U.S. equities finished mixed in quiet, post-holiday trading on Wednesday. The Dow Jones Industrial Average lost a fraction, the S&P 500 gained 0.2%, the Nasdaq Composite gained 0.7% and the Russell 2000 lost 0.5%. Treasury bonds were mostly stronger, the dollar was mixed, gold gained 0.2% and oil broke its eight-session winning streak with a 4.1% decline.
Breadth was negative with 1.6 decliners for every advancer on the NYSE with volume at 92% of the 30-day average. Technology stocks led the way with a 1% gain while energy was the laggard, down 1.3%.
Nvidia Corporation (NASDAQ:NVDA) gained 2.7% after announcing an AI-focused partnership with Baidu Inc (ADR) (NASDAQ:BIDU) to build out the company’s cloud-based footprint and bring its Volta GPUs to self-driving vehicles and AI home assistants. Tesla Inc (NASDAQ:TSLA) fell 7.2% after announcing second-quarter deliveries of “just over” 22,000 versus the 24,185 expected.
Analysts at Goldman cut their price target and noted demand of the Model S/X is likely plateauing. The result is a massive technical breakdown, pushing shares below their 50-day moving average.
The recent rebound in oil has widely been explained by overly bearish sentiment amid disappointment with OPEC’s supply freeze agreement amid increased U.S. shale activity, bloated inventories, and tepid U.S. gasoline demand. So, some short-covering buying not unlike the short-lived rebounds in April and May.
The catalyst for the latest reversal lower was chatter that Russia wants to stick with the current supply freeze deal (ahead of a meeting of group ministers later this month) and comments by International Energy Agency chief Fatih Birol on Tuesday that while he expects the global energy market to rebalance by the second half of the year output increased by Libya and Nigeria could hamper the process.
And finally, on the economic front, the Federal Reserve released the minutes from their June policy meeting noting most policymakers dismissed recent weakness in the inflation data as related to specific factors like price pressure in wireless plans and prescription drugs. There were disagreement on the timing of the start of the balance sheet roll off process, with some preferring to start within a couple of months while others preferred waiting until the end of the year.
Conclusion
Watch for another leg lower in energy stocks as the sector’s eight-month downtrend looks ready to extend. Ongoing pressure on energy prices will also weigh on both inflation (confusing the Fed’s path forward) and weigh on corporate earnings growth (with oil weakness responsible for the two-year earnings recession between 2015-2016).
Also, investors will be bracing for the start of the second quarter earnings season next week, with big banks like JPMorgan Chase & Co. (NYSE:JPM) reporting on July 14.
Check out Serge Berger’s Trade of the Day for July 6.
Today’s Trading Landscape
To see a list of the companies reporting earnings today, click here.
For a list of this week’s economic reports due out, click here.
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Anthony Mirhaydari is founder of the Edge (ETFs) and Edge Pro (Options) investment advisory newsletters. A two-week and four-week free trial offer has been extended to Investorplace readers.
