Before The Bell - The stock market started the week on a mostly positive note, as the Dow Jones Industrial Average rose 238 points and the S&P 500 was up 11 points. The NASDAQ Composite, however, was a laggard for much of yesterday, finishing the session with a decline of 68 points. Results there were hurt by the underperformance of a few large communications and technology stocks. In the broader market, energy issues were among the strongest performers on the day, aided by an increase in the related commodity prices. Conversely, REITs were among the weakest performers.
Overall, advancers outpaced decliners by a slightly more than two-to-one ratio, suggesting wide appeal for stocks. Concerning interest rates, near-term U.S. Treasury bond yields were higher. At the same time, long-term issues were lower, indicating a flattening of the yield curve. This usually is a negative for financial companies’ earnings. Generally, we think this combination suggests that traders believe that the economy is heating up, and that may produce short-term inflationary pressures.
The futures market was in negative territory last night, as the indices gave back a portion of the day’s gains. By midnight, the futures were decidedly in the red. The futures, though, recovered somewhat this morning, retracing some of the initial losses, but are still pointing to a lackluster start to the trading day.
Traders will probably be looking to a slew of economic and earnings reports for some direction today. The U.S. trade deficit and factory orders for March will give some insight into how well the global economy has been recovering from the coronavirus pandemic. Additionally, it may show how well goods have traveled, as higher congestion levels have impacted ports along the West Coast. Later this week, traders will be looking for information on weekly initial and continuing jobless claims. On Friday, April nonfarm payrolls will be released, which should show how well the labor market is recovering and how long it may take to again reach full employment.
Meantime, several large companies are slated to report quarterly results both before the opening bell and after the close. Moreover, the earnings season will continue in full, as many companies will report over the coming days. All told, traders will likely be looking for insight into how earnings will progress over the coming quarters. - John E. Seibert III