After The Close - The stock market opened higher this morning, pulled back after about an hour, but regained its stride in the afternoon. While there was little news to explain the further shift in sentiment, traders seemed less worried about the nation’s trade problems, and the possibility of global economic slowdown. At the close of the session, the Dow Jones Industrial Average was up 207 points; the broader S&P 500 Index was ahead 23 points; and the NASDAQ was higher by 48 points. Market breadth showed a mildly supportive session, as advancers were ahead of decliners by a small margin on the NYSE. Of note, the small cap issues did not participate in today’s advance. From a sector perspective, the healthcare, consumer, and utility stocks moved nicely higher, offsetting weakness in the energy and basic materials issues.
There were a number of important economic news items released today. Foremost, according to Automatic Data Processing (ADP) there were just 27,000 private sector jobs added to the economy in the month of May. This was well below the 170,000 figure that analysts had been anticipating, and also quite disappointing when compared to the 271,000 jobs added in April. The poor report may have some traders wondering about the May employment report, which will be released Friday morning. At the present time, expectations are running quite high, with analysts thinking that 180,000 jobs were added to the monthly nonfarm payrolls. It is possible that some of concerns about a slower job market, are being offset by hopes that the central bank will lower interest rates to support the economy, a suggestion advanced yesterday by Federal Reserve Chair Jerome Powell. Meanwhile, we will get another look at the employment situation tomorrow, when the latest weekly initial jobless claims are posted.
Elsewhere, in the corporate area, we heard from a few large names over the past 24 hours. Specifically, Salesforce.com (CRM) put out a decent report, sending the software giant’s stock up on the news. In addition, shares of Campbell Soup (CPB) moved higher in response to an encouraging release.
Technically, equities retreated in the month of May, but seem to have found some support at the start of June. However, it remains to be seen if the bulls can push the market meaningfully higher in the weeks ahead. – Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before The Bell - The bull is back and with plenty of muscle. On point, after the market fell sharply for much of last week and throughout the often difficult month of May, stocks really turned the corner yesterday, rising from the opening bell and never really looking back, as it forged a wire-to-wire win. Behind that strength, which saw the Dow Jones Industrial Average gain better than 40 points by late in the morning was an apparent easing in trade tensions and some suggestions by the Federal Reserve that it might be open to reducing interest rates sooner rather than later in an effort to keep the business expansion going.
With regard to interest rates, the Fed Chair Jerome Powell signaled that the central bank was open to easing monetary policy in order to sustain the long business expansion. That was the prime factor in the string price upsurge. There also was a diminution in tensions on the trade front following comments by China and Mexico. It had been a worsening in such relations that had sparked the most recent round of selling on Wall Street. Meanwhile, Republican lawmakers were discussing whether or not they have the necessary votes to stop the new tariffs on goods out of Mexico.
Among the gainers yesterday, as the Dow Industrials headed into the noon hour were General Motors (GM) and Ford (F). The large-cap tech names also did better after a selloff on Monday. Also rising was the yield on the 10-year Treasury note, which climbed to 2.13% after sinking below 2.10% the day before. Also doing well were some major banking issues. On the docket for this week and likely to influence trading over the latter part of this five-day trading span is Friday's employment report, a release that is expected to show that non-farm payroll growth had slipped from 263,000 in April to 180,000 in May.
Regarding the equity market, the upsurge in prices continued after lunch, with the Dow surging to a gain of over 500 points in late afternoon. Mexico's suggestion that it thought a resolution on immigration could be reached with the United States helped as did China's indication that it felt additional talks could yet solve the trade dispute between the two countries. But the main boost, we think, came from Fed Chair Powell's admission that the Fed would do all it could to keep the expansion going. Thus, it raised the strong possibility of rate cuts later this year--most likely in September and December.
All told, the market ended matters at their session highs with the Dow concluding matters ahead by 512 points. Gains of 59 and 194 points, respectively, were tallied by the S&P 500 Index and the NASDAQ. Many high-profile tech names surged on the day, as did some out-of-favor industrials, such as Dow Inc. (DOW – Free Dow Stock Report), which jumped almost four percent. Also rising were Treasury note yields and oil prices, along with almost four times as many stocks as not. Looking ahead, trade, the fed, and additional economic news, including data on non-manufacturing activity will be watched closely.
As for the day ahead, after yesterday's fireworks, we find that stocks were mostly higher in Asia in the overnight hours, while in Europe, the principal countries are showing early gains in their markets. Also, Treasury note yields are edging upward following the Fed Chair's remarks and oil prices are falling on supply concerns. Looking at our markets, the bulls hoping for more of the same today are seeing the equity futures posting early sizable increases once again. - Harvey S. Katz, CFA