After The Close - Premarket trading started out weakly this morning, as expectations fell concerning a meeting between President Trump and President Xi of China. Then, the composites slid further once the session began, as a few key economic data points were weaker than expected. These included growth slowing in housing prices, and consumer confidence reaching its lowest levels since September 2017. The Dow Jones Industrial Average was down by as many as 114 points in the early part of the session, while the other indices moved lower in tandem. After recovering for a short bit, the market started a new leg down when St. Louis Fed Chief Bullard stated that he did not see the need for a half point rate cut in July. Traders had been speculating that this was the likely outcome, and it negatively impacted sentiment. Overall, the day was marked by continued selling, and the indices closed near the day’s lows. All told, the Dow was down 179 points, while the S&P 500 was lower by 28 points.
Additionally, market breadth was rather negative, as decliners outpaced advancers by a 1.8-to-1.0 ratio. Materials stocks were among the best performers on the day, while communications equities were among the weakest.
In commodity news, oil prices were slightly higher today, as tensions rose across the Middle East in the wake of new U.S. sanctions on Iran. Meantime, U.S. Treasury bond yields were a mixed bag, as short-term yields rose, while most long-term issues fell. This shows a flattening of the yield curve, which is usually a headwind for financial companies’ profits. The VIX Volatility Index was higher today, as demand for options protection rose.
Looking ahead, tomorrow should be full of economic news, including the Energy Information Agency’s weekly status report on crude oil inventories. Too, durable goods orders for May are slated for release. Additionally, trading will likely be affected by a few large quarterly earnings reports, which are expected both after the bell today and in the morning tomorrow. Also, we expect that any news from the G20 or from the Federal Reserve will drive trading. - John E. Seibert III
At the time of this writing, the author did not have positions in any of the companies mentioned.
Before The Bell - Optimism about a high-level trade meeting between the leaders of the United States and China and concerns about the most recent confrontation between our country and Iran dominated the early activity on Wall Street yesterday. On point, hopes that the United States and China could at least get a dialogue going at the G-20 meeting later this week, helped stocks to get off on a winning note. But rising tensions in the Middle East capped the early gains, so as we passed the 90-minute trading mark, stocks were up just modestly.
In all, as we headed toward the late morning, the Dow Jones Industrial Average was climbing closer to a record high, gaining another 50 points. However, the S&P 500 Index was barely in positive territory and the NASDAQ was in and out of the red. The small-cap Russell 2000, meanwhile, had posted an early and fairly substantial loss. In individual equity trading, Dow component United Technologies (UTX –Free United Technologies Stock Report) gained some modest ground on an analyst upgrade. Otherwise, individual movements were small, in the main.
Long term, meanwhile, the major issue continues to be trade and hopes for the upcoming meeting between the heads of our nation and China. At the very least, Wall Street is hoping for continued negotiations and an end to the continued tit-for-tat tariff increases. The market also has been boosted by hopes for an easier monetary policy at the Federal Reserve, with some pundits sensing that an interest rate cut may come at next month's FOMC meeting. In all, these twin positives have led to a furious June rally following a major setback in May.
On the other hand, there is Iran and the threat of higher oil prices in the wake of a possible armed conflict between that country and the United States. Last week calmer heads prevailed as the President reconsidered an escalation of the situation in hopes that negotiations would carry the day. We shall see how that all works out. As to the market, prices remained generally on the uptick, save for the NASDAQ and the small-cap Russell 2000. Things would not change much as morning tuned into the afternoon, with the market gradually taking on a mixed tone as the Dow stayed modestly in the black, while the NASDAQ held in the red, working steadily lower.
Things would continue that way throughout the balance of the afternoon, before some late profit taking limited the gain on the Dow and pushed the NASDAQ more deeply into the red. All told, the Dow would close up just eight points, after having been up close to 90 points late in the morning. Elsewhere, the S&P 500 lost five points, while the NASDAQ ended off 26 points. The big loser, though, was the Russell 2000, which tumbled 20 points. In sum, it was a losing performance for a market that is still somewhat overbought.
Looking ahead to a new day, we see that stocks were lower in Asia in the overnight hours, while in Europe, the leading bourses are tracking a mixed pattern at this hour. In other news, oil prices are little changed and Treasury note yields are essentially flat. Also, ahead of the market open, the U.S. equity futures are off a little. Finally, in economic news, a half hour into the trading session, the Conference Board will issue its latest data on consumer confidence for the month of June. Stay tuned. – Harvey S. Katz, CFA