After The Close - The futures market was quite volatile as rumors flew about the U.S. trade negotiations with China. But by the time the stock market opened, prices were well into the green. The move higher was aided by a report stating that President Trump was going to meet with the Chinese Vice Premier Liu for high-level negotiations tomorrow. The Dow Jones Industrial Average rose by as many as 257 points in the first portion of the trading session, while the other indices were up in tandem. However, sentiment reached an overbought condition, and the markets tapered off throughout much of the second half of the trading session. Even so, the composites retained most of the day’s gains and staged a small move up in the last portion of the day. Overall, the Dow closed higher by 151 points, the S&P 500 was up 19 points, and the NASDAQ gained 47 points.
Moreover, market breadth was positive, as advancers outpaced decliners by a 1.7-to-1.0 ratio. Energy stocks were among the best performers on the day, while utility equities were among the weakest.
In commodity news, oil prices were higher today, as demand expectations rose alongside sentiment for a trade deal. Meantime, U.S. Treasury bond yields were mostly higher, as traders moved away from the safe-haven asset. Too, long-term interest rates had greater moves up than short term ones, which usually is positive for financial companies’ earnings. The VIX Volatility Index was lower today, as demand for options protection fell a bit.
Looking ahead, tomorrow will have a have few economic reports, headlined by a sentiment survey from the University of Michigan. Meantime, there are a few companies slated to issue earnings reports (earnings season will be rolling in earnest next week). Overall, we think most eyes will be watching to see how U.S. trade negotiations with China develop, especially considering high-level meetings at the White House. - John E. Seibert III
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before The Bell - The rollercoaster ride investors have been taken on so far this fall continued yesterday, with the bulls leading the way this time. Indeed, after two down days to start the week, including outsized losses on Tuesday, the major equity averages reversed course yesterday and rallied notably, paring a good deal of the prior two-day losses. For the session, the Dow Jones Industrial Average, the NASDAQ Composite, and the broader S&P 500 Index rallied 182, 80, and 26 points, respectively.
On a quiet day for earnings and economic news, the market turned to the trade front for some guidance, and, in response, stocks were bid higher. Ahead of today’s commencement of trade negotiations between top U.S. and China officials, the major averages rallied on some sentiment that the two bickering countries are moving closer to a trade détente, even if it is a partial deal. Some positive trade sentiment, along with benign inflation data on Tuesday morning (the Labor Department reported that producer prices for final demand decreased 0.3% in September), which many pundits think will push the Federal Reserve to cut rates later this month, pushed more investors to add risk to their portfolios.
Then yesterday afternoon traders were awaiting the minutes from the Federal Reserve’s September monetary policy, which concluded with a 25-basis-point interest cut. Investors were hoping yesterday’s release would provide more clues as to what the central bank leaders are thinking ahead of this month’s FOMC meeting. The release showed the voting members were divided on rate cuts, but the accompanying projections showed seven of the Fed’s 17 policymakers (a majority) indicated they forecast one more rate cut this year. However, since that meeting, the manufacturing and nonmanufacturing data were very weak and the jobs report was lukewarm. That, combined with benign inflation data on the wholesale side, has many market pundits thinking that maybe two more rate cuts could come before the end of this year.
Speaking of inflation, just minutes ago, the Labor Department released its latest report on consumer pricing. Specifically, the Consumer Price Index for All Urban Consumers was unchanged in September on a seasonally adjusted basis after rising 0.1% in August. Over the last 12 months, the all items index increased 1.7% before seasonal adjustment. Given another set of benign pricing data, our sense is that calls for further monetary policy loosening may increase in the coming weeks. That said,
All eyes today will be on the commencement of trade talks between the United States and China. The meeting, along with commentary emerging from the talks, will likely be the main driver of trading today, especially with earnings season not starting until next Tuesday with the release of third-quarter results from banking giant JPMorgan Chase (JPM – Free JPMorgan Chase Stock Report) before the opening bell.
With less than an hour to go before the commencement of trading stateside, the equity futures are presaging a slightly lower opening for the U.S. stock market. So far today, most of the international indexes are none too far removed from the neutral line, as traders may be hesitant to make any major moves ahead of the trade discussions. The main indexes in Asia finished modestly higher overnight, while the major European bourses are mixed, as trading moves into the back half of the session on the Continent. Stay tuned. – William G. Ferguson