After The Close - The futures markets started modestly positive today, as traders' sentiment improved, thanks to the increased likelihood of a U.S. trade deal with China. This move higher continued into the trading session and the Dow Jones Industrial Average was up by more than 100 points in the early portion of the day. The other indices sold off in the first few minutes of trading, and the NASDAQ briefly fell into the red. However, those composites quickly rebounded, reaching their daily highs. Still, the market could not hold up in the second half of the day, and all the indices fell back into the red and spent the rest of the day bouncing between positive and negative territory. All told, the Dow closed higher by 38 points, the S&P 500 closed within a point of breakeven, and the NASDAQ fell nearly 16 points.
Moreover, market breadth was positive, favoring advancers over decliners by a good margin. This outcome occurred despite the largely directionless trading. Energy stocks were among the best performers on the day, while technology issues were laggards.
In commodity news, oil prices were higher today, as investor sentiment improved, thanks to optimism surrounding the global trade outlook. Too, the new Saudi Arabian energy minister, Prince Abdulaziz bin Salman, confirmed expectations that his country would continue to limit exports. Meantime, U.S. Treasury bond yields were higher across the board, as a move away from the safe-haven assets occurred. Additionally, the yield curve rose, as rates were up more on long-dated issues than short-duration ones. This usually is a good sign for financial stocks' earnings, which borrow short and lend long. The VIX Volatility Index was higher today, as demand for options protection expanded a bit.
Looking ahead to tomorrow, the economic news calendar is quite light. Meantime, a few companies are expected to release quarterly earnings reports tomorrow. Overall, we think that trading tomorrow will be guided by any changes in sentiment concerning a trade deal with China. - John E. Seibert III
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before The Bell -The first trading week of September, one that was abbreviated at the start by the Labor Day holiday and began on a skittish note because of trade worries and a weak report on U.S. manufacturing activity, eventually turned positive, propelled by a big midweek advance by the bulls on Wednesday. The good tidings late in the week were driven by a number of factors, most notably news that the United States and China would continue their trade talks even after another round of tariffs by the U.S. on September 1st. That, along with some positive remarks on the U.S. economy late in the week from Federal Reserve Chairman Jerome Powell, encouraging geopolitical developments in Britain, Hong Kong, and Italy, and the announcement of an economic stimulus package by China, had investors seeking risk again. For the four-day stretch, the Dow Jones Industrial Average gained 1.5%, while the NASDAQ, and S&P 500 Index both advanced 1.8%.
On Friday, it was another mostly positive day for Wall Street. The Dow 30 and the broader S&P 500 Index climbed 69 and three points, respectively, while the NASDAQ shed a mere 14 points, but still ended the week comfortably above the 8,000 mark. Most of the 10 major equity groups finished to the upside, and advancing issues led decliners on the New York Stock Exchange; the spread, though, was slightly negative on the NASDAQ Exchange. Giving the market some support on the final trading day was data from the labor market. The jobs release was a Goldilocks report for Wall Street. Although nonfarm payrolls came in lighter than expected at 130,000 positions, there were other positive signs, including an uptick in hourly wages and a low unemployment rate (3.7%) despite an uptick in the labor participation rate. From an investment perspective, the job figures did nothing to change the narrative that the Federal Reserve will continue on an accommodative monetary course over the remainder of 2019, which often is good news for equities. The prevailing sentiment among economists is that the lead bank will cut interest rates again by 25 basis points at this month’s two-day FOMC meeting, which commences on September 17th. We will not hear much from the Fed over the next five trading days, as central bank leaders enter a quiet period ahead of next week’s confab.
With the second-quarter earnings season now in the books, the investment community’s attention will be focused on the U.S./China trade dispute, the central bank’s next move later this month, and forthcoming U.S. economic data. On the latter front, we will get reports this week on consumer and producer (wholesale) prices and retail sales this week. All three reports will be monitored by the Federal Reserve. In particular, the central bank, with fresh off data showing an increase in hourly wages last month, will be looking at the pricing data for clues about inflation.
With less than an hour to go before the start of the new trading week stateside, the equity futures are presaging a modestly higher opening for the U.S. stock market. So far overseas, the equity markets have delivered uninspiring performances. Overnight, the main indexes in Asia finished mostly higher, but none too far removed from the neutral line, while the major European bourses trading in a tight band around the breakeven mark as trading moves into the second half of the session on the Continent. Stay tuned. – William G. Ferguson