After The Close - The major U.S. equity indexes lacked conviction today, as early gains gave way to a midday slump. However, a late afternoon rally allowed stocks to recoup most of the ground lost earlier in the session.
The news was generally light on the economic front. Of note, there was an encouraging report from the U.S. Labor Department, as job openings increased by 65,000 in April, to a record 6.7 million. Moreover, March figures were revised upward, marking the first time since 2000 that available positions exceeded the number of job seekers. (By comparison, at the end of the recession, unemployed workers outnumbered job openings by about six to one.)
At the closing bell, the 30-stock Dow Jones Industrial Average (after being down as much as 110 points around midday) had clawed its way back to a loss of only fourteen points, while the broader S&P 500 ended just above breakeven. The NASDAQ fared the best of the lot. After hitting an all-time intraday high, the tech-heavy benchmark held on for a gain of 31 points. Performance among the 10 major market sectors was split down the middle. Basic materials led the winners, with a gain of 0.8%. At the other end, utility shares were down 0.7%.
Trading was also mixed on the European bourses today, with Germany’s DAX holding on for a modest gain, while France’s CAC-40 was down slightly for the session and the UK’s FTSE 100 shed nearly three-quarters of a percent.
Elsewhere, light sweet crude prices broke a three-day losing streak, rising 0.83%, to $65.29 a barrel. The move ran counter to reports alleging that the U.S. has asked OPEC to increase output by about one million barrels per day. The cartel, along with some non-member countries, agreed to cut production by about 1.8 million barrels back in 2016. OPEC and its partners are scheduled to meet on June 22nd in Vienna. – 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 - After Wall Street went on a merry joyride this past Friday to celebrate a very solid, but not especially inflationary, jobs report, the equity market followed that strong rally with an encore yesterday morning. On point, the Dow Jones Industrial Average, buoyed by further optimism on the economy quickly sprinted out to a gain north of 220 points in the first few minutes of trading. The industrial and technology issues led the way, with shares of tech icon Apple (AAPL – Free Apple Stock Report) scoring another nice win and a fresh all-time high.
It would seem that, for the moment at least, the Street is focusing more on the economy and the 223,000 jobs that were added last month than it is on the uncertainty of the international trade outlook. With respect to this latter point, the announcement last week by the President that he likely would be slapping tariffs on steel and aluminum products from Mexico, Canada, and the European Union had occasioned some spirited selling last Thursday. But that was a brief respite from the general buying the past two sessions.
Meanwhile, in news out yesterday, it was announced that U.S. factory orders had dropped 0.8% in April. That was a somewhat larger decline than had been forecast. A falloff of 0.5% had been the estimate. The decline was mainly in commercial aircraft. Otherwise, it was a typical light Monday for economic tidings. The economic calendar heats up a bit today with data out later this morning on non-manufacturing activity. In fact, the report from the Institute for Supply Management will be released shortly. Tomorrow, we will get data on productivity and the trade gap.
This report on non-manufacturing activity will follow the upbeat issuance this past Friday on manufacturing activity. This companion release, also from the ISM, showed that the overall manufacturing index had ticked up nicely in May, garnering a score of 58.7. In April, the index had registered a reading of 57.3. Among core components of the survey, we saw further strength in new orders, production, employment, supplier deliveries, backlogs, and prices. This overall show of strength further supports our view that GDP growth will exceed 3% this quarter.
As to the market, it continued to rise nicely over the balance of the morning. Thus, as we passed the noon hour in New York, we saw that the Dow was ahead close to 200 points. The S&P 500 and the NASDAQ also were higher. Only the small-cap Russell 2000 had failed to make a definitive move to that point. The equity market's gains would then continue into the first part of the afternoon. with the Dow's advance generally straying in the 170-200-point range. That level of strength would then continue over the balance of the session.
As noted, things would change little over the course of the afternoon, so that as the final bell sounded, the Dow, up notably all day, concluded with a gain of 178 points, while the S&P 500 tacked on 12 points, making it back-to-back strong sessions. Further, the NASDAQ, surged by 52 points, thereby securing an all-time record closing high and the small-cap Russell 2000, a notable laggard earlier in the day came on strong, finally adding five points. Looking at the day's action from a sector perspective, we see eight of the ten leading groups ended higher on the day.
Looking out at a new day now, we see that stocks in Asia were higher in overnight action, while in Europe, the leading bourses are now gaining modestly. Elsewhere, interest rates, as gauged by the 10-year U.S. Treasury note are passing hands at 2.93%, following yesterday's late close of 2.94%. Finally, as the bulls try to make it three gains in a row to start out June, the equity futures are posting early gains. – Harvey S. Katz, CFA