After The Close - The markets started quite positively today, as investor sentiment improved overnight concerning potential trade progress with China. Indeed, a statement out of China’s Commerce Ministry stated that “differences and frictions between the two sides” should be dealt with through talks, which suggested that the two nations could be more open to striking a detente. This news sent the markets higher in the early portion of trading. Additionally, U.S. Federal Reserve Chairman Jerome Powell stated that the Fed would be open to easing monetary policy. That acknowledgement caused stocks to accelerate across the board, as traders took this to mean that a “Powell Put” is now baked into the market. The Dow Jones Industrial Average rose consistently throughout the day, rising by as many as 450 points by midafternoon. The other indices also moved higher in tandem. The rally continued though the end of the session and erased several days of losses. At the time of the market’s close, the Dow was higher by 512 points, the S&P 500 was up 59 points, and the NASDAQ increased 194 points.
Additionally, market breadth was very positive, as advancers outpaced decliners by a 3.6-to-1.0 ratio. Technology stocks were among the best performers on the day, as a few mega-cap equities posted solid results. Meantime, REITs were among the weakest sector, hurt by a rise in interest rates.
In commodity news, oil prices rose, as expected demand projections increased. Meantime, U.S. Treasury bond yields were higher across the board, as the Federal Reserve commentary caused traders to reduce their positions. Too, the VIX Volatility Index was lower, as demand for option protection fell.
Looking ahead, tomorrow is expected to be a full day for economic news. This includes the Energy Information Administration’s weekly report on crude oil inventories. Too, the ISM non-manufacturing index is slated for release. Meantime, a few quarterly earnings reports are expected from some retailers. Still, we think that trading will be focused on any developments that come from the trade war with China or from the U.S. Federal Reserve. - 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 - Stocks got out of the gate strongly yesterday to begin both a new trading week and a new month after a notably weaker May. But that initial euphoria did not last very long and soon the market was lower again, especially the NASDAQ. But that further selloff following a steep drop last Friday did not last long, and within minutes, the market was on its merry way again. In fact, after that second buying burst, the Dow Jones Industrial Average would race out to a gain of 120 points. But the NASDAQ still lagged, with a solid loss.
The rest of the morning would see a seesaw and rather jagged trading pattern, in particular with respect to the Dow Industrials. However, it was the NASDAQ, where shares of Alphabet (GOOG) tumbled by more than 70 points during the day that saw the major move. Alphabet, the parent of Google saw that extreme selloff after the Justice Department indicated that it might possibly probe into that company's business practices. So, while the Dow was going up and down within 50 points or so of breakeven, the NASDAQ was plunging.
In all, the NASDAQ would fall by about 125 points as we neared the final hour of trading, moving into correction territory as a result. (A market correction is a fall of 10% or better from recent peak to trough.) As we reached the final hour, shares of several other tech stalwarts, including Apple (AAPL – Free Apple Stock Report) and Nvidia (NVDA) also were laboring, but nowhere near to the extent of Alphabet. Going into the final hour, then, the Dow was off by 60 points; the S&P 500 was down by 14 points; and the NASDAQ was lower by 125 points.
There were some winners, to be sure, but these were in the basic materials group and industrial groupings and included such recently out of favor issues, such as Dow, Inc. (DOW) and U.S. Steel (X). Several of the big drug houses also were faring well, as they now have been for weeks. As to what was going on in the market, the Street still was upset by the new tariffs threatened on Mexico by our country, as well as the continuing harsh rhetoric coming out of China, where a trade deal between that country and ours grows more remote by the day.
Then as the final hour unfolded, the stock market would turn even more volatile. On point, during the first half of that concluding 60 minutes, the market would fall further, tumbling to session lows in the process, with the Dow dropping by 135 points. The decline in the NASDAQ would hit just over 160 points. Then, in the final few minutes the market would turn, with the blue chip composite erasing its losses entirely and ending up by five points. The NASDAQ, however would end off by 120 points, primarily on the sharp drop in Alphabet shares.
Now, a new day is upon us. And in Asia overnight, the leading indexes posted losses on lingering trade concerns. In Europe, meantime, the major bourses are showing early gains, in spite of the trade worries. Elsewhere, oil prices are falling in growth slowdown fears and Treasury note yields, which fell sharply yesterday, closing at 2.08% on the 10-year instrument, are now passing hands at 2.10%. Finally, our equity futures are showing early gains ahead of a week of major economic reports. – Harvey S. Katz, CFA