The Dow finished at an all time high on Monday buoyed by the rally in shares of Goldman Sachs, Home Depot and Boeing. However, the technology sector slumped due to familiar overvaluation concerns, pulling the Nasdaq and S&P 500 to end in the negative territory. Although seven out of eleven major sectors of the S&P ended in the green, led by financials, a selling in major tech stocks such as Facebook and Google owner Alphabet negated such gains.
For a look at the issues currently facing the markets, make sure to read today’s Ahead of Wall Street article.
The Dow Jones Industrial Average (DJIA) touched an all-time intraday high of 21,929.80, earlier in the session. However, the blue-chip index pulled back to close at 21,891.12, also an all-time high, rising by 0.3% or 60.81 points in the process. The S&P 500 Index (INX) declined 0.1%, dwindling 1.80 points to close at 2,470.30. Meanwhile, the Nasdaq Composite Index (IXIC) closed at 6,348.12, declining by 26.55 points or 0.4%. A total of around 6.3 billion shares were traded on Monday, above the last 20-session average of 6.0 billion shares. Advancing issues outnumbered decliners on the NYSE by 1,495 to 1,017. On the Nasdaq, advancing issues outnumbered decliners by 1,278 to 971.
Boeing Lifts Dow to Fresh Record
The Dow’s stellar showing was powered by excellent earnings from Goldman Sachs (GS - Free Report) and Home Depot (HD - Free Report) . A rally in the shares of Boeing (BA - Free Report) also helped Dow’s excellent performance. Moreover, low sovereign bond yields along with these results have essentially helped the Dow notch a record high on Monday.
Technology Stocks Suffer, Drag S&P 500 and Nasdaq Lower
Ongoing tech overvaluation concerns led the investors to indulge in portfolio reshuffling toward the end of the month. A sell off in stocks of tech giants dragged the Nasdaq lower. During the session, Facebook (FB - Free Report) , Alphabet (GOOGL - Free Report) , Amazon (AMZN - Free Report) and Netflix (NFLX - Free Report) declined 1.9%, 1.2%, 3.2% and 1.3% respectively. Apple Inc is due to report on Tuesday and investors are hopeful of a good show from Apple. The analysts expect Apple to control much of the tech sector over the coming week.
Upbeat earnings from Chevron CVX and the growth in housing market boosted energy and bank shares. Broad based gains for the S&P 500 came from what has been an amazing earnings season all around. Further, there was a hike in oil prices as a result of production-curb commitments from OPEC and Saudi Arabia’s decision to curtail oil export to the States. However, the S&P 500 declined 1.8% to finish at 2,470.30. This fall was a result of the slump in tech stocks.
Materials also contributed to the decline in S&P 500. The Materials Select Sector SPDR declined 0.8%. Seven of the eleven sectors of the S&P 500 were high, with the financial sector turning up in good numbers. The Financials Select SPDR was up 0.6%. However, this was negated by the losses incurred in the technology sector which turned out to be one of the worst performers. The Technology Select SPDR was down 0.5%.
White House Drama Keeps Markets on the Edge
The latest White House upheaval was marked by Anthony Scaramucci’s resignation from the post of White House communications director. Scaramcci stepped down just ten days after being nominated to the post. Moreover, the Trump administration’s failure to push through a bill to repeal the Obamacare has hurt the investor sentiment. Market watchers are increasingly losing faith in the promises made by President Trump in the run up to presidential elections. Trump's failure to keep his campaign trail promises has made investors doubtful about his ability to further his wider pro-growth agenda.
The National Association of Realtors announced that its Pending Home Sales Index, increased 1.5% in June based on contracts signed last month. This was more than what the economists’ expectation of a 0.7% increase. For the record, the Chicago Purchasing Managers Index declined to 58.9 in July from 65.7 in June.
For the month, the Dow increased 2.5% and the S&P 500 rose 1.9% whereas the Nasdaq increased 3.4%. The Dow’s great run has been supported by excellent earnings for the month. Leading companies which posted better-than-expected earnings include the likes of AT&T (T - Free Report) , McDonalds MCD, Boeing, Verizon (VZ - Free Report) , Facebook and Caterpillar (CAT - Free Report) .
However, the Nasdaq and the S&P 500 lost out on some of the gains made earlier in the month. The tech rally initially gained on strong tech earnings expectations which were expected to justify high valuations of the tech stocks. Gradually, investors took profits off the table by selling off tech stocks and this weighed on the broader markets, curbing gains for the S&P 500 and the Nasdaq.
Also, Trump administration’s inability to repeal Obamacare hurt investor sentiment. Market watchers lost their faith in Trump’s ability to bring about tax reforms and increasing spending on infrastructural growth among other items on his pro-growth agenda. Moreover, the Fed’s call to leave rates unchanged aided rate-sensitive industries and helped in broad based gains. Pegged at 1.4%, inflation still remains well below the targeted 2.0%, hurting investor sentiment.
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