After The Close - Stocks closed down to end the week following unhelpful news on trade negotiations with China. Early in the afternoon, word came that a delegation from the Asian nation cancelled a visit scheduled to farmland in the United States.
The market had moved modestly higher by mid-morning on Friday in a bit of a news vacuum, since there was no major economic data scheduled to be released. The impact of the Federal Reserve’s Wednesday decision to lower interest rates was also largely factored into stock prices.
Wall Street was somewhat disappointed in the lack of the Fed’s commitment to lower rates further. But with the nation at full employment and the economy still chugging along, it was difficult for the central bank to provide a more aggressive outline for easing monetary policy.
For now, the Federal Reserve is viewing its two rate cuts this year as an insurance policy against slowing global growth brought about in large part by trade and tariff disputes.
U.S.-China talks thus have taken center stage with respect to how bullish investors feel about equities these days, and word that the officials from China were skipping a trip to Montana dampened optimism. The subsequent feeling that the visit was not all that symbolic one way or the other helped stocks come off their lows for a while, but the market weakened into the close.
As for the bigger picture, reaching a broad trade agreement is clearly proving difficult, but there is still room for optimism as long as both sides are talking.
Stocks shifted into more of a defensive mode as the session wore on, with traditionally less volatile sectors, such as healthcare and utilities, showing relative strength.
Utilities have enjoyed quite a run this year, moving in tandem with bond prices as interest rates have fallen. Today, the yield on the benchmark 10-year Treasury note last stood at 1.72%, down from 1.78% on Thursday.
Elsewhere, oil prices were little changed, but enjoyed their best week in several months following recent attacks on processing facilities in Saudi Arabia.
Indications point to a full resumption of the damaged plants in Saudi Arabia within a few weeks. That is keeping oil prices from moving higher.
At the close, the Dow Jones Industrial Average was down 160 points; the S&P 500 was 15 points lower; and the NASDAQ was off 65 points.
Even so, September has been a positive month for investors thus far, retaking ground lost in August. - Robert Mitkowski
At the time of this writing, the author did not have positions in any of the companies mentioned.
Before The Bell - After a seesaw afternoon on Wednesday, as the stock market initially fell following the conclusion of the two-day Federal Reserve FOMC meeting, but then rebounded strongly into the close, to end matters slightly to the plus side, the Street showed that there was no hangover yesterday morning. On point, after a weak session in the futures early on, they came back near the start of live trading and equities opened the session to the upside, with the Dow Jones Industrial Average quickly rising to a gain of nearly 100 points. Strength in the NASDAQ was even more pronounced.
Gains in Microsoft (MSFT – Free Microsoft Stock Report) and other technology names helped to offset what was in some respects a disappointing outcome of the Fed meeting. True, the central bank did lower interest rates by the expected 25 basis points, but it did not specifically indicate a timetable for future rate action, preferring to leave the door slight ajar for such a move, rather than fully open. That didn't sit well with some investors. So stocks waxed and waned as Wednesday's session wound down. Meantime, the optimism shown yesterday came amid a new round of face-to-face trade talks with China that are about to begin.
As to the Fed, its Chair, Jerome Powell intoned that he would be willing to impose a sequence of interest rate cuts if the need for such curative action arose, but he thought the business expansion would continue without additional help for now. That would seem to have been enough, as the bulls did some rethinking and started buying again yesterday morning, with the Dow's gain topping the 100-point mark after the first hour of trading. As noted, the advance was led by Microsoft. That Dow component saw its shares surge anew after the company upped its share buyback program and raised its dividend.
The stock market then would hold solid gains into the noon hour in New York, peaking before lunchtime with a 125-point Dow gain. Things would weaken thereafter. However, it likely was not because of woeful economic data. That is because just one day after the Commerce Department reported sharp gains in housing starts and building permits, the National Association of Realtors indicated that existing home sales had inched up 1.3% in August, the second time in as many months that this metric had risen. Lower mortgage rates likely helped the outcome here.
Still, the Conference Board did report that its Index of Leading Economic Indicators had shown no change in August after a 0.4% advance in July. Overall. We sense that the business data, including a constructive new report on weekly unemployment claims, did little to push the market needle. So, when some hawkish comments were issued on both sides on the trade battle, stocks pulled back as the afternoon wore on, eventually leading to a mixed close, with the Dow hurt by a sharp loss in Walt Disney (DIS – Free Walt Disney Stock Report) shares. Also, erstwhile Dow entity U.S. Steel (X) fell on a weaker outlook.
At the close, the Dow was off 52 points and the Russell 2000 also was lower, while the S&P 500 was flat and the tech-heavy NASDAQ retained a slight gain after more formidable increases earlier in the session. Looking out to the final day of the week now, and peering out overseas, we see that shares were generally higher in Asia overnight. In Europe, the leading bourses are gaining ground so far today. Also, Treasury note yields, virtually unchanged yesterday, are up slightly this morning and oil prices are rising anew. Finally, the U.S. stock market appears headed for a higher opening when trading resumes shortly. – Harvey S. Katz, CFA