After The Close - The equity market moved higher this morning, pulled back in the early afternoon, before regaining its stride late in the day. At the close of trading, the Dow Jones Industrial Average was ahead 241 points; the broader S&P 500 Index was up 18 points; and the NASDAQ was higher by 34 points. Market breadth was quite favorable, with advancers well ahead of losers on the NYSE. Most of the major market sectors forged ahead, with sizable gains in the energy and basic materials issues.
Traders received a few economic news items to review this morning. Specifically, the nation’s trade gap widened to $57.6 billion in the month of February, where analysts had been looking for a more favorable reading. On the employment front, initial jobless claims came in at 242,000 during the week of March 31st, which was higher than had been anticipated. Tomorrow will be an important day for economic news, as the March employment report is due out before the market opens. This key report will be widely watched by traders, and may well move the market.
In the corporate sector, we received a corporate report from Monsanto (MON). That stock moved up slightly, even though the agricultural chemical company released a lackluster report. Elsewhere, shares of electronics retailer Conn’s (CONN) sank after that company provided a weak outlook.
Technically, today, the market managed to build on yesterday’s advance. The recent buying puts the S&P 500 Index further above its 200-day moving average, located around 2,590. However, it remains to be seen if the bulls can push stock prices meaningfully higher from here. Perhaps, the first-quarter earnings season, which is set to start up shortly, will serve as the catalyst needed for such an outcome. – Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before The Bell - The stock market, down sharply on Monday and up notably on Tuesday, fell back again yesterday morning. As before, the reason was trade, and the rising threat of a trade war, especially from China, the world's second largest economy. What set this latest alarm off was the announcement by that economic giant that it was slapping tariffs on more than 100 U.S. goods in a retaliatory move aimed at the United States for its earlier enactment of stiffened tariffs on goods imported from China. In response to the charges placed on an array of U.S. products, from cars to chemicals, the Dow Jones Industrial Average sold off dramatically at the open.
In all, that 30-stock composite tumbled by some 475 points within minutes of the start of trading, even though the Administration suggested that business with China represented a just small share of our country's aggregate GDP. Losses were spread throughout the sectors, with the industrials, basic materials, and energy leading the way lower early. In all, the first half hour ended with more than six stocks down for every issue rising in price. It was a full-fledged rout by a stock market that, in spite of Tuesday's recovery, was still wholly on the defensive.
The market then stabilized as the morning progressed, with the Dow's losses holding in a 300-400-point range, for the most part. But unlike most previous sessions, it was the Dow and the S&P 500 that led the way lower--not the tech-laden NASDAQ, which was off, but less dramatically so. Also, the small-cap Russell 2000 Index, a disproportionately large casualty on Monday, was just a little lower, as the morning moved along. Also, the food stocks, losers of late, actually saw early plus signs, while most of the market still labored. All told, it was a bearish early backdrop.
Meanwhile, in other news, the Institute for Supply Management, which reports on manufacturing and non-manufacturing, and which on Monday issued a survey showing healthy activity in the former, did the same for non-manufacturing yesterday. In all, the service sector scored a solid advance, with a result of 58.8%. That was well into expansion territory, and just a bit below the 59.5% level reached a month before. Breaking the report down, we saw slower growth in orders, but greater strength in employment, backlogs, and prices. Also, Automatic Data Processing (ADP) posted a private-sector payroll gain of 241,000 in March; 205,000 had been the forecast.
As to the stock market, the declines lessened as the morning moved further along, and as we moved toward the noon hour in New York, the Dow's deficit had eased to fewer than 150 points, while the small-cap Russell 2000 had turned positive. At that point, it looked as though the market was ready to come fully back in the afternoon. The comeback, in fact, accelerated as the afternoon got under way, with the Dow's loss shrinking to fewer than 100 points soon thereafter. It seems that the suggestion by some that China's announcement was just an opening for negotiations took some of the sting out of its pronouncement.
Then after some backing and filling into the early to mid-afternoon, which saw the Dow briefly sink back to a deficit of 150 points, the buyers became more serious, sending the Dow and the other indexes all into positive territory as we moved into the final two hours of this turnaround session. Helping was a sense the market was oversold. Also, the ADP number raised hopes that tomorrow's government payroll data would show a greater increase than the 173,000 jobs expected for March. A month ago, a large (313,000) gain in jobs helped to set into motion a nice rally for a time.
The buying then continued, with the Dow surging past the 100-point gain mark as we neared the final hour of trading, and then the 250-point advance level, with the NASDAQ surging by more than 100 points. In all, it was a turnaround of dramatic proportions all across the market and the individual sectors, giving the weary Street a needed psychological boost. At the close, the Dow was ahead 231 points and the NASDAQ had risen by 101 points. Finally, as we look ahead to a new day, after selective gains in Asia overnight and a nicely higher start in Europe this morning, U.S. equity futures are pointing to further gains in the session today. - Harvey S. Katz, CFA