Stocks Edge Lower But Bulls Hold Their Ground

Hi Everyone,

The stock market finished in the red following a choppy and relatively quiet session on Wall Street with traders focusing on another batch of quarterly reports. The Dow was down 135 or 0.5%, to 26,735, the Nasdaq lost 77, or 0.7%, to 10,474, while the S&P 500 fell by 11, or 0.3%, to 3,216. Decliners outnumbered advancing issues by a 3-to-2 ratio on the NYSE, where volume remained very light.

Traders said that while the day started on a clearly negative note, stocks settled down and finished off their intraday lows. As one trader explained, “The afternoon price action was promising in light of the bearish overnight session and the volatile first hours of trading, even though today’s quarterly earnings failed to boost investor sentiment.”

While the short-term pullback might not be over yet, the market-leading Nasdaq stabilized toward the end of the day, and compared to Monday’s plunge, the tech exchange saw much lower volatility too. Small-caps performed in-line with the major indices, so the most reliable risk measures are not flashing red, despite this week’s dip. Netfilx (NFLX) dropped by double-digits in after-hours trading due to its earnings miss and weak guidance, which could cause turmoil overnight, but the underlying trends remain bullish on Wall Street.

The feared second-quarter earnings from the financial sector have been almost all bullish so far, but looking at the post-earnings price action in the sector, the picture is much more mixed. Bank of America (BAC) suffered a hit today, despite beating on its top and bottom lines, and just as in the case of Wells Fargo (WFC), the huge credit loss provision increase was behind the negative market reaction. The pattern that the companies with the most credit exposure perform worse than the trading or investment banking focused ones, like Morgan Stanley (MS), seems clear, and it could be foreshadowing a rough second half of the year for the corporate sector.

The European Central Bank (ECB) left its monetary policies unchanged today, including its benchmark interest rate and the conditions of its asset purchase program, following in the footsteps of the Bank of Japan (BOJ), and making a quiet Fed meeting likely next week. Currency and bond markets remained relatively stable in the wake of the ECB’s messages, but Treasury yields still finished lower amid the risk-off shift despite the positive U.S. economic numbers. All eyes remain on the leaders of the European Union (EU), who could get closer to a stimulus deal this weekend.

As always, have a great evening and stay tuned!!!

Joe

Skills

Posted on

July 17, 2020

Submit a Comment

Your email address will not be published. Required fields are marked *

Wordpress Popup Plugin Free