After The Close - The stock market started out modestly lower today, as investor sentiment fell somewhat due to greater trade tensions increased between the United States and Europe. After the initial brief spell lower, the markets traded into the green for a time, and the Dow Jones Industrial Average was up by as many as 31 points in early action. The other indices also trended higher. However, this move reversed itself, and the composites made their daily lows. Overall, the day could be characterized as one with choppy, but largely directionless trading. All told, the Dow closed up 69 points with a late rush ahead, the S&P 500 was ahead by nine points, and the NASDAQ gained 18 points.
Additionally, market breadth was rather neutral today, favoring neither the advancers nor the decliners to any great degree. Interest-rate sensitive REITs and utilities stocks were among the best performers on the day, while energy issues were among the weakest.
In commodity news, oil prices fell today, as worries about the strength of the global economy grew. The price of black gold was down more than 4% on the day, severely hurting the performance in the related stocks. Meantime, U.S. Treasury Bond yields were lower almost across the board, as a flight to safe-haven assets occurred. However, the three-month bond yield was slightly higher on the day. The yield curve has continued to flatten, which is not good for financials earnings, and further, it suggests a further slowing of the U.S. economy. Meantime, the VIX Volatility Index was lower today, as demand for options protection fell.
Looking ahead, the stock market will close at 1 P.M. EDT tomorrow, ahead of the Independence Day holiday. This means that there will be more economic news than usual on Wednesday, including initial jobless claims and the Energy Information Administration’s weekly report on crude oil inventories. Too, the international trade deficit for May and the ISM non-manufacturing index for June will be released. We think trading volume will be lighter than usual, as traders take an early start to the holiday. - John E. Seibert III
At the time of this article's writing, the author did not have positions in any of the companies mentioned.
Before The Bell - Equities stormed out of the gate yesterday morning in a bullish stampede that quickly pushed the Dow Jones Industrial Average up to an all-time record and lifted the Dow Jones Industrial Average into striking distance of one. The impetus for this latest charge was an agreement reached over the weekend between the United States and China to refrain from imposing additional tariffs while the two economic giants seek to work out their long trade dispute. A clear outcome is uncertain at this time.
Nevertheless, the bulls ran with this good news and within minutes, the Dow was sporting a gain of 290 points, bringing that composite to within 60 points of a peak intraday level. But this rarified air would prove a bit too much for the bulls and the Dow soon began to backtrack, and as we ended the morning, the blue chip's advance had been pared to about 125 points. Meanwhile, the gainers were led by shares of tech giant Apple (AAPL – Free Apple Stock Report) and by the chip stocks, which were rallying broadly. In addition, the NASDAQ was posting handsome gains.
Now, of course, comes the hard bargaining, and there is no consensus whether or not a trade accommodation will be reached between our country and China. We have had optimism expressed before, only to see subsequent disappointments evolve. For now, though, the lack of additional tariffs is good news, as no one wins in a trade war. So, the market entered the afternoon in good shape, but holding well south of the day's best levels. Of course, following a good June and the best first half in 22 years, climbing much higher may not be an easy feat.
The equity market then continued to show plus signs as the afternoon evolved, only fewer of them, as the gains moderated over the next several hours, with the low point of the afternoon being reached as we entered the final 90 minutes of the trading day when all but 20 points in the Dow had been erased. But things would strengthen again into the close, with a partial comeback being staged into the close. Further cautious optimism about an eventual trade deal seemed to be the motivating factor in this second leg up on the day.
Meantime, there was other news yesterday, as a new month brought the latest tidings on manufacturing from the Institute for Supply Management. In this survey, we learned that the industrial sector expanded once more last month, but at a lesser rate than in May. In fact, it was the weakest reading, at 51.7, in well over a year. But for yesterday, at least, all thoughts were on trade, and that was what was moving the markets. Thus, at the close, the Dow would claim an advance of 117 points and the S&P 500 would add 23 points.
So, following the best June in the stock market since 1938 and a strong opening session to the second half, the stock markets of Asia were mostly higher in the overnight hours. Meanwhile, in Europe, the bourses are thus far trading in the green amid some U.S.-China trade optimism and uncertainty. Also, oil prices are a bit lower on demand concerns and Treasury note yields are easing. Finally, the U.S. equity futures are posed to show early slight backtracking this morning. – Harvey S. Katz, CFA