After The Close - Equities opened lower this morning, briefly managed to reverse course, but then weakened again, and remained under pressure for the rest of the session, closing with a burst of selling. Today, investors seemed worried that a recession here in the United States could be on the horizon, and that some of the weakness brewing overseas could eventually make its way to our shores. Meanwhile, the yield on the government’s 10-year Treasury moved lower, to 1.56%, as traders sought out safe havens. On a related note, many on investors have been buying precious metals, pushing the price of gold above $1,500 an ounce. After the late day selling, the Dow Jones Industrial Average was down 173 points; the broader S&P 500 Index was off 23 points; and the NASDAQ was lower by 54 points.
Market breadth was somewhat negative, with decliners outpacing advancers by a thin margin on the NYSE. Among the major equity sectors, the financial stocks were quite weak today. The technology issues also lost ground. In contrast, the utilities, which are often held for income, managed to display some relative strength.
There were no major economic reports released today. Tomorrow the pace picks up somewhat. Specifically, we will get a look at the latest monthly existing home sales figures. In addition, the Federal Reserve will deliver the minutes from its July FOMC meeting, and for investors watching interest rates, this report may hold some importance. On Friday, Federal Reserve Chair, Jerome Powell, will give a speech in Jackson Hole, Wyoming, and that will also be widely followed.
In the corporate arena, shares of Home Depot (HD – Free Home Depot Stock Report) moved up, after the home improvement retailer posted solid results. Elsewhere, shares of Medtronic (MDT) advanced nicely, after the medical devices company put out a good report and an encouraging outlook.
Technically, stocks have spent the month of August in a choppy range. The S&P 500 Index is still sitting under its 50-day moving average located at 2,945, and it remains to be seen if the bulls can mount a sustained buying campaign, and push stocks over this key technical level. - 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 continued the rebound that began last week yesterday morning. To recap, after having been through back-to-back 300-points swings in the Dow Jones Industrial Average last Monday and Tuesday, the blue chip index tumbled by 800 points last Wednesday after the yield curve inverted. That is, yields on the two-year Treasury note moved above that on the 10-year note. Such an inversion has, at times, been a predictor of a recession. Following that swoon, stocks began a recovery last Thursday and Friday.
Then, the market got off on a strong footing yesterday morning, quickly gaining 330 points in the Dow Industrials within minutes after the day's open. Stocks then would spend the next several hours staying strongly in the win column, but not rushing up to new highs. Helping the market was a pickup in yields on the 10-year Treasury note. On point, after that debt instrument had fallen in yield to just above 1.47% last week that issue rose in yield to 1.60% yesterday afternoon. That reduced fears, for now, at least of a recession near term.
The stock market also is being helped by a sense that efforts to defuse the tariff war with China may be starting to see some progress. However, the big news seems to be the ticking up in interest rates on longer-dated issues such as the 10-year Treasury note. Of course, should rates roll over again, the market could sell off anew. So, we are in a tough area for sentiment, with the market potentially vulnerable to further recessionary fears and signals, but not willing to capitulate if yields on longer issues rise as they are doing now.
In other news, earnings season is almost in the rearview mirror for calendar yearend companies, but is now heating up for retailers, many of which have July ending quarters. Results there began last week with a weak showing from Macy's (M), which contributed to the midweek selling of equities. Results from the retail sector figure to be mixed, as retail sales rose for July, but sales at department stores were generally wanting. Thus, it figures to be a mixed bag for the stock market, with, clearly, the bigger influence coming from shifting yields.
Meanwhile, the market's strength would persist into the close, with just a slight backing off in the leading equity averages as the session wound down. Also helping sentiment on the Street yesterday were comments over the weekend by the President that the United States is doing very well with China, but that it is not ready to sign a trade deal. So, stocks retained their positive edge into the close. When all the numbers were in, the Dow was ahead 250 points; the S&P 500 Index was better by 35 points; and the NASDAQ was a winner to the tune of 107 points.
Looking out to a new day now, we see that following that strong rebound yesterday that the primary indexes were mixed in Asia overnight, while in Europe, the principal bourses are starting the trading day with modest early gains. In other news, oil prices are up slightly; gold is fairly flat; and yields on the 10-year Treasury note, up to a close of 1.60% late yesterday, are at 1.56% this morning. All of this is suggesting a mixed opening as to the new trading day on our shores gets under way. – Harvey S. Katz, CFA