After The Close - The stock market moved strongly higher earlier this morning, and managed to hold onto these gains through the afternoon. Investor sentiment turned positive today after a batch of retailers delivered encouraging reports. This likely helped overshadow fears that the domestic economy may be starting to slow, and that the trade dispute between the United States and China is creating major challenges. At the end of the day, the Dow Jones Industrial Average was ahead 240 points; the broader S&P 500 Index was up 24 points; and the NASDAQ was higher by 72 points. Market breadth was supportive, with winners nicely ahead of losers on the NYSE. All of the major sectors participated in today’s rally, with sizable gains in the healthcare and basic materials issues.
Meanwhile, there were a few economic news items released this morning. Specifically, existing home sales rose to 5.42 million units, annualized, during the month of July, which was a healthy showing and shows that the housing market is still in good shape. In the afternoon, the FOMC released the minutes from its July meeting. That report showed that the various members of Federal Reserve have been somewhat divided about lowering interest rates, and was taken in stride by Wall Street. Looking ahead, on Friday, Federal Reserve Chair, Jerome Powell, will deliver some remarks in Wyoming.
In the corporate arena, shares of Target (TGT) moved nicely higher, after the discount retailer posted solid quarterly results. In addition, shares of Lowe’s (LOW) advanced, as investors seemed pleased with the progress made by the home improvement store operator.
Technically, stocks continue to bounce around as we move through the month of August. It remains to be seen how the market will do, as the summer draws to a close and the corporate scene picks up in the fall. Further, investors are still hoping for a trade deal between the United States and China, and probably will not be pleased if additional tariffs are actually put in place. – 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 - Wall Street got off to a weaker start yesterday following several straight advances, two of them significant, with moderate losses across the board. Falling Treasury note yields contributed mightily to the early setback, as yields on the 10-year Treasury note eased from 1.60% late on Monday, to 1.55% in mid-morning yesterday. However, the initial stock market setback, which took the Dow Jones Industrial Average quickly to a loss of nearly 100 points and the S&P 500 Index down almost 20 points, would ease back considerably as we passed the 90-minute trading mark.
Tech stocks, meantime, led the early setback, with such stocks as Netflix (NFLX) and Advanced Micro Devices (AMD) leading the early downtick. Bank shares also weakened as those Treasury note yields faltered. On the other hand, Dow component The Home Depot (HD - Free Home Depot Stock Report) reported better-than-expected earnings and saw its stock rise over 4% in the morning. Still, the home improvement retailer warned that tariffs could be a problem later on in the year and, therefore, pared back its 12-month earnings estimate. In the main, though, it was declining bond yields that was the biggest early factor in trading.
The stock market would then fully erase its early losses by late morning, before settling back into the loss column as the afternoon approached. The market then continued to hold in the red as the afternoon proceeded. In fact, as we moved inside the final two hours of the trading day, the averages fell back further, with the Dow settling back in with a low triple-digit loss. The S&P 500 and the NASDAQ also took it on the chin with 17 and 42-points losses, respectively before once again working to pare those deficits. A major loss by recent Dow addition, Dow Inc. (DOW – Free Dow Stock Report) also was a factor in the afternoon losses.
An earlier downgrade in Dow stock by a major brokerage house dimmed optimism on this blue chip issue and the stock fell back to within a fractional point of a new 52-week low, as the yield on the issue climbed above 6%. Elsewhere, traders were worried about the global economy, as the trade war between this country and China was persisting. Meanwhile, the latest session was another day devoid of economic issuances. That will change today as the National Association of Retailers will soon announce July sales of existing home. The companion new hole sales report is due out on Friday.
The market would then meander into the close with steady losses continuing as the final minutes concluded. In all, the Dow, with a late burst of selling would surrender 173 points; the S&P 500 would finish off 23 points; and the NASDAQ, owing to weakness in tech, would end matters in the red by 54 points. The big casualty, meantime, would be interest rates, with the 100-year Treasury note ending off at a yield of 1.56%. All in all, it was a weaker session, but not one that took a major toll on the Street. Going forward, trade and interest rates will be the big factors in the day ahead, as the Federal Reserve's minutes from its last meeting will be released.
Looking ahead to the middle day of the week, we see that stocks were mixed in trading in Asia overnight, while in Europe, the major bourses are showing early gains. In other markets, oil prices are climbing; gold is flat, but holding above $1,500 an ounce; and Treasury note yields are ticking higher after a sizable decline yesterday. As noted, the day ahead will bring data on existing home sales and the minutes from last month's FOMC meeting. Also, a number of major retailers will issue their results. Finally, all of this is suggesting that our markets will open to the upside when trading resumes this morning. - Harvey S. Katz, CFA