S&P 500 Index did slightly better, with its 20-point advance lifting the index by over three quarters of a percentage point. Both indexes closed at new all-time highs. However, the NASDAQ was the winner of the day, as tech stocks regained more of the ground they lost over the last couple of weeks. Up by 87 points, the composite came out ahead by 1.4%.
Market breadth showed a decidedly positive bias, with advancing issues outnumbering decliners by a wide margin. In terms of sectors, technology shares (as demonstrated by the NASDAQ’s performance) led the charge higher, gaining 1.7%. Healthcare stocks also put in a strong showing, rising about 1.2%. On the other side of the ledger, utility shares slipped by about half a percentage point, while energy shares lost an equal amount of ground, largely on continued fears of rising oversupply for oil. Elsewhere, sentiment among European traders also appeared to be quite upbeat, with London’s FTSE, Germany’s DAX, and France’s CAC-40 all posting gains close to the one percent mark.
The day was light on the economic news front, but Wednesday’s release of existing home sales figures will likely be closely watched to see if the data confirms recent softness on the construction side. Specifically, last week’s report on new home builds for May came in weaker than expected, with that metric falling for a third-straight month. Indeed, housing starts fell 5.5%, to an annualized rate of 1.09 million units, marking an eight-month low. However, with market fundamentals still largely favorable, the housing market likely still has a ways to run. – Mario Ferro
At the time of this article's writing, the author did not have positions in any of the companies mentioned.
12:15 PM EDT - Equities in the United States are trading higher this morning, following respectable gains in the overseas markets. As we pass the noon hour in New York, the Dow Jones Industrial Average is ahead roughly 114 points; the S&P 500 Index is up 17 points; and the technology-heavy NASDAQ is higher by 71 points. Market breadth shows a positive bias to today’s session, with advancing stocks well ahead of decliners on the New York Stock Exchange. Most of the major equity sectors are trading in positive territory. The technology shares are, once again, displaying leadership. In addition, the healthcare and basic materials issues are making positive strides. In contrast, the utility names are not participating in the advance, as traders may be moving capital to more dynamic parts of the market.
Traders received no major economic news items this morning. Tomorrow will also be a light day for reports. However, the pace should pick up somewhat on Wednesday with the release of the latest monthly existing home sales figures, and the EIA’s weekly crude oil inventory report. These issuances will probably be closely watched by Wall Street, given the attention that has been paid lately to the housing market and the price of energy commodities.
Meanwhile, in the corporate arena, few major companies delivered their quarterly financial reports this morning. However, there was some M&A news. Specifically, shares of PerkinElmer (PKI) are advancing today, after the scientific equipment maker agreed to purchase a Germany-based medical diagnostics company.
Technically, the stock market has held up quite well lately, despite a number of concerns. From here, traders are likely looking ahead to the second-quarter earnings season, which will start up in a few 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 major U.S. equity indexes enter the new trading week off of a mixed session on Friday that had a slightly more bullish undertone. The big picture may be that the stock market is showing some fatigue after a long-stretch of trading that saw the bulls rally since last November’s presidential election. To wit, some very important news last week on the economy and the monetary policy decision from the Federal Reserve did not produce any major moves for the equity averages. Friday’s session looked like a number of session we have seen over the last fortnight, which was with the Dow Jones Industrial Average finishing modestly higher (up 24 points), the NASDAQ ending the session lower (down 14 points), and the broader S&P 500 Index finishing the day not too far removed from the neutral line (up less than one point).
The big news last week was the Federal Reserve’s monetary policy decision on Wednesday afternoon. The central bank decided to raise the federal funds rate by 25 basis points, to 1.00% to 1.25%. However, the news did not have much of effect on trading, as the market seemed to have already factored in the likelihood that the lead bank was going to tighten the monetary reins. The big news, though, was the Federal Reserve noting that it plans to begin reducing its massive $4.5 trillion balance sheet, staring later this year, via selling bonds. This hawkish monetary policy is likely to push bond yields higher in time. But the Fed statement did not hurt the major indexes, as some may have expected, as it was offset by data showing weakening producer and consumer prices. The retail sales report for May was also disappointing and the latest data on housing starts and building permits fell on both a sequential and year-over-year basis. In particular, the weakening pricing data—the Fed noted that inflation is running below its target of 2%--offset some of the impact of the Fed’s more hawkish posture, as it raised doubts about how aggressive the central bank can hike interest rates if prices continue to weaken. The offsetting variables produced some mixed trading sessions to end the week.
Meanwhile, we would not be surprised if the major equity averages traded in a tight band for at least the next week, especially with the Federal Reserve news in the rearview mirror and second-quarter earnings season still some three weeks from kicking off. Simply put, there doesn’t seem to be a lot of major news to put the major equity averages off of their already lofty perches. And the near-term down side risk appears limited with fixed-income rates still very low. It has created an environment where there are few attractive investment alternatives to stocks. Further, it will be a quiet week on the economy, with the only notable reports coming on the housing market, with data due on new and existing home sales later in the week.
The Federal Reserve decision has come and gone, but the central bank will very much be in the minds this week, as the investment community get speeches from nine Federal Reserve District Presidents over the next five days. If more of the Federal Reserve leaders come across more hawkish than they once were, it could prompt some selective profit taking, especially with market valuations stretch. In fact, the S&P 500 Volatility Index (or VIX) ended last week at slightly above 10, a reading that suggest the market is way overbought. In this environment, any negative news could prompt some selling, and with several Fed Presidents on the docket this week, and the central bank showing some signs of becoming more hawkish with regard to monetary policy, the bears will be closely watching. That said…
With less than an hour to go before the commencement of trading stateside, the equity futures are indicating a nicely higher opening for the U.S. stock market. With the news light in the United States, the market is taking its cue from overseas, where the news has been mostly market friendly. Specifically, the major European bourses are on pace for their biggest advance in two months today, as elections in France over the weekend produced a parliamentary majority for pro-business President Emmanuel Macron. This is pushing European stocks, particularly those in France, higher this morning. Likewise, the main indexes in Asia finished higher overnight. The international news may be all the impetus needed to push the U.S. equity higher on this slow day for domestic news. Stay tuned. - William G. Ferguson