Before the Bell - The U.S. stock market staged a solid advance yesterday, as traders returned from the Fourth of July holiday weekend. Overnight, the international markets have weakened somewhat. In Asia, the Nikkei traded lower, and in Europe, the FTSE 100 has retreated. On our shores, the equity futures are pointing to a soft opening.
Meanwhile, sentiment on Wall Street remains upbeat, despite a good deal of uncertainty. For one, the coronavirus still poses considerable public health risks, and a medical treatment has yet to be found. In the United States, numerous states across the country have reopened for business. However, the process has been difficult, and possibly counterproductive. There has been a sharp rise in cases in states like Florida, Texas, Arizona, and Georgia, possibly due to a lack of caution. Some states have paused their reopening plans, as a result. This development has some analysts worried that the domestic economy may not recover as quickly as the recent data might suggest.
In contrast, reports show that the economy may well be recovering. For example, at the end of last week, the government released better-than-anticipated employment figures for the month of June. Specifically, 4.8 million non-farm jobs were added to the economy during the month, and the headline unemployment rate fell to the 11.1% level. Moreover, the June figures build on the improvements logged in May, which is encouraging. Yesterday, the ISM Non-Manufacturing Index for the month of June came in well above expectations, further supporting the bulls case. This week will be relatively quiet. However, on Thursday, we will get a look at the latest weekly jobless claims, as well as the monthly wholesale inventory numbers.
In the corporate arena, the second-quarter has now concluded, and in the weeks ahead numerous companies will weigh in with their results. Given the severe disruptions caused by the coronavirus during the second quarter, Wall Street is already anticipating that companies will deliver depressed numbers. Of importance will be the guidance offered for the second half of 2020.
Technically, the stock market took pause during the month of June. Stocks seem to be off to a good start in July, but it is likely too early to tell how events will unfold. In the days ahead, pushing the S&P 500 Index through the 3,200 mark will be the next key task for the bulls. From a sector perspective, the technology issues have been strong, and have helped lead the market higher, and take the NASDAQ to record high territory. While this makes sense, some analysts worry that other parts of the market have not participated in the rally. In addition, it has been noted that valuations in the technology sector may be getting extended. – Adam Rosner