Dow Flat-Lines as U.S. Economy Shows Stability at the End of Q2

Journalist:
Sam Bourgi @hsbourgi
July 22, 2019

The Dow struggled to keep pace with the broader U.S. stock market on Monday, as shares of Verizon Communications (NYSE:VZ) and Johnson & Johnson (NYSE: JNJ) weighed on the blue-chip index.

The U.S. economy appears to have stabilized at the end of the second quarter, raising cautious optimism that policymakers won’t have to resort to drastic measures to boost growth.

Dow Lags S&P 500, Nasdaq

The Dow underperformed the wider stock market. | Source: Yahoo Finance

All of Wall Street’s major indexes reported gains Monday afternoon, mirroring a positive pre-market for Dow futures. The broad S&P 500 Index of large-cap stocks rose 0.3% to 2,985.80, with technology shares leading the way.

A strong performance in the technology sector propelled the Nasdaq Composite Index sharply higher. The index was up 0.7% at 8,204.74 at 2:59 pm ET.

The Dow Jones Industrial Average was a notable underperformer, gaining just 6.35 points, or 0.02%, to 27,160.55. Shares of Verizon were down more than 2%. Three other companies reported losses of at least 1.3%.

U.S. Economy Stabilizes

U.S. economy shows signs of stabilizing at the end of the second quarter, according to the Chicago Fed’s National Activity Index. | Source: Shutterstock.

The U.S. economy appears to have regained its footing after a dismal start to the second quarter, according to the Federal Reserve Bank of Chicago’s National Activity Index (CFNAI).

CFNAI, which tracks overall economic output using 85 monthly indicators, came in at -0.02 in June versus -0.03 the previous month. On the CFNAI scale, zero represents trend growth and figures below that level suggest the U.S. economy is expanding below the long-running average. However, at -0.02, the indicator suggests that economic output is more or less on par with the historic average. The indicator plunged to -0.73 in April.

The second quarter was a turbulent period for the U.S. economy, with key metrics on consumer spending, manufacturing and trade declining. Compared to the first quarter, U.S. economic output was likely cut in half between April and June, according to the Atlanta Fed’s GDP Tracker.

Economists at the Commerce Department will release their preliminary estimate of second-quarter GDP on Friday. The consensus forecast on Wall Street calls for annual growth of 1.8%, which is higher than the Atlanta Fed’s 1.6% estimate.

Click here for a real-time Dow Jones Industrial Average price chart.

Sam Bourgi @hsbourgi

Financial Editor to CCN Markets, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi. Sam is based in Ontario, Canada and can be contacted at sam.bourgi@ccn.com