After The Close - The stock market opened lower this morning, but managed to recover all of its ground, and then some, as the session unfolded. Of note, earlier today, a weak economic report in China may have ignited investor concerns that the world’s second largest economy, and the broader global outlook, could suffer if a trade deal does not materialize soon. However, by the end of the session, the situation looked a bit better. The Dow Jones Industrial Average was ahead 74 points; the broader S&P 500 Index was up one point; and the NASDAQ was lower by three points. Furthermore, there were some pockets of strength in the market today, particularly in the small cap names. In addition, bargain hunters seemed willing to buy some of the battered value issues. Market breadth was positive, with advancing issues ahead of decliners on the NYSE. The major equity sectors showed a divided market. There was notable strength in the industrials and in the basic materials issues, while the technology stocks and services issues moved lower.
Meanwhile, it was a light day for economic reports on our shores. For investors looking for signs of inflation, the next few days may well provide some useful information. Specifically, tomorrow we will get a look at the Producer Price Index (PPI) for the month of August, followed by the Consumer Price Index (CPI) on Thursday.
In the corporate arena, shares of Wendy’s (WEN) moved lower, after the fast-food operator tempered its outlook. Elsewhere, Mallinckrodt (MNK) stock surged on reports that the drug maker, which has had to grapple with opioid-related challenges, has agreed to sell some of its assets.
Technically, stocks have recovered some ground since selling off in early August. The S&P 500 Index is back above its 50-day moving average, located near the 2,950 level. However, as long as trade problems between the U.S. and China persist, the path ahead may be volatile. – 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 opened higher yesterday morning on further optimism about the upcoming trade negotiations between the United States and China and a sense of relief that yields on the 10-year Treasury note had moved above the yield on the two-year note. That more normalized relationship in the returns on key government debt instruments should lessen the odds of an imminent recession. Meanwhile, this somewhat better feeling on Wall Street could, if sustained, lead to further all-time record highs for the equity market.
As to the early trading, the Dow Jones Industrial Average, after a haltingly higher opening, moved ahead by some 60 points after the first half hour of trading. The S&P 500 Index was also a bit higher, but the NASDAQ, after a positive open, had dipped gingerly into the red, in spite of early strength in shares of technology behemoth Apple (AAPL – Free Apple Stock Report). Also contributing to the early strength in the Dow was optimism about further Federal Reserve stimulus. Specifically, the bank will be meeting next week and all expectations are that it will cut interest rates again.
Also rising in early trade were shares of AT&T (T). The telecom giant and erstwhile Dow component has seen Elliott Management take a stake in the company. The issue rose more than 4% in early action. The market then would firm across the board, reaching sessions highs after 90 minutes of trading. In all, the Dow was ahead by just over 100 points at that time, while both the S&P and the NASDAQ were in the green, but more modestly. That strength did not last, however, and soon red arrows were appearing again.
The most pronounced weakness would be in the NASDAQ, which would lose about 50 points by 2:00PM (EDT). The S&P also would turn negative, but less materially so, while the Dow would go in and out of the profit column. On a brighter note, though, the small-cap Russell 2000 was comfortably in the win column as the first session of the week started to wind down. Things improved a little as we moved further into the afternoon, but the day's highs, attained in late morning, would not be approached.
Meanwhile, some of the morning's winners, such as Apple and AT&T, would see their best gains pared notably as we headed towards the close. Also, the NASDAQ's losses would be reduced, from 50 points to a mere dozen, for a time. Treasury notes, meantime, would increase, with the return on the 10-year U.S. treasury climbing to 1.62%. All told, the fay would be reasonably decent, despite the final losses in the S&P 500 and the NASDAQ, as the Dow would gain 38 points and the basic industry stocks would shine.
Looking out to the second day of the trading week, we see that stocks were mixed in Asia overnight. In Europe, the major bourses are thus far in the loss column. Also, oil prices are somewhat higher; Treasury note yields are up nominally; and gold prices are down for a fourth consecutive day. Finally, the early trend in the equity futures suggests that our stock market will open today's action in unimposing fashion. - Harvey S. Katz, CFA