Before The Bell - The first half of this year ended on Tuesday and it was a turbulent six months for the financial markets to say the least, with a further surge in equity prices early in the year, followed by a six-week plunge in the markets (brought on by the COVID-19 pandemic), which would precede a dramatic comeback in stock prices in the second quarter. The market would end the six months with prices being relatively near their best levels ever, especially on the tech-heavy NASDAQ, which recently topped the 10,000 mark for the first time ever.
As for the start of the third quarter, stocks came out of the gate going immediately to the upside following some choppy trading in the pre-market. The Dow Jones Industrial Average then would fade in late morning, giving back some early gains before moving back into the positive column near the lunch hour. The blue chips then would go back and forth before finally moving onto the negative side of the ledger as trading wound down. It was a rather different story for the S&P 500 and especially the NASDAQ, which held solid gains into the close.
Boosting the market were upbeat signs on the economy and rising hopes for a vaccine against COVID-19. On the latter front, drug giant Pfizer (PFE) reported that an early trial of an experimental coronavirus vaccine showed that it is safe and prompted patients to produce antibodies against the virus. Pfizer stock rose modestly on this upbeat development. On the other hand, Federal Reserve officials released the minutes from the last FOMC meeting and cited concerns that a second wave of this disease could cause a deeper recession.
Also on the economic front, the Automatic Data Processing (ADP) National Employment Report showed that U.S. private-sector payrolls rose nicely in June. That was encouraging, but still was shy of expectations. Also of note, The Institute for Supply Management said that index of national factory activity, or manufacturing, jumped to a reading of 52.6 in June from 43.1 in May. That ended three-straight months of industrial contraction, or readings below 50. That survey, issued 30 minutes into the trading day, helped to firm up prices as the morning progressed.
Looking ahead to the fourth and final stock market session of the week, as investors look ahead to tomorrow's Independence Day observance, we see that the government has just issued the June non-farm payrolls report. In that survey, the Labor Department reported that the nation added a larger-than-expected 4.8 million jobs in June. The forecast by most economists had been for a gain of 2.9 million positions. At the same time, and in another survey, Labor noted the jobless rate had fallen to 11.1% from 13.3%.
As to the report, employment in leisure and hospitality led the way higher. Also, the labor-force participation rate rose by 0.7% to 61.5%. On the other hand, average hourly earnings fell by $0.35 in June, likely reflecting the larger job gains in lower-paid employees. Adding it all up it was a good report and the equity futures, already up sharply in the pre-market have gained further, setting up a strong opening in a few minutes. – Harvey S. Katz, CFA