After The Close - The equity market moved higher this morning, and managed to improve on these gains through the afternoon. At the close of trading, the Dow Jones Industrial Average was ahead 197 points; the broader S&P 500 Index was up 25 points, and the NASDAQ was higher by 65 points. There was widespread buying today, with advancers easily outpacing of decliners on the NYSE. All of the major equity groups forged ahead, with sizable gains in the technology and basic materials issues. Meanwhile, the consumer stocks made more modest progress.
There were a few key economic reports released today. Specifically, initial jobless claims for the week of May 5th came in at 211,000, which was a somewhat better reading than had been anticipated. Furthermore, inflation remains under control, with the CPI increasing just 0.2% in April. Many had expected prices to climb a bit more during the month. Tomorrow we will get a look at the monthly import prices, as well as a report on consumer sentiment.
In the corporate arena, it was a relatively light day for earnings reports. However, shares of CenturyLink (CTL) edged up, after the telecom company posted better-than-anticipated results. Shares of Magna International (MGA) also advanced after the auto-parts retailer delivered an encouraging report.
Technically, the stock market has managed to rally a bit over the past several sessions. The recent buying campaign puts the S&P 500 Index back above its 50-day moving average. - 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 stock market, which waded through a seesaw session on Tuesday, as concerns emerged late in the day after it was announced that the United States was pulling out of the Iran nuclear deal, started yesterday's session nicely to the upside, with the Dow Jones Industrial Average initially moving out to a gain just north of 100 points. Optimism on earnings and strongly higher oil prices, with the latter coming in the wake of the Iran pullout, helped get the ball rolling for the bulls. The other indexes followed suit in the early going, with strength mostly in the energy and basic materials groups.
Meanwhile, a benign report on inflation, with the Producer Price Index, a key gauge on wholesale pricing, showing an uptick of just 0.1% for April, also helped sentiment early in the day. Fears of rising inflation, and the possible aggressive response by the Federal Reserve to that situation, have been limiting the market's strength in recent weeks. The slight increase in the PPI, which compared with an expected rise of 0.3% for the month, did help reduce those pricing concerns for the moment, as did the fact that the PPI, less food and energy, also rose just 0.1% in April.
Still, the market's advance did wilt as we headed toward the noon hour in New York, with the Dow at one point giving up its gain and falling into the red by some 35 points. Some late-morning buying, though, soon surfaced, and as we headed into the morning's home stretch, the averages were all clustered just above the breakeven point. Meantime, helping the Dow were solid gains by its energy components, as oil shot up to yet another four-year high on Iran concerns. Of course, the higher oil quotations could start to have some impact on inflation down the road, with the May PPI and Consumer Price Indexes likely to head notably higher.
But those reports are still several weeks down the road. For now, the rise in oil is still supportive for several industry groups, as they will likely contribute to further strength in earnings in the quarters to come. The bulls then stiffened their resolve as we moved more deeply into the lunch hour and beyond, with the day's highs exceeding rather quickly, as the Dow rose to a gain north of 200 points as we headed to the final two hours. The easing in inflation and the lingering optimism on the corporate profit side were seemingly still a winning combination for the bulls, even as global risks intensify.
The belated positive reaction to the latest economic and global developments would then gather steam as we moved inside the final two hours of trading, with the Dow moving further past the 200-point advance mark, while the NASDAQ pressed strongly higher as well. But the leadership mantle clearly was in the hands of the S&P 500 Index, with that composite surging by better than one full percent. Then, after the Dow jumped to a session-best gain of about 225 points, it gave back almost a hundred of those points in short order, but then regrouped and made up some of that ground into the close.
In all, the session ended with that blue chip composite rising 182 points at the close. Gains of 26 points and 73 points, respectively, were tabulated by the S&P 500 and the NASDAQ, while gaining stocks held a comfortable lead on declining issues on the Big Board. As the week winds down, and after the generally ho-hum reaction to the latest global headwinds, our sense is that the focus will return to the economy and more so to corporate news, where results are still pleasing to the bulls for the most part. Even so, we sense it will be difficult for stocks to make dramatic strides. We seem to be in a trading range just above correction territory.
Now, a new day gets under way, with stocks in Asia trading moderately higher in the overnight hours. Regarding Europe, the early action is mixed. Also, oil, up yesterday, is now gaining a little more in early New York dealings, while U.S. Treasury notes, which ended matters at 3.00% on the 10-year duration, are now trading at 2.98% this morning. Finally, the U.S. futures are forecasting a higher open when trading resumes this morning on our shores. – Harvey S. Katz, CFA