After The Close - On Tuesday’s holiday-shortened session, the major large-cap indexes each shed meaningful value. The NASDAQ, Monday’s widest-gaining composite, dropped the most (65 points, -0.86%), while the Dow Jones Industrial Average lost about 132 points (-0.54%) by the time the closing bell rang. The blue chip grouping was dragged down by shares of Apple (AAPL – Free Apple Stock Report), among others, with the iPhone-maker’s pullback in stock price underscoring the rotational nature of trading in the technology sector after yesterday’s solid performance. Tech stocks were the only industry group to shed aggregate value today.
However, as evidenced by the small-cap Russell 2000’s five-point advance (+0.32%), market breadth was more positive than the major indexes suggest. In fact, advancing shares outnumbered declining issues by a 1.7-to-1.0 margin. The strength was led especially by the energy and telecom groups, though solid upticks were also registered by the noncyclical consumer goods and utility sectors, as well.
Traders remain concerned over bubbling trade tensions between the United States and many of the world’s major economies. A statement by the Commerce Secretary Wilbur Ross did little to assuage the fears that recent tariffs, though not catastrophic by any means, were not to be the end of the country’s campaign to effect what it views as a more beneficial trade arrangement. Caterpillar (CAT – Free Caterpillar Stock Report) and Boeing (BA – Free Boeing Stock Report) both slipped considerably today, as both multinational businesses are more trade-sensitive in nature.
While we expect trade developments to continue dominating the headlines, with late July’s earnings season also holding some influence down the road, investors are also awaiting Friday’s jobs report. The U.S. economy is projected to have added roughly 200,000 positions in June, a strong figure that could help reinvigorate the bulls, however briefly, amidst a sea of geopolitical uncertainties. Stay tuned, and have a happy holiday. – Robert Harrington
At the time of this article’s writing, the author did not hold positions in any of the companies mentioned.
Before The Bell - Wall Street, which ended a mixed first half in undistinguished fashion, with notable weakness down the stretch, began the second six months on a softer note, as well, with hefty morning losses yesterday. On point, the Dow Jones Industrial Average, a nominal loser during the opening half, quickly suffered a near 200-point setback in the initial few minutes of trading on escalating trade and tariff concerns. In short, China, the European Union, Canada, and Mexico were all acting to try and offset U.S. tariffs with levies of their own.
The negative sentiment, meantime, was not helped when Commerce Secretary Wilbur Ross said even a falling stock market would not dissuade the President from taking strong trade action in trying to remedy long-term ills. The biggest early casualties were those stocks with major global exposure, such as Dow component Caterpillar (CAT – Free Caterpillar Stock Report). Energy and technology, meantime, were the groups suffering the most as the second half got under way. The early sour note would then fester as the first hour ended.
However, a welcome respite was soon provided as the Institute for Supply Management reported that its closely tracked survey on manufacturing rose once more in June. That upbeat showing indicated that the dollar strength was not yet hitting manufacturers. The fallout from trade disputes may come, but through the second quarter, at least, there had been no major ill effects. As to the ISM survey, it registered a reading of 60.2, with new orders, production, and employment all growing.
In all, the ISM tally of 60.2 bettered the May result of 58.7. Inventories, meantime, were lean, while price increases slowed somewhat, suggesting no major new inflation pressures. As to the market, after an attempt to rally after that report, stocks fell back again, so that as we reached the noon hour in New York, the Dow was back off some 150 points. Encouragingly for the bulls, though, the selloff did not gather any new momentum, suggesting at the time that an afternoon rally was still feasible.
Indeed, the afternoon would bring yet fresh attempts to rally the market, and with some success this time, as the NASDAQ turned notably higher as we approached the final hour of action, gaining more than 30 points on selective buying in the technology arena. The S&P 500, meanwhile, straddled the fence as the final hour arrived, while the Dow sharply pared its earlier deficit, but remained a bit under water. The more domestically focused Russell 2000 also moved into the profit column. It seemed as though a strong economy was so far weathering the tariffs.
The comeback then continued into the close, with the Dow, the last of the indexes to go positive, finally ending an up-and-down session with a modest 36-point advance. More substantive percentage increases of eight and 57 points, respectively, were tallied by the S&P 500 and the NASDAQ. Breaking things down further, a few more stocks wound up the session in the plus column than not on the Big Board, while about half the major equity groups posted advances led by technology. Energy and basic materials were the biggest losers.
Looking ahead to a new day, and after yesterday's impressive comeback by a resilient market, we look out and see that shares in Asia were mixed in overnight dealings, while in Europe, the major bourses are higher. Also, oil prices are rising anew; Treasury note yields are up a little in early trading; and the U.S. equity futures are pointing to initial healthy gains when trading resumes, in spite of elevated trade tensions. – Harvey S. Katz, CFA