After The Close - The equity markets put in a choppy, and mostly lower, performance today, as investors weighed a strong August employment report, against news that more trade tariffs on China could be coming. At the end of the session, the major averages closed in negative territory, with the Dow Jones Industrial Average down 79 points, the broader S&P 500 Index off six points; and the NASDAQ lower by 20 points. Market breadth showed a downward bias to the session, with decliners well ahead of advancers on the NYSE. All of the major equity groups retreated today, with sharp losses in the basic materials issues and high-yielding utility stocks. The technology and consumer names managed to display some relative strength during the day, but ultimately closed on a soft note.
In economic news, the government delivered the August employment figures earlier this morning. Of note, nonfarm payrolls increased by 201,000 jobs during the month, which was a better figure than had been expected. The unemployment rate remained unchanged at 3.9%, which was in line with expectations. Meanwhile, average hourly wages moved up 0.4%, which was a notable increase. This showing suggests that inflationary pressures may be starting to build in the labor market. In general, the report was strong enough that it could induce the FOMC to incrementally lift interest rates at its upcoming meeting later this month. Such an outcome may be warranted, too, given recent economic strength, and should not come as a surprise to investors.
In the corporate arena, shares of electric car maker Tesla (TSLA) moved lower in price today, in response to reports that a high ranking official has resigned from the company. Meanwhile, shares of Broadcom (AVGO) gained ground after the technology company delivered a better-than-anticipated quarterly report.
Technically, the stock market has been holding up relatively well over the past few months. Ultimately, a strong domestic economy and vibrant corporate sector seem to be overshadowing concerns about rising interest rates, combative trade policies, and ongoing political tensions. – 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 turned in a split decision on Wednesday, as selective strength in some core industrial stocks domiciled on the 30-stock Dow Jones Industrial Average offset part of the technology related weakness on the NASDAQ. There was a similar split yesterday morning. Only this time, the gains in the industrial stocks easily overcame the continuing selloff among the tech issues. As before, the Dow was a beneficiary, while the NASDAQ fell from the start. All of this transpired against a backdrop of lingering trade fears and political uncertainty in the nation's Capitol.
Specifically, Netflix (NFLX), a big casualty on Wednesday, perked up some yesterday morning, even as the NASDAQ fell back some more. On point, some contend that the selling in the heretofore strong NASDAQ was the result of a little overdue profit taking; but others suggest the selling suggests possible dangers for the market up ahead. We shall see. For now, though, the Dow's gain, which had approached 100 points in the initial few minutes, eased off as the morning progressed, while the NASDAQ's deficit, once just nominal, surged past 50 points after the first hour of trading.
Meanwhile, in some news of note, officials from Canada and the United States continued to work on a new trade deal after days of inability to fashion an accord. Some now suggest that these talks could last days or even weeks. At the same time, the relationship between our country and China remains tense, as the threat to impose $200 billion in levies on goods from that nation continues in place. Further, data out yesterday morning showed that Automatic Data Processing (ADP) had reported that its survey on private-sector payrolls detailed an increase of 163,000 jobs for last month, nearly 30,000 below expectations.
Finally, in other economic news, the Institute for Supply Management, a Tempe, Arizona-based trade group, reported that its survey on non-manufacturing activity had shown a result of 58.5 for August. That was up from the July tally of 55.7 and the expectation of 56.0. This result followed by two days the companion ISM report on manufacturing, which also came in strong and better than the consensus forecast. Helping the latest survey were gains in new orders, employment, supplier deliveries, backlogs, and exports. The data should help to generate a solid third-quarter GDP increase of more than 3%.
The market then strengthened selectively in the early and mid-afternoon, as investors digested further news from the political and trade arenas. Specifically, the Dow went positive as we moved inside the final two hours of trading, after being lower for much of the session, and picked up some more as the session wound down. However, the NASDAQ remained under pressure from reversals in some large-cap tech names, including Apple (AAPL – Free Apple Stock Report). Here, too, though, there was a bounce off of earlier lows, which had seen that composite tumble by about 110 points.
The equity market then changed little as we neared the close (with the Dow closing up 21 points), in spite of logical nervousness ahead of the just-released data on the employment situation. On that score, the nation's job rolls increased by 201,000 in August. Expectations had been for a gain of 190,000. As to July, the initially reported payroll uptick of 157,000 was revised to show an advance of 147,000. Also, the jobless rate, which was expected to come in at 3.8%, remained unchanged at 3.9%. Looking further at this survey, we see that hourly wages rose by $0.10% last month, while the labor-force participation rate eased to 62.7%.
As to the responses across the globe, stocks in Asia were lower in overnight trading on emerging market fears, while in Europe, the bourses are now pointing downward, as well. Further, oil prices are now relatively flat; yields on Treasury issues, which fell in dealings yesterday, are now gaining notably on inflation fears from the sharp uptick in wages; and our equity futures are suggesting a weaker opening when trading resumes shortly. Overall, the jobs picture remains bright and the Federal Reserve probably is on course to raise interest rates at its meeting later this month. - Harvey S. Katz, CFA