After The Close - The U.S. equity markets started off the final day of the week with a strong open, but stocks largely treaded water until slumping late in the session.
The news was relatively light on the economic front. The Department of Commerce reported that personal income increased 0.4 percent in May, while the Personal Consumption Expenditures (PCE) price index was up 2.3% versus a year ago (+2.0% excluding food and energy). Elsewhere, the University of Michigan’s consumer sentiment index for June showed little change from the prior month, clocking in at 98.2. While this represented a historically high level, the outlook dimmed a bit, with the survey’s Expectations measure dipping to a five-month low of 86.3, versus a reading of 89.1 in May. Potential fallout from tariff wars with the U.S.’s major trading partners was cited as a key area of concern.
At the closing bell in New York, all three of the major indexes were in the green. By the numbers, the Dow Jones Industrial Average held on for a gain of 55 points, the S&P 500 Index tacked on two points, and the tech-heavy NASDAQ was ahead by nearly seven points. Nearly all of the major market sectors finished in positive territory, led by energy (+0.9%), healthcare (+0.6%), and basic materials (+0.5%). Telecommunications issues were the laggards, ending just below breakeven.
Elsewhere, oil prices continued to rise, with light sweet crude advancing 1.1% on the session, to just under $74.30 a barrel. This marked a new 52-week high, with the commodity up more than 65% over the last year. The recent surge was attributed to supply disruptions in Canada and Libya, along with recent U.S. sanctions on Iran and lower domestic stockpiles. All this in spite of OPEC’s decision last week to ease output constraints.
Lastly, the European bourses also had a positive showing, with Germany’s DAX and France’s CAC-40 up about one percentage point each, while London’s FTSE gained about a quarter percent. - Mario Ferro
At the time of this article's writing, the author did not have positions in any of the companies mentioned.
Before The Bell - Following on the heels of sharp market pullbacks on Monday and Wednesday, the market began yesterday's penultimate session of a volatile first half notably to the downside. To wit, after a few minutes of trading, the 30-stock Dow Jones Industrial Average was off by more than 100 points, with that composite falling just below the 24,000 mark on continuing trade fears with regard to China. However, when the initial setback did not deepen, the buyers felt some confidence return, sending shares back toward the neutral line for the session as the morning proceeded, although the indexes remained deeply in the red for the week.
Still, equities remain under some pressure and vulnerable to further selloffs because of elevated trade tensions, primarily with China and disputes over intellectual property with that fast-growing nation. But some easing, apparently, of those concerns and a little bargain hunting helped to propel stocks somewhat forward as the morning ended and the afternoon got under way. The buying then intensified as we moved inside the final two hours, with the Dow jumping ahead to a triple-digit win on the strength of nice gains in the financial stocks. The NASDAQ and the S&P 500 did even better on a percentage basis.
Of course, even though most of the headlines are being made by our difficult commercial relations with China, we also are in trade disputes with the European Union. All of this is shaking up the bulls somewhat and causing market volatility to jump up strongly. In other news on this day, retailing behemoth Amazon.com (AMZN) announced that it had purchased online pharmacy concern PillPack. That move, albeit greeted warmly by Amazon, as that stock jumped more than 2% in the mid-afternoon, was received less charitably by two drugstore chains Walgreens Boots Alliance (WBA – Free Walgreens Boots Alliance Stock Report), a new Dow component and CVS Health (CVS).
The sharp drop in Walgreens, meantime, held the Dow's gain down somewhat. WBA shares, in fact, were off 10% in early action. As to economic news, the government reported that our nation's gross domestic product rose by 2.0% in the first quarter of 2018. That was the third and final estimate for opening-period GDP; a month from now, the Commerce Department will announce the first estimate for second-quarter GDP. Current expectations are for an increase of about 4%. Meanwhile, the GDP result for the opening quarter reflected gains in business investment, consumer spending, exports, and government spending.
The GDP data, though, had little appreciable impact on trading, which strengthened as the afternoon proceeded, with the Dow soaring by some 190 points as we entered the final hour of trading. The NASDAQ, at its late-afternoon crest was ahead by about 80 points. However, some of those gains were whittled away as the final hour proceeded, especially on the Dow, which saw its best gains on the day about halved as we reached the close. The other indexes held onto a greater percentage of their earlier advance. Overall, though, it was a nice comeback win for the recently battered bulls.
Taking an overall look at the day, we see that the Dow would wind up adding 98 points and the NASDAQ would climb 59 points. Elsewhere, nine of the top 10 equity groups gained in price, led by telecom and technology, while advancing stocks led decliners by about a three-to-two mark on the Big Board. Looking out to a new day now and to the conclusion of the first half on the Street, we see that shares were higher in Asia overnight and they are posting gains in Europe so far this morning. Moreover, oil, a big gainer again yesterday, is now holding steady in the early going and our equity futures are poised to begin the session to the upside as the half ends. – Harvey S. Katz, CFA