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Post-Fourth of July Fireworks for the Bulls
05-Jul-18 16:15 ET
Dow +181.92 at 24356.74, Nasdaq +83.75 at 7586.45, S&P +23.39 at 2736.35

https://www.briefing.com/investor/markets/stock-market-update/2018/7/5/postfourth-of-july-fireworks-for-the-bulls.htm

[BRIEFING.COM] The stock market took back on Thursday what it lost on Tuesday, and then some, in what has become a virtual seesaw of activity surrounding trade headlines -- real, perceived, or otherwise.

Today, the bulls won out, capitalizing on thin trading conditions, robust leadership from the S&P 500 information technology sector (+1.5%), and opportunistic reports that U.S. and EU officials may be deliberating over the possibility of eliminating all tariffs on auto imports to the EU and U.S.

It wasn't just a case of the information technology sector carrying the day, however. The gains were broad based and featured advances by 10 of 11 economic sectors. Solid gains were also registered by the consumer staples (+1.5%), health care (+1.1%), materials (+1.0%), and real estate (+1.4%) sectors.

The lone laggard was the energy sector (-0.2%), which fell in conjunction with oil prices ($73.04, -$1.28, -1.7%) after a bearish weekly inventory report. The energy sector's loss barely registered, however, as sellers lacked conviction overall in the post-Fourth of July trade.

Volume was on the light side, which was to be expected as many market participants remained on vacation -- or at least away from the stock market.

The participants who were involved today showed an affinity for the semiconductor stocks, which rallied around Micron (MU 52.84, +1.36, +2.6%) affirming its fiscal fourth quarter revenue outlook and some bargain-hunting activity following a rough patch for industry components over the last month.

The relative strength of the semiconductor stocks drove the outperformance of the information technology sector along with a cohort of familiar mega-cap names that included Apple (AAPL 185.40, +1.48, +0.8%), Facebook (FB 198.45, +5.72, +3.0%), and Alphabet (GOOG 1124.27, +21.38, +1.9%). The Philadelphia Semiconductor Index surged 2.7%.

By and large, the market seemed impervious to the understanding that the U.S. is poised to levy tariffs on $34 billion worth of Chinese goods, effective at midnight tonight, and that China is set to retaliate in kind with tariffs on a comparable amount of U.S. goods.

The insouciant trading behavior was viewed as a tacit sign that this tariff action has been priced in already and that the market still expects a full-fledged trade war to be avoided.

That perception could shift on the "next headline," but on Thursday the market traded on positive thoughts and not negative ones.

To that end, the FOMC Minutes for the June meeting were released at 2:00 p.m. ET. There weren't any notable surprises in the text, which is why there wasn't much reaction overall in the market to their release.

One passage that caught some added attention was an acknowledgement that contacts in many districts were concerned about the possible adverse effects of tariffs and other proposed trade restrictions and that contacts in some districts scaled back, or postponed, capital spending plans as a result of the uncertainty over trade policy.

Following a brief hiccup after the release of the Minutes, the major indices would all go on to reach new highs for the session, which were just a smidgen above today's closing prices.

Today's economic calendar featured four releases:

The MBA Mortgage Applications Index for the week ending June 30 (actual -0.5%; Prior -4.9%)
The ADP Employment Change Report for June (Actual 177,000; Briefing.com consensus 180,000; Prior revised to 189,000 from 178,000)
The key takeaway from the report is that it reflects difficulty for employers in finding qualified workers
The Initial Claims Report for the week ending June 30 (Actual 231,000; Briefing.com consensus 225,000; Prior revised to 228,000 from 227,000)
The key takeaway from this report is that there are no alarm bells ringing in it. The initial claims and continuing jobless claims levels continue to be low and encouraging, which is why the market keeps hitting the snooze button upon its release.
The ISM Non-Manufacturing PMI for June (Actual 59.1; Briefing.com consensus 58.3; Prior 58.6)
The key takeaway from the report is that it matched an uptick in the ISM Manufacturing Index for June, suggesting there was an acceleration in both manufacturing and non-manufacturing activity. That will help substantiate the belief that second quarter GDP growth is poised to pick up noticeably from the first quarter.

Friday's economic calendar will feature the Employment Situation Report for June and the Trade Balance Report for May.

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Dow Jones Industrial Average -1.4% YTD