Before The Bell - The stock market started positively yesterday, as earnings data began to flow in, and trader sentiment about the economy and the coronavirus improved. COVID cases began to stabilize or even slow in states that have recently had higher infection rates. And news slowly trickled in about potential stimulus packages from the U.S. Congress. The indices trended higher throughout the day and ended near their session highs. The Dow Jones Industrial Average ended up by nearly 115 points; the S&P 500 rose 24 points, and the NASDAQ increased by 173 points. A significant outperformance in technology stocks occurred, which make up a more substantial portion of the NASDAQ. On the other hand, safe-haven utility equities were among the weakest performers on the day. Moreover, the advance was broad, as advancers outpaced decliners by a 1.7-to-1.0 ratio.
However, the futures markets gave back a portion of the rise that occurred late in the session and turned negatively after the close yesterday. This move to the downside continued for a few hours before the futures reversed course alongside positive action in the markets in Asia. Still, this positivity was short-lived, and the futures again moved lower throughout the night. Currently, the markets are decidedly in the red, suggesting a weak start to the trading day.
In commodity news, oil prices were slightly higher yesterday as sentiment improved in the energy markets. Meantime, gold reached a record high yesterday, as traders moved into the commodity, given uncertain economic outlooks and the potential for dollar devaluation through higher debt loads and added stimulus. Silver prices also followed suit, reaching about $24 per ounce. U.S. Treasury bond yields were uneven, with some yields moving higher and others lower. Still, most of these moves were small. Lastly, the VIX Volatility Index declined yesterday, as demand for options protection fell.
On the economic front, the Richmond Fed's Manufacturing Survey and Consumer Confidence for July are on the docket.
All eyes will be on earnings today, as a large number of companies will report quarterly results. These include Dow-30 components McDonald's (MCD), Pfizer (PFE), 3M (MMM), and Raytheon Technologies (RTX) before the bell and Visa (V) after the market closes. Many other significant names will also post earnings, and these will give some insight into how the coronavirus-related shutdowns impacted the broader economy during the second quarter.
Overall, we think that earnings outcomes will drive stock market performance today. Finally, among the companies already reporting, a weak showing by McDonald’s has contributed to the current decline in the futures. – John E. Seibert III