After The Close - The stock market opened lower this morning, but quickly reversed course and continued to move higher through much of the afternoon, before some last-minute selling. Investors may be getting used to the disappointing news that a trade deal between the U.S. and China has failed to materialize as hoped. Further, today, Wall Street seemed pleased with a report suggesting that the U.S. will delay placing new tariffs on automotive imports from Europe. Finally, it is also possible that some traders might be hoping that the Federal Reserve will take action in order to keep the economy expanding. At the end of trading today, the major averages showed respectable gains. The Dow Jones Industrial Average was ahead 116 points; the S&P 500 Index was up 17 points; and the NASDAQ was higher by 88 points. Market breadth was favorable, with winners outpacing losers by a comfortable margin on the NYSE. From a sector perspective, the technology and consumer issues led the way higher, while the defensive utility stocks lagged the broader market.
There were numerous economic reports released this morning. Specifically, retail sales dipped 0.2% in the month of April, while analysts had anticipated a slight increase. In addition, industrial production declined 0.5% in the latest month, which was also a weaker-than- expected showing. Tomorrow will be a busy day for economic news. We will get a look at the latest weekly initial jobless claims, as well as the monthly housing starts.
In the corporate arena, a few large names posted reports over the past 24 hours. Of note, shares of Agilent Technologies (A) slid after that company delivered disappointing results and tempered it outlook.
In contrast, shares of Alibaba Group (BABA) moved up after the China-based Internet retailer put out encouraging results.
Technically, the stock market has softened over the past few weeks. However, the situation may be stabilizing, at least for now. – 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 - What a difference a day makes! That key phrase from a long-ago hit song by Dinah Washington, clearly describes the stock market on Monday and Tuesday of this week. On point, after an escalating trade war between the United States and China broke out over the weekend and took the measure of Wall Street to start the new trading week, with the Dow Jones Industrial Average tumbling by 617 points, that same composite rocketed ahead by more than 200 points yesterday morning. Why was there this turnaround? Perhaps investors reassessed the situation and concluded that a trade war, even a major one, was not the end of the world.
Of course, it was not only the Dow that barreled ahead, but also the other larger-cap composites, with Boeing (BA – Free Boeing Stock Report) and Caterpillar (CAT – Free Caterpillar Stock Report), rebounding after selling off the prior day. Contrast this latest market behavior with the prior day's action, which had seen stocks tumble along a wide front on news that China had announced plans to raise tariffs on $60 billion worth of goods imported into the United States beginning on June 1st. Helping the market yesterday might have been the sense that a deal will eventually get done as the stakes are just too high for any other result. We shall see.
Other pundits, however, had a somewhat different take, with some speculating that a prolonged trade conflict could well produce earnings headwinds as well as lead to an eventual recession. Meanwhile, these conflicting conclusions aside, the stock market continued to push ahead yesterday, with the Dow's gain closing in on 350 points as the morning drew to a close. With corporate earnings for the first quarter largely in the books, and with the next employment report still more than two weeks off, the focus was clearly on trade. And if a downturn in the economy was ahead, the bulls were not yet buying it, as stocks continued to rise.
Things would not change all that much as the afternoon began, with the Dow's gain surpassing 360 points at one time. Indeed, for a brief span, it appeared as though all of Monday's loss would be made up. But that proved to be too big a hill to climb. And after bouncing along with gains north of 300 points in the Dow and 130 points in the NASDAQ, some caution crept in and stocks gave back about a third of their best gains as the session drew to a close. Still, the numbers were compelling, and pointed up the durability of this long bull market.
At the close, meanwhile, the Dow would be up by 207 points; the S&P 500 would climb 23 points; and the NASDAQ would post an increase of 87 points. Gaining stocks would be well ahead of declining issues, while technology equities, off sharply on Monday, would see some nice buying. Looking ahead at the day to come, we see that stocks were higher in Asia overnight, while in Europe, the bourses are trending somewhat lower. Also, oil prices are easing; Treasury note yields, up yesterday, are moving downward so far this morning; and U.S. equity futures are signaling a modestly lower opening when trading resumes. - Harvey S. Katz, CFA