After The Close - U.S. stocks were mixed on Tuesday, as investors digested a number of political factors and looked ahead to the Fed’s impending interest-rate announcement tomorrow afternoon. The S&P 500 vacillated between positive and negative territory before finishing slightly higher and the Dow finished the day just shy of its breakeven line. Neither advancing nor declining shares were able to carve out a meaningful lead, with selling in the energy and basic material sectors offsetting strength by utility and technology stocks, the latter of which bounced back after some profit collecting on Monday. Accordingly, the NASDAQ was the steadiest large-cap index today, gaining roughly 44 points during the session.
There were a couple of items from Corporate America that bear notice. Significantly, the decision on the proposed $85 billion merger between AT&T (T) and Time Warner (TWX) was scheduled to be announced after 4 P.M. (EST). The ruling will be an important one for the future of the telecom/media landscape, with Comcast (CMCSA) and Disney (DIS – Free Walt Disney Stock Report) likely paying especially close attention. The latter is attempting to complete its takeover of Twenty-First Century Fox’s (FOXA) content businesses in the face of a steep challenge by the Philadelphia-based cable giant. Elsewhere, Tesla (TSLA) announced it would be laying off 9% of its employees, perhaps as a means of moving the electric carmaker closer to profitability.
Generally speaking, investor concerns regarding recent geopolitical tensions, namely last week’s trade-centric G7 summit in Montreal and yesterday’s groundbreaking meeting between the United States and North Korea, seem to have eased today. While any accord between the two nations is very much preliminary in nature, the prospect of an easing of volatility from the foreign policy front has been a welcome reprieve by equity traders, however tenuous it is.
One space confronted with new international developments was the oil trade. The per-barrel value of U.S. crude ticked $0.26 higher today, despite OPEC indicating today that the outlook for the market is uncertain. This comes after several weeks of mounting worries in the sector, which have stemmed from a lower-than-expected demand environment in China, oversupply pressures at home, as well as news that Saudi Arabia and Russia were mulling an increase in daily output.
Now, investors will turn their focus to another meeting: that of the Federal Open Market Committee. The central bank’s policy wing is expected to announce a 25-basis-point increase in borrowing rates when the two-day discussion concludes tomorrow. In fact, with the hike being essentially a foregone conclusion, we believe traders will hone in on the Fed’s tone in the accompanying release to better understand how it views the rate of economic expansion as it relates to its long-term tightening plans.
Thereafter, investors will likely begin looking forward to another earnings season. Corporate America has been on a hot streak in recent quarters, but will begin to face difficult year-to-year comparisons as the year progresses, which could open up the opportunity for profit takers in the months ahead. Stay tuned – 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 - The stock market, following a stellar week of trading, opened the new five-day span a bit to the upside, as the bulls awaited news from the just-ended much-hyped summit with North Korea. In addition to the news on that side, there also were concerns about intensifying trade discord and the fallout from the latest G-7 meeting. All of this aside, stocks, as noted, began the week mildly to the upside, so that as we closed in on the first hour of action, the Dow Jones Industrial Average, the S&P 500, and the NASDAQ were all gaining ground, but grudgingly.
Overall, it seemed as though the market was shrugging off the tensions arising from the G-7 weekend meeting, feeling that both the celebrated meeting between the President and North Korea's leader and the two-day FOMC meeting set to begin this morning, would be more consequential for the markets. As to the Federal Reserve get together, overwhelming expectations are that the central bank will raise interest rates by 25 basis points. That would be the second such increase this year. One or more rate hikes is then likely thereafter in 2018.
Meanwhile, the stock market aided by global events and the expectation of a benign Fed move and accompanying monetary statement, continued to edge higher as the morning continued, but not by all that much. A pickup in merger activity in the health care arena also helped sentiment to a degree. Still, there were pockets of weakness afoot, especially in the technology space, where some recent gainers encountered profit taking of a modest degree. Overall, though, stocks were generally a little over the breakeven line for much of the morning.
The equity market then eased into the red momentarily as we neared the noon hour in New York. However, as the morning concluded, the indexes were again all in positive territory, with the Dow ahead by some 45 points and the NASDAQ better by 20 points. Stocks then firmed up even more as the afternoon began. In fact, as the one o'clock hour arrived, the indexes were all at session highs to that point, with the Dow ahead by some 60 points. It seemed as though global events were taking a back seat again, at least for the moment.
Things would then get as little better until near the close, with the Dow's session-best advance reaching 86 points in mid-afternoon. The upturn then wilted somewhat, so as we reached the end of the trading day, the Dow had given back nearly all of its afternoon gain, finally settling accounts with an increase of just six points. The NASDAQ, once ahead by 35 points, ended matters up by 14 points,. Still advancing issues held a six-to-five lead on declining stocks on the NYSE, while eight of the top 10 sectors were in the green.
Now, after this mildly constructive session, we see that stocks were generally higher in Asia in the overnight hours, while in Europe, the major bourses are pressing downward after the conclusion of the U.S.-North Korea summit. Elsewhere, oil prices are up a touch; the euro is now ahead slightly in early trading; and Treasury note yields, which ended the session yesterday at 2.95% on the 10-year security, are passing hands at 2.96% this morning. Finally, as the summit concludes and the Fed starts its two-day confab, the U.S. equity futures are pointing to an initial small loss when trading resumes. - Harvey S. Katz, CFA