Before The Bell - The stock market, on a veritable tear to start the new trading week on Monday, as growing hopes for a vaccine to combat COVID-19, helped to fuel a stealth advance on the session, saw the Dow Jones Industrial Average climb back above 24,000, with an advance of 912 points. As to those vaccine hopes, they were led by Moderna (MRNA), and its supportive Phase 1 test results on a relatively small sample of individuals. The stock surged on that news, but retraced some of those gains yesterday.
As to the latest session, the stock market, in particular, the Dow, started the new day to the downside, albeit not aggressively so, with modest early losses. However, the NASDAQ would quickly turn positive, and would spend much of the rest of the day in the plus column. It would reach its best level of the day as the final hour neared, gaining more than 80 points, or nearly one percent at its session highs. It would be much the same story for the S&P 500, but not the Dow, which would remain under water throughout the day, closing at session lows.
It was a bumpy session all told, with the selling intensifying as the session wound down. What happened? To start out with, stocks were pressured by a very weak report on residential construction, with housing starts tumbling to just 891,000 annualized units in April. Building permits also softened, but not as severely. The housing survey was another unsettling April metric that also has included data on manufacturing, non-manufacturing, employment and unemployment, retail sales, and industrial production.
In other news, the day saw some real heavyweights report their results, including The Home Depot (HD) and Walmart Inc. (WMT). The former reported mixed results and gave ground on the day, accounting for about 50 points of the Dow's aggregate loss on the session. Walmart's performance was better, especially on the revenue line. But after an early buying flurry, that stock also ended matters in the red. Also of note, both Federal Reserve Chairman Jerome Powell and the Treasury Secretary testified before the Senate Banking Committee.
As to what they had to say. Mr. Powell noted that this is the biggest response by Congress ever and the fastest and biggest from us." At the same time, the Treasury leader said that the government is "fully prepared to take losses on coronavirus business bailouts." Meanwhile, the late selling squall, which would ultimately take the Dow down by 390 points might well have reflected some pause on the prior day's Moderna news, as there seems to be some skepticism emerging about how effective the drug will be and how quickly it can come to market.
Also concerning investors are the eroding relations between our country and China. Finally, there are some doubts emerging about whether the latest negotiations in Congress will produce another aid package for the country. Now we look ahead to a new day, and one that will see the Federal Reserve release the minutes from its last FOMC meeting. Finally, after yesterday's choppy session, the stock market seems poised to start the middle session of the week to the upside following generally supportive showings overseas. – Harvey S. Katz, CFA