After The Close - The U.S. stock market moved higher today in a pre-holiday shortened session. At the close, the Dow Jones Industrial Average had advanced 92 points; the broader S&P 500 Index was ahead 11 points; and, the NASDAQ tacked on 28 points. Market breadth was favorable, with advancing stocks moderately ahead of decliners on the NYSE. These gains were a bit stronger on the NASDAQ proportionally. Essentially, all of the market sectors participated in today’s up move. There was clear leadership in the basic materials group. The consumer names, too, made progress. However, investors continued to rotate out of the utilities. Also, the energy sector was somewhat sluggish. Lower crude oil prices probably did little to help this group.
Technically, stocks continue to press higher. Today, the Dow moved through the widely watched 17,000 level. Further, the S&P 500 Index is closing in on the 2,000 mark. Passing these milestone numbers may carry some “psychological” significance with traders and retail investors. It may also convince some investors, who have been sitting on the sidelines, that the market is running higher, despite their personal worries or predictions. The mood has turned quite bullish, and possibly overly so. The VIX retreated 4%, to 10.32, today. Notably, this is the lowest level seen on this index over the past 52-weeks, and may suggest that investors have become too complacent.
Meanwhile, traders received a key piece of economic news this morning, and that likely spurred on today’s rally. Specifically, non-farm payrolls increased by 288,000 during the month of June. This showing was both higher than May’s figure, and also quite a bit better than had been anticipated. Too, the headline unemployment rate dipped to 6.1% in June, from the prior month’s 6.3%. The report clearly demonstrated that the employment situation is making progress. Elsewhere, traders received a few other news items. The nation’s trade gap narrowed to $44.4 billion in May, showing that some progress has been made on this front. Further, the ISM Non-Manufacturing Index came in at 56.0 for the month of June, which was a respectable reading. Tomorrow, there will be no reports issued.
Finally, there were no notable corporate reports worth mentioning. However, the second-quarter earnings season will soon be starting up. Former-Dow-component Alcoa (AA) is slated to issue its report on Tuesday. That stock has been gaining in price lately, on optimism that the company can capture market share in the sizable aerospace industry. - Adam Rosner
At the time of this article’s writing, the author had a position in Alcoa.
Stocks to Watch from The Survey– Corporate news is light this morning ahead of today’s abbreviated trading session before the July 4th holiday, but there are a few stocks worth keeping an eye on. Facebook (FB) is facing criticism after revealing that it had experimented on the emotions of users of its popular social media Website. Retailer Target Corp. (TGT) will ask its customers to not bring guns into its stores, in response to pressure from a gun-control group. The question of a succession plan looms large for financial services giant JPMorgan Chase (JPM - Free JPMorgan Chase Stock Report) after long-time chief executive James Dimon revealed earlier in the week that he had been diagnosed with throat cancer, from which he expects to make a full recovery. - Sharif Abdou
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before The Bell - The stock market, fresh off a stellar start to the second half, in which the Dow Jones Industrial Average scored a 129-point gain on Tuesday, began the session yesterday with another move to the upside. However, this advance was much more muted. Once again, though, the market was helped by good economic news. On Tuesday, it had been reassuring data on manufacturing in China and our own country; yesterday, it was an issuance showing a better-than-forecast rise in private-sector payrolls in June. That report, furnished by Automatic Data Processing (ADP), affirmed an increase of 281,000 jobs. Expectations had been less aggressive.
Meanwhile, that figure is always a headline grabber, as it precedes the more closely tracked government report on job creation and the unemployment rate. That government issuance was released just moments ago (see below).
With regard to the leading averages, they continued to track somewhat higher through much of the morning, with occasional brief and contained selloffs. However, these indexes never advanced very far, as the Dow proved unable to crack the psychologically important 17,000 mark coming to within 15 points, or so, of that unprecedented level. Also, unlike most recent sessions, the major larger-cap benchmarks, notably the Dow Jones industrials and the Standard and Poor's 500 Index, were not joined by gains in the small- and mid-cap composites, as the Russell 2000 and the S&P Mid-Cap 400 both headed lower almost from the start, with the latter index pulling back more notably, falling to a closing loss of almost nine points.
Given this breakdown, it was not surprising that the advance-decline line was quite negative on the Big Board, though rising volume did narrowly exceed falling volume for much of the session, before falling back by the close. The major groups also were divided, with the utilities showing some rare and considerable weakness, while the basic materials stocks, recently out of favor, did quite well on developing economic optimism. The healthcare group also prospered, with some of the bigger drug makers moving ahead nicely by the close.
This in-and-out pattern lasted into the early afternoon, as neither the bulls nor the bears seemed ready to make a statement up to that point, as they shied away from any overt moves ahead of the aforementioned release on non-farm payrolls by the U.S. Labor Department. In addition to that just-issued metric, the day ahead also has featured the latest figures on the U.S. trade deficit (see below), and the non-manufacturing sector. This latter issuance is due out in about an hour from now, and could be a market mover, as it occasionally is.
Regarding yesterday's market, after weaving back and forth for much of the session, stocks finally sought to put together a selective rally in the large caps, with the Dow moving ahead to a closing gain of some 20 points, while the S&P 500 was little better than flat and the NASDAQ eased ever so slightly, falling less than a point. This standoff was not all that surprising given the importance of the jobs report and the potential for it to be a game changer, especially if it is an outlier.
As to that key metric, Washington reported that the nation added 288,000 non-farm payrolls last month, which was well above expectations for the addition of 215,000 jobs, while the unemployment rate fell to 6.1% for June, down from 6.3% in May and expectations for a flat reading. The equity futures firmed up just after this report's release, but those gains soon wilted. As to the other report that was issued at that time, the trade gap narrowed to $44.4 billion in May from a revised $47.0 billion in April. (The April figure had been initially estimated at $47.2 billion.) Within this report, we saw that exports were up 1.0% last month, while imports, which subtract from growth eased slightly to $ 239.9 billion. On the other hand, the trade deficit with China increased to $28.8 billion in May from $27.3 billion in April. Taken as a whole, both reports were uplifting, with the employment data the more pivotal.
Finally, the markets in Asia were mixed overnight, with Japan's Nikkei showing a slight loss after a succession of daily advances. Hong Kong, too, moved lower. In Europe, though, the principal bourses are tracking higher at this time, as the Continent awaited the U.S. jobs data. As to our futures, they show a mixed to nominally higher trend. - Harvey S. Katz
At the time of this article's writing, the author did not have positions in any of the companies mentioned.