After The Close - The stock market got off to a tentative start this morning, but managed to firm up somewhat as the session progressed. At the end of trading, the S&P 500 Index up two points and the NASDAQ was higher by 23 points. The Dow Jones Industrial Average finished slightly lower, the result of some last-minute selling. Market breadth showed some support for equities, with advancing issues outpacing decliners on the NYSE. From a sector perspective, the technology and basic materials issues displayed leadership, while some consumer and healthcare names retreated.
Meanwhile, it was a quiet day for economic news. Tomorrow will be uneventful, too, as a report on wholesale inventories is the only item on the docket. On Wednesday, the Federal Reserve will deliver its Beige Book report for the month of July. That summation will likely be watched by traders, seeking a better understanding of the Fed’s monetary policy agenda. On a related note, Federal Reserve Chair Janet Yellen will be making a series of addresses later this week, as well.
Elsewhere, only a handful of companies posted their quarterly financial reports this morning. Of note, shares of Helen of Troy (HELE) advanced slightly during the day, after the consumer products manufacturer posted respectable results. In M&A news, shares of Abercrombie & Fitch (ANF) sank, after the apparel retailer ended acquisition talks with possible buyers.
Technically, the stock market seems to be firming up somewhat, after a lackluster showing during the month of June. The S&P 500 is now at roughly 2,430. Moving the index back to the 2,450 mark, and possibly beyond, will likely be the next big challenge for the bulls. – Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
11:45 AM EDT - The new trading week on Wall Street is off to a very nondescript start. The major U.S. equity indexes are little moved from the neutral line as we approach the midday hour on the East Coast. The lack of any major earnings and economic news stateside has given investors little reason to make any significant moves. There also may be some hesitation ahead of Federal Reserve Chair Janet Yellen’s testimony on monetary policy before Congress on Wednesday. Her prepared remarks may give some more color as to how the lead bank will proceeded with regard to interest rates during the second half of this year.
Thus, as we near the noon hour, the Dow Jones Industrial Average, the NASDAQ, and the S&P 500 Index are sporting small gains, but the market, at best, is mixed. The spread between up and down arrows among the 10 major equity groups is nearly split, while declining issues are leading advancers on both the Big Board and the NASDAQ, with the margin nearly two to one on the latter exchange. It is also worth noting that the broader small- and mid-cap sectors, which typically lead the market in one direction, are weaker so far today. This could prove to be a feather in the cap of the bears as we move into the second half of the session.
On a light day for earnings and economic news, the focus on Corporate America is on some M&A news. On the negative side, shares of Abercrombie & Fitch (ANF) are down sharply after the struggling retailer announced that it has broken off talks with potential buyers and will pursue its own business plan. Conversely, the stock of ClubCorp (MYCC) jumped after Apollo Global Management (APO) said that it is buying the golf and country club operator for $1.1 billion in cash. Meantime, shares of Best Buy (BBY) are falling after a report surfaced that Amazon.com (AMZN) is rolling out of its own Geek Squad service. The new service is aimed at helping its customers set up their smart home products and is already in seven markets.
Looking ahead to the second half of today’s session, we are not expecting the bulls or bears to make any major moves for the reasons noted above. Market fundamentals slightly favor the bears right now, with the Russell 2000 currently down 0.6%, which is the biggest percentage move among the major equity averages. However, the technology stocks are faring well, which, along with a rally for the basic materials issues after Friday’s lackluster showing, should give the bulls some support, too. Right now it is looking like we are in store for a directionless day on Wall Street. Stay tuned. - William G. Ferguson
As of this article’s writing, the author did not hold positions in any of the companies mentioned.
Before The Bell - The first trading week of July and the second half of 2017 looked very similar to many of the five-day stretches that we saw over the first six months of this year, which was with the bulls coming out ahead. That is not to say the bears did not have their moments (the market fell sharply on Thursday), but some very encouraging data on the U.S. economy (more below) was enough to push the major equity averages higher off of their already lofty perches. The Dow Jones Industrial Average is moving closer to its all-time high set earlier this year.
On Friday, the bulls were emboldened by a strong report on the labor market. Specifically, the Department of Labor reported that nonfarm payrolls increased by a stronger-than-expected 222,000 positions in June. The strong jobs data, along with encouraging reports earlier in the week on manufacturing and nonmanufacturing activity, prompted some buying. For the day, the Dow 30, the tech-heavy NASDAQ, and the broader S&P 500 advanced 94, 64, and 15 points, respectively. In general, the economically sensitive groups fared the best on the strength of the jobs data, with the leadership coming from technology, industrial, and consumer discretionary sectors. Conversely, the stronger dollar (it hit a two-month high against Japan’s yen this morning), which makes commodities more expensively priced in international markets, weighed on the basic materials and energy stocks, with the latter finishing the session in the red. Lower crude prices on both the New York Mercantile Exchange and on the Continent are taking a bite out of the energy issues.
Meantime, the new week will bring some notable reports from Corporate America, as the second-quarter earnings season kicks off. Our sense is that earnings news will have to be good for stocks to make another notable move higher. The consensus is that the second-quarter reporting season will prove constructive, but the question is whether the results and, maybe more importantly, the guidance will be enough to give the equity averages another boost. The earnings season heats up this Friday, with reports from banking giants JPMorgan Chase (JPM - Free JPMorgan Chase Stock Report) and Wells Fargo (WFC) due before the opening bell. The final trading day of this week also will bring a number of important economic reports, including data on consumer prices, retail sales, industrial production, and consumer sentiment. Prior to that, we will get a report on producer (wholesale) prices (Thursday) and the latest Beige Book summation of economic conditions from the Federal Reserve (Wednesday afternoon at 2:00 PM EDT). All of the economic data will be scrutinized, as it may give more clues about whether the central bank will be more hawkish or dovish during the second half of this year, which may play a big role in how stocks fare in a market that is clearly overheated right now. Investors also should note that Federal Reserve Chair Janet Yellen will speak before Congress on Wednesday morning, an event that is sure to be watched for more clues to what the central bank is thinking.
With less than an hour to go before the commencement of the new trading week stateside, the futures are pointing to a mixed opening for U.S. stock market. So far today, the international indexes have rallied, as recent strong economic data from the United States and Germany is making investors increasingly confident about the strength of the global economy. Likewise, the Bank of Japan overnight provided an optimistic view of the country's regional economies on the strength of solid exports and private consumption. This positive sentiment about the world’s major economies may embolden the bulls further during this first full week of trading in the second half of 2017. Stay tuned. Harvey S. Katz