After The Close - Driven in large part by some geopolitical uncertainty, the major U.S. indexes were volatile during Tuesday’s trading session. Speculation over the United States’ future participation in the Iran nuclear deal of 2015 led to a lower opening by the Dow Jones Industrial Average, S&P 500, NASDAQ, and small-cap Russell 2000. And while each of these composites rose into positive territory briefly in the late morning hours, only the Russell managed to stay above its breakeven line for long stretches into the late afternoon. However, in the final hour, after the large-cap groupings swiftly fell to session lows after President Trump announced his intention to remove the nation from the pact, they each gradually pared their losses as the closing bell approached.
The news of the President’s intention had an immediate impact, if not a lasting one, on the equity averages. But U.S. crude oil fell as much as 2.4% on a day that saw considerably higher volume and a $2.00 per-barrel trading range. But losses were pared somewhat after the announcement, suggesting that the reintroduction of sanctions on the Middle Eastern nation would not be as severe as previous U.S.-led efforts. In fact, since the new round of sanctions will likely not feature the full support of a number of international allies, traders are not overly concerned about the impact on global crude supplies.
Meanwhile, earnings-related headlines were largely overshadowed by the Iran developments. But there were some updates worth noting on the corporate front. Comcast (CMCSA) shares traded lower as investors processed the media giant’s intention to disrupt Disney’s (DIS - Free Walt Disney Stock Report) acquisition of Twenty-First Century Fox (FOXA) with its own all-cash offer. The deal is reportedly contingent on the regulatory approval of AT&T (T) and Time Warner’s (TWX) pending tie up. The burgeoning standoff will likely be a hot topic after the bell, too, when Disney is scheduled to report its fiscal second-quarter results.
By the time the closing bell rang, the major averages had risen back near breakeven levels, wrapping an indecisive day on the stock exchange. The rest of the week will likely center somewhat around today’s decision to exit the Iran deal, though a plethora of earnings reports also figures to influence equity trading ahead. Stay tuned. – Robert Harrington
At the time of this article’s writing, the author did not hold positions in any of the companies mentioned.
Before The Bell - Following up on the heels of Friday's big win, in which the Dow Jones Industrial Average surged forward with a closing gain just north of 330 points, after an in-session advance that crested at 400 points, the market continued on its merry bullish course to start out the latest session. On point, as we closed out the first hour of trading, the blue chip composite was ahead by over 200 points. Strong earnings and a further rise in oil, to above $70 a barrel, in New York and $75 in Europe, gave the equity market its second big lift in as many days.
On Friday, you will recall, it was not just earnings and oil, but also the economy that added to the bullish tide, as the government reported a modest advance in employment for April accompanied by a non-inflationary increase in hourly wages. The market had been rattled in recent days by fears that the Federal Reserve, which raised interest rates in March, but held them in place last week, might be tempted to lift them an additional three times this year. Now, the reasoning goes, with inflation in some check, the increase might be limited to twice more.
So, the advance was continuing as we pressed further into the morning, with several high-profile issues, such as Apple (AAPL – Free Apple Stock Report), which was boosted on Friday by word that Warren Buffet had taken an increased stake in the tech behemoth, rising further to yet another all-time high above $187 a share. Other big Dow components contributed as well to the early strength, including earth-moving giant Caterpillar (CAT - Free Caterpillar Stock Report), which rose some 4% in price early in the day, after a several-week period of ups and downs.
Meantime, the market's strength persisted into the noon hour on the East Coast and through the mid-afternoon, with the Dow's advance remaining in the 140-180-point band. True, that was down from the morning-best gain of more than points. However, given the strong rally on Friday and the combined gain of just about 550 Dow points in little more than a session, the moderating bullish tone exhibited into the mid-afternoon was easily understandable. There seemed to be little at the time to slow down the bullish tide.
Encouragingly for the bulls, there was persisting strength shown by the energy issues, as well as by the technology stocks with the NASDAQ adding almost a percentage point as we entered the final two hours of trading. Indeed, there also seemed to be some further buoyancy, creeping in, as we entered the home stretch. Still, there were concerns, namely trade issues, with talks ongoing between China and the United States. There also is the nuclear deal with Iran, which the President has threatened to break.
Should this latter come to pass, and he has now indicated his decision will be forthcoming today, it would likely push oil prices still higher and add to inflation. In fact, at some point, the rise in oil, now seen as a positive for the Street, could become a concern. Meanwhile, his acknowledgement that an Iran deal decision will be made today sent a chill through the markets as we entered the final hour of trading, with the Dow's climb, once more than 200 points, being just about erased, before a final uptick left the indexes modestly higher.
At the close, the Dow, with strength, in the technology sector, added 95 points; the S&P 500 rose nine points; and the NASDAQ tacked on a healthy 56 points. Also, six of the 10 leading sectors rose, while gaining stocks held a five-to-three lead on the NYSE. Now, we ready ourselves for a new day, and with global jitters on the rise, stocks in Asia were still somewhat higher in overnight trading. In Europe, the key bourses are now trending lower ahead of the President's Iran nuclear deal announcement. Finally, our futures are suggesting a softer opening when trading resumes later this morning. - Harvey S. Katz, CFA