Before The Bell - The futures market started unevenly last night, trending largely sideways in the early evening. The regular-session markets were sent lower during the Rosh Hashanah holiday by traders selling due to increased fears that the Delta variant of the coronavirus may slow economic growth. Additionally, Friday’s jobs report was far weaker than expected, adding to this narrative. The futures continued to trade unevenly through the night, but started to trend lower by about midnight. They had recovered the losses by morning and were slightly in the green, but not by a large amount. Overall, this suggests an uneven start to the trading day.
Looking ahead, a small number of stocks will be reporting quarterly earnings, both before the opening bell and after the close. These are in disparate industries and could cause pockets of weakness or excitement depending on results and prospects for the coming quarters. Meantime, some economic reports are on the docket today, including data on job openings for July and consumer credit. We think traders will be looking forward to other economic reports coming later in the week, such as the initial jobless claims data on Thursday and the Producer Price Index on Friday. These releases, along with the Federal Reserve’s Beige Book summation of economic conditions (due at 2:00 P.M. (EDT) today) should give further insight into how well the economy is holding up and to what extent inflationary pressures have affected output.
The stock market had a mixed, but mostly lower session yesterday, as negative trading activity pushed several indices lower. The Dow Jones Industrial Average was down 269 points, while the S&P 500 finished the day off 15 points. However, the NASDAQ was able to eke out a small gain, finishing 11 points to the upside. Market breadth was negative, as decliners outpaced advancers by a 2.3-to-1.0 ratio. Investors should note that trading volume was far lower than usual, in part thanks to the holiday, suggesting that yesterday’s activity may not be a strong barometer of things to come. Consumer discretionary stocks were among the best performers on the day, while industrial issues were among the weakest. Given that these sectors benefit from cyclical economic growth, it makes it tougher for traders to read too much into yesterday’s price action.
In commodity news, oil prices languished yesterday, as traders sold on increased prospects that a slowdown in the economy would lower demand for energy resources. Interest rates were a mixed bag, with near-term rates rising and long-term rates falling. This flattening of the yield curve usually is a negative for financial companies’ earnings. The VIX Volatility Index rose yesterday as demand for options protection increased. - John E. Seibert III