After The Close - The major U.S. equity indexes rose on Monday afternoon, building on the tentative optimism that characterized morning trading. Residual bullishness from Friday’s positive jobs report, as well as sustained outperformance from Corporate America as it reveals second-quarter earnings performance, were the two main factors driving averages higher today. The Dow Jones Industrial Average set a new intraday trading high, with aerospace component Boeing (BA - Free Boeing Stock Report) contributing a large share of the gain. The smaller issues were less positive, though, which resulted in a mostly mixed market breadth during the week’s opening session.
The merger and acquisition market appears to be heating up, with United Technologies’ (UTX - Free United Technologies Stock Report) bid to take over parts-maker Rockwell Collins (ROC) headlining the most recent wave of speculation. Moreover, Sprint (S) is said to be on the block, with Charter Communications (CHTR) figuring to be among the most likely suitors for the mobile telecom company. And though earnings releases were scarce today, the rest of the week ought to give investors more to digest on that front. In addition to a slew of major retailers set to reveal their business updates, media conglomerates Disney (DIS -Free Walt Disney Stock Report) and News Corp. (NWSA) will also publish earnings reports. With roughly three-quarters of S&P 500 components beating top- and bottom-line estimates, it would take a run of disappointing postings to offset the broad-based positivity running through the market.
Meanwhile, U.S. crude oil dipped slightly today. Though the dip was spurred partly by speculation from an OPEC-led summit in Abu Dhabi, the eventually pared-down daily loss probably reflects investors selling following a multi-week show of strength by the commodity market. So, while prices will undoubtedly falter should OPEC and its allied nations loosen the terms of its current drilling accord, we believe the tentatively positive fundamentals in the market remain intact. U.S. crude dropped $0.19 per-barrel and, accordingly, the energy and industrial sectors moved lower on Monday.
As the closing bell neared, the Dow, though choppier in the final hour, looked poised to close at a historically high level. The S&P 500 was nearing its own all-time record, while the NASDAQ led the way, adding more-than 30 points on the day. Eventually, investors will look for more concrete details regarding the timing of key economic strategies from the Trump Administration, namely tax reform. But for now, earnings-driven optimism and a series of solid updates from the business beat, as well as a still-accommodating monetary policy from the Federal Reserve, will likely help the bulls as they build on the current winning streak. - Robert Harrington
As of this article’s writing, the author did not hold positions in any of the companies mentioned.
12:15 PM EDT - The U.S. stock market put in a mixed showing earlier this morning, but is now firming up. At just past noon in New York, the Dow Jones Industrial Average is ahead roughly 14 points; the broader S&P 500 Index is up slightly; and the NASDAQ is higher by 27 points. Market breadth is now neutral, with advancers just about even with decliners on the NYSE. The major market groups are still divided, too, with gains in the technology, consumer, and basic materials issues offsetting weakness in the energy and financial categories. On a related note, the price of crude oil, which is still under the $50-a-barrel mark, is moving lower today.
Meanwhile, it has been a light day for economic news. In addition, the lack of information may be contributing to the market’s somewhat lackluster tone this morning. Tomorrow will also be a quiet day for economic issuances. However, the pace should pick up on Wednesday, when preliminary second-quarter productivity numbers are released. We will also get a look at wholesale inventories for the month of June.
Meanwhile, we continue to receive quarterly profit reports. Today, we heard from a few more companies. Specifically, shares of Tyson Foods (TSN) are trading higher, following the food processor’s solid quarterly update. However, things are not going as well for Armstrong Flooring (AFI). That stock is down today, as traders were less than impressed with the company’s issuance.
Technically, stocks continue to hold up well, aided by a relatively encouraging corporate earnings season. Many of the big companies have already posted their numbers. Now, some of the smaller names will be weighing in with their reports. - 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 - It continues to be mostly about earnings on Wall Street these days, as the dog days of August continue, with favorable reviews from the investment community, interspersed with a few notable setbacks among individual stocks, being the rule. That was the case again on Friday, as generally solid profit reports helped lift the Dow Jones Industrial Average further into record territory, with that index going well past 22,000 in a modest buying campaign. A few headline movers, such as Weight Watchers (WTW), benefiting from an earnings beat, paved the way for the early gain that carried the market solidly higher in the morning.
To be sure, Friday wasn't all about Corporate America, as the Labor Department issued a rather reassuring release on the nation's employment situation. To wit, it reported that non-farm payrolls had risen by 209,000 in July, or above the 180,000 estimate. Also, in another survey, the government noted that the jobless rate had fallen from 4.4% to 4.3%. Further, average hourly wages rose by nine cents (a solid gain), and the labor-force participation rate increased from 62.8% to 62.9%. This report, while constructive in the main, likely wasn't strong enough to encourage the Federal Reserve to advance its monetary tightening schedule.
Our sense is that the Fed will just modestly tighten the monetary reins over the next year, given that inflationary pressures still are largely muted. That likelihood helped explain why the equity market's response was minimal to the jobs report. Also, on Friday, the Commerce Department reported that the nation's trade deficit had decreased in June, on higher exports. This latter issuance could help second-quarter GDP enjoy an upward revision when the next such report comes out late this month. For now, the increase for the period stands at 2.6%.
Meanwhile, as we moved into the early part of the afternoon, the Dow was ahead by 40 points, while the other large and small-cap indexes were up modestly, as well, with gaining stocks retaining a small lead on declining issues. All told, the session was a positive one to that point, even though there were a few headline makers on the downside, such as Fluor Corp. (FLR), which while posting better-than-forecast second-quarter earnings, still weighed in with lower orders and backlogs, and much-reduced guidance for the 12 months. The stock tumbled to a 52-week low, in response.
The equity market remained range-bound over the final few hours of trading, as investors further digested the benign jobs report and the likelihood that the Fed will not be unduly influenced by it. Another generally constructive earnings day proved supportive, as well. So, all of the averages stayed on the plus side of the ledger, but the gains were far from formidable. As to stocks on the Dow, the financials did better, while most other issues on that composite moved little. The lone negative on the day was a rise in bond yields on the better jobs data, with the 10-yesar Treasury note climbing to a yield of 2.27%.
The market drifted until near the close, when there was a late spurt of additional buying, which helped cap off a week of generally higher prices. At the close, the Dow was ahead 67 points; the S&P 500 was better by five points; and the NASDAQ, on selective strength in technology, was in the black by 11 points. Meanwhile, there were more gaining groups than declining sectors, while on the Big Board, the earlier advantage held by advancing issues was retained into the close, with rising stocks holding about a four-to-three lead. Next week will be a lighter one for economic news, while earnings releases will start to slow down.
Looking at that new week, a five-day span that will see the release of data on productivity (Wednesday), producer prices and initial jobless claims (Thursday), and consumer prices (Friday), we see that stocks in Asia were higher in overnight trading, while on the Continent, the principal European bourses are now trading lower. In other markets of note, oil is down a little in price; gold is steady; and Treasury yields are up, following a rise late last week. As to our equity futures, the early read is somewhat stronger after the healthy gains to end the latest week. - Harvey S. Katz