After The Close - After yesterday’s substantial decline, the stock market started in the green today. A report stated that China is open to a partial trade deal with the United States, while another asserted that an offer to buy more U.S. agricultural products was on the table to reach an agreement. Traders received the news positively, and the Dow Jones Industrial Average was higher by 205 points in the first few moments of the trading session. The other indices were up as well. The markets then traded sideways for a spell, before making another move higher, and the composites slowly continued to rise throughout the afternoon. The Dow was up as many as 260 points at its apex. However, the indices tapered off into the final portion of trading and gave back some of the day’s gains. All told, the Dow closed higher by 182 points, while the S&P 500 was up 26 points.
Additionally, market breadth was quite positive, as advancers outpaced decliners by a 2.0-to-1.0 ratio. Technology stocks were among the best performers of the day. On the other hand, REITs were among the worst performers of the day, though only on a relative basis.
In commodity news, oil prices were slightly higher today, as demand expectations rose alongside the broader market. However, the Energy Information Administration reported rising crude oil inventories, which partially offset this improvement in sentiment. Meantime, U.S. Treasury bond yields rose today, as demand for the safe-haven asset fell. Long-term interest rates were up more than short-term ones, which usually is positive for financials’ earnings. The VIX Volatility Index was notably lower today, as demand for options protection fell.
Looking ahead, tomorrow will have a lot of economic data on the docket. This list will include initial jobless claims and the Energy Information Administration’s weekly report on natural gas inventories. Too, factory orders for August and the ISM nonmanufacturing index for September will be released. Also, a few companies are slated to report quarterly earnings, including a few consumer staples companies.
Overall, we think most eyes will be on any developments in the U.S. trade negotiations with China. - 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 - Stocks head into trading on Wednesday off a difficult session that saw the Dow Jones Industrial Average fall 314 points; the NASDAQ drop 133 points; and the S&P 500 lose 46 points. Declining issues outpaced gainers by a three-to-one margin on both the New York Stock Exchange and the NASDAQ. More stocks hit 52-week lows than highs. The problem was disappointing developments on trade relations with China, but the tone on that front has improved this morning.
Investors got cold feet during Tuesday’s session when signs pointed to little progress on trade. Proposed visa restrictions on officials from China and the addition of 28 companies based in China to an export blacklist by the Commerce Department indicated that relations were becoming more strained.
Wall Street has been looking for a deal between the U.S. and China to boost economic growth for quite some time now. The implementation of reciprocal tariffs by both nations over the past year has clearly weighed on global business conditions.
This morning, though, stock futures are nicely higher about an hour before the market opens on signs that China may be open to a partial deal, and could buy more U.S. agricultural products, as long as no more tariffs are imposed.
Without an accord, the worry is that stimulative monetary policy might not be sufficient to offset the damage caused by the trade war.
Federal Reserve Chair Jerome Powell indicated yesterday that the nation’s central bank plans to expand its balance sheet to improve liquidity in the market. The announcement of this strategy lifted sentiment for a while Tuesday afternoon, but news of the potential visa restrictions on officials from China caused stocks to fade into the closing bell.
Most sectors were weak, with financial, energy, and technology stocks faring among the worst.
In earnings news, apparel maker Levi Strauss (LEVI) reported better-than-expected fiscal third-quarter revenues and earnings. Its shares indicate a modestly higher open this morning.
Earnings season is set to ramp up in the days ahead, and investors are keen to hear what companies have to say about the outlook ahead.
As for any potential agreement with China, sometimes the art of the deal means taking what you can get, and declaring victory. In that vein, Wall Street probably feels that something is better than nothing. - Robert Mitkowski