After The Close
The futures market started positively, as an interest-rate cut in China buoyed the S&P 500 futures to an all-time high. The accommodative policy was seen as a positive by many traders. But by the time the stock market opened, this move higher was erased, as concerns about U.S. trade negotiations with China took hold. A government official from China stated that the mood in Beijing about a trade deal was pessimistic, and traders sent the Dow Jones Industrial Average lower by as many as 36 points in early market action. The other indices also fell in the first part of the trading session. However, sentiment started to shift, and the market eventually moved higher. The Dow, S&P 500, and NASDAQ reached all-time highs during the session. Then, the composites tapered off in the final portion of trading and ended not too far off of breakeven levels. All told, the Dow closed higher by 31 points, the S&P 500 finished up two points, and the NASDAQ rose nine points.
Additionally, market breadth was somewhat directionless, favoring neither the advancers nor decliners by a significant amount. Consumer staples stocks were among the best performers on the day, while energy stocks lagged the broader markets.
In commodity news, oil prices fell today as oversupply worries and trade concerns hurt sentiment. Meantime, U.S. Treasury bond yields were lower today, and long-term interest rates fell more than those with a shorter duration, which usually is a negative for financial earnings. The VIX Volatility Indicator was higher today, as demand for options protection rose a bit.
Looking ahead, tomorrow will have some economic data released, including building permits and housing starts for October. Too, several earnings reports are on the docket, including several large retailers both before and after the bell. Dow-component Home Depot (HD – Free Home Depot Stock Report) is scheduled to report tomorrow morning. Too, any change in sentiment concerning U.S. trade negotiations with China will likely be a factor in tomorrow’s trading session.
– John E. Seibert III
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before The Bell
The major U.S. equity indexes finished last week at record highs after another bullish five-day stretch of trading on Wall Street. The Dow Jones Industrial Average set three record highs along the way, including Friday’s close above the 28,000 mark. The tech-heavy NASDAQ, the broader S&P 500 Index, and the small-cap Russell 2000 moved locked step with the index of 30 bellwether companies over the five-day stretch. Pushing the market higher were some positive third-quarter earnings news, some strong data on the economy, most notably on the consumer, and continued optimism on the trade front.
On Friday, the Dow Jones Industrial Average, the NASDAQ, and the S&P 500 Index advanced 223, 62, and 24 points, respectively. Optimism on the trade front, which included comments from White House economic adviser Larry Kudlow, who told reporters late in the week that a trade deal with China was close but “not done yet,” and added that that deliberations were “coming down to the short strokes,” and that the two sides have been in communication every day. That, along with commentary from Speaker of the House Nancy Pelosi that the House of Representatives plans to soon put the trade deal between the United States, Mexico, and Canada up for ratification emboldened investors, with optimism that both deals would boost U.S. economic growth in the coming quarters. In addition, a better-than-expected report on retail sales ahead of the fast-approaching holiday shopping season had investors adding risk to their portfolios during the final session of the week. The CBOE Volatility Index (or VIX) once again fell on the aforementioned trade optimism, finishing last week below 13.
Not surprisingly, advancing issues led decliners by a sizable margin on both the New York Stock Exchange and the NASDAQ during Friday’s bullish session, and nearly all of the 10 major equity groups finished in positive territory. The leadership came from technology and healthcare groups. The technology sector got a boost from better-than-expected results and upbeat guidance from semiconductor giant Applied Materials (AMAT). Meantime, the healthcare stocks jumped after President Trump held a press conference to announce rules to make healthcare prices more transparent. The stocks of healthcare providers and the drug companies, including shares of UnitedHealth Group (UNH – Free UnitedHealth Group Stock Report) and Pfizer (PFE – Free Pfizer Stock Report), rallied following the late-session announcement.
Meantime, the news from the business beat proved constructive last week. The market reacted positively to a decent report on retail sales on Friday. Before the market opened, the Commerce Department reported that October retail sales rose a better-than-expected 0.3% month-over-month. That figure was above the 0.2% gain expected and September’s 0.3% decline. The increase was led by gas sales (up 1.1%) and non-store retailers (e-commerce platforms), which saw a sales increase of 0.9% for the month. The retail data followed a strong quarterly report from retailing giant Walmart (WMT –Free Walmart Stock Report) earlier in the week. Fellow retailing giant Home Depot (HD – Free Home Depot Stock Report) is on the earnings schedule this week. The retail sales data are encouraging ahead of what many pundits think may prove to be a holiday shopping season that produces record sales. Such results could play a role in any possible Santa Claus rally we see on Wall Street before the year’s end.
This week, the news on the economy will be dominated by the housing sectors, with data due on housing starts and building permits (Tuesday) and existing home sales (Thursday). Investors should also note that we will receive the minutes from the latest FOMC meeting on Wednesday afternoon at 2:00 P.M. EST. That report could bring some clues as to how central bank leaders feel about monetary policy ahead of the final meeting of the year next month.
With less than an hour to go before the commencement of the new trading week on Wall Street, the equity futures, which were higher earlier this morning, are now pointing lower on mixed trade signals. So far overseas, the trading has been mixed. The main indexes in Asia finished mostly higher overnight, while the major European bourses are lower as trading moves into the back half of the session on the Continent. Our sense is that traders over the next five days will be mostly focused on the latest developments on the trade front and the ongoing drama surrounding Brexit, especially with third-quarter earnings season nearly in the record books. Stay tuned.
– William G. Ferguson
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
