After The Close - The stock market got off to a positive start this morning, managed to move higher in the afternoon, and closed out the day with the broader averages at record levels. Investors seemed pleased that Federal Reserve’s plans to maintain a supportive stance, in an effort to engender further economic expansion. In fact, many are expecting an interest-rate cut at the July meeting. At the close of trading today, the Dow Jones Industrial Average was ahead 244 points; the S&P 500 Index was up 14 points; and the NASDAQ was higher by 48 points. Market breadth was favorable, with advancers ahead of decliners by a comfortable margin on the NYSE. The industrials, technology stocks, and services issues displayed leadership, while the healthcare names and defensive utilities weighed on the market.
Meanwhile, it was a light day for economic reports. However, the Producer Price Index (PPI) increased 0.1% in the month of June, with a 0.3% advance in the core reading. These numbers were slightly higher than had been expected, but do not likely indicate that inflation is becoming a problem yet.
In the corporate sector, few widely followed companies posted profit reports today. However, we did hear from Infosys (INFY). Shares of the India-based technology company moved nicely higher in response to a better-than-anticipated release. Meanwhile, the pace of reports will pick up dramatically in the weeks ahead. The major banks and financial companies are normally the first to weigh in with their numbers. In fact, on Monday, we will hear from Citigroup (C).
Technically, the stock market continues to perform well. The S&P 500 Index has crossed over the 3,000 mark, and this feat will likely receive some media attention over the weekend. Looking ahead, much will depend on the corporate outlook, which should soon become clearer. Also, traders will likely want to see improved trade relations with China. - 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 is all about Jerome Powell these days on Wall Street. First, the Federal Reserve Chair reassured the House of Representative on Wednesday morning that the central bank would likely be reducing interest rates when it meets at the end of this month. Then, he gave similar testimony to the Senate yesterday morning. All the while, the stock market was racing ahead to all-time highs, with the S&P 500 Index rising above 3,000 for the first time ever Wednesday and the Dow Jones Industrial Average following suit yesterday morning, with a surge above 27,000.
Wall Street, it seems, just adores lower interest rates, and that is just what the Street is likely to get later this month. Regarding the stock market yesterday, the bulls pushed the Dow quickly ahead by nearly 150 points, with that index, as noted, rising to above 27,000 in the early going. The other indexes followed suit, initially. But it was the Dow that provided much of the early pop, as the S&P 500 and the NASDAQ would be treading water after the first 90 minutes of trading and the small-cap Russell 2000 would turn lower. Leading the way among the blue chips was UnitedHealth (UNH – Free UnitedHealth Stock Report).
The rise in UnitedHealth Group and also in drugstore chain CVS Health (CVS) came about after the White House dropped a proposal to eliminate drug rebates. The stock market also was being helped by comments from Mr. Powell, who said business investments across the United States had slowed notably recently as uncertainties over the business outlook have lingered. In other news on this penultimate session of the week, the Labor Department reported that the Consumer price Index had increased by just 0.1% in June. Over the last 12 months, the increase has been 1.6%.
That increase was less than the 1.8% rise reported through May of this year. The monthly increase for all items less food and energy, often referred to as the core rate of inflation, was up 0.3% last month. For the past 12 months, the core increase in inflation stands at 2.1%. None of this worried the market, however, as stocks continued to press forward as the morning concluded and the afternoon got going, with the Dow surging to a session-best gain of 212 points early in the afternoon before backing off somewhat. Interestingly, though, the S&P 500, the NASDAQ, and the Russell 2000 all were lower in mid-afternoon.
The market would then remain in bifurcated mode into the close, with the Dow pressing strongly higher, to a closing gain of 228 points, with strength in such blue chips as The Boeing Co. (BA – Free Boeing Stock Report), as well as UnitedHealth. It was a different story for the other composites, where the S&P 500 would end just modestly higher, while the NASDAQ, off for much of the session, would close off by six points. Another subpar index on the day was the small-cap Russell 2000, which also eased modestly. Ticking higher, meantime, were interest rates, with the yield on the 10-year Treasury note rising to 2.12%.
Now, we look out to the end of the week, and glance out at Asia, where the leading indexes were higher in trading overnight. In Europe, meanwhile, the key bourses are trending upward in early trading this morning. Elsewhere, oil prices are climbing anew as a major tropical storm heads towards the U.S. Gulf, and yields on U.S. Treasury notes are rising once more. Finally, as sentiment warms towards an interest-rate cut later this month and earnings season fast approaching, the U.S. equity prices are suggesting a higher opening when trading resumes. - Harvey S. Katz, CFA