After The Close - The equity market moved nicely higher this morning, and managed to extend its gains through the afternoon. Today investors seemed pleased to learn that China has decided to suspend tariffs on some U.S. goods. While it is still unclear if the upcoming trade negotiations will be successful, the decision to ease restrictions is a definite plus for businesses. At the end of today’s session, the Dow Jones Industrial Average was ahead 228 points; the broader S&P 500 Index was up 22 points; and the NASDAQ was higher by 86 points.
Market breadth was quite favorable, with winners well ahead of losers on the NYSE. All of the major equity sectors managed to make progress today, with notable gains in the technology, healthcare, and utility issues.
Meanwhile, in economic news, the Producer Price Index (PPI) moved up 0.1% during the month of August, which, more or less, met analyst expectations. The core rate, which excludes food and energy, rose 0.3%, which was slightly higher than had been anticipated. Nonetheless, these readings are still tame and do not suggest that inflationary pressures are mounting. Elsewhere, wholesale inventories increased 0.2% in July, which was in line with the consensus view. Tomorrow, we will get a look at the monthly Consumer Price Index (CPI). In addition, the latest weekly initial jobless claims figures are due to be released.
In the corporate arena, shares of GameStop (GME) plunged after the video game retailer posted weaker-than-expected results. In addition, shares of Dave & Buster’s (PLAY) also moved lower in response to a disappointing outlook. On a brighter note, RH (RH) put out a solid release, sending that stock higher.
Technically, stocks have made some progress in the first days September. The S&P 500 Index has now hit the 3,000 level again. A move past this large number may hold some psychological significance for traders, and may also lead to some extra media attention, which may motivate retail clients. However, in the months ahead, Wall Street will likely be looking for better trade relations between the U.S and China, as well as continued support from the Federal Reserve, and corporate earnings. - 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 equity futures sold off modestly ahead of the opening of the trading day yesterday, and when line trading commenced, the market continued on its downward path, losing ground steadily for the first 90 minutes or so, and reaching the day's nadir in the process. That selling, which would push the Dow Jones Industrial Average down by some 120 points at the session lows would continue in place for much of the day, but with a few ventures into positive territory along the way for the blue chip composite in particular near the close. Things were less cheery for the S&P 500 and the NASDAQ, which lost ground through most of the session.
Behind the moderate early reversal were pressures on the technology group. A downgrade in its credit rating also hurt shares of Ford Motor (F), which fell about 2% on the day. Elsewhere, there was little news, as economic issuances of note were not to be found for a second day thus far this week. So, investors were focused on the trade situation with China and on weaker economic data out of that country. Another casualty of the market yesterday, and a key reason for the weakness in the NASDAQ, was a modest drop in the shares of Facebook (FB).
As to the market, value stocks led growth issues, with technology faltering, but industrial and basic materials stocks did well. On point, that dichotomy would produce a rather sharp loss in shares of Walt Disney (DIS – Free Walt Disney Stock Report), but nice gains in the stock of once-faltering chemicals giant and fellow Dow component Dow Inc. (DOW - Free Dow Inc. Stock Report). Also rising and helping the get the market on a firmer track were bongs yields, with the 10-year Treasury note, which had bottomed recently at below 1.45%, has now jumped back up to 1.70%. That reversal of the earlier invested yield curve would seem to lessen the odds of a near-term recession stateside.
Meanwhile, this rotation away from growth and into value was in part due to the rise in oil prices, which are up some 5% in the past month. Of course, not all growth stocks lagged, as shares of IBM (IBM – Free IBM Stock Report) rose with a late selling burst, to climb by almost 2%. In all, this was a choppy session, but with late buying that would carry the Dow to a closing gain of 74 points, thereby making for a peak-to-trough swing of almost 200 points in the blue chips. Also gaining notably on the day were the small caps., with the S&P Mid-Cap 400 and the small-cap Russell 2000 each gaining strongly.
When the final bell had sounded, we saw that the Dow had added the aforementioned 74 pints, with all of the modest advance coming in the final few minutes of the day. The S&P would end near breakeven, with just a token one point increase, while the NASDAQ, once off nearly 90 points, would ease just three points. We would expect this choppy trading pattern to continue in the coming days, as the Street tries to put a positive spin on upcoming trade talks with China. As to other matters, we will get a look at consumer spending on Friday, when the government reports on retail sales for August.
Looking out to a new day and to the somber memories engendered by September 11th, when our country was attacked 18 years ago today, we see that stocks were generally higher in Asia in the overnight hours. In Europe, the leading indexes are showing early gains, as well. In other markets, oil prices are climbing anew and Treasury note yields are edging upward. Finally, ahead of trading today, our futures are now pointing to a higher stock market opening. – Harvey S. Katz, CFA