After The Close
The stock market delivered a strong performance today, with traders seeming to be more confident that the Trump Administration’s tax plan will be approved. At the close of trading, the Dow Jones Industrial Average was ahead 332 points; the broader S&P 500 Index was up 21 points; and the NASDAQ was higher by 50 points. Market breadth was supportive, with winners nicely ahead of losers on the NYSE. Most equity sectors participated in today’s advance. The energy and industrial issues showed leadership, while the telecom names and utility stocks underperformed.
Today’s economic news was constructive. Specifically, personal incomes rose 0.4% (while spending increased 0.3%) during the month of October. These figures were largely in line with the consensus forecasts. Meanwhile, initial jobless claims dipped to 238,000 during the week of November 25th, suggesting that the employment situation is still in good shape. Finally, the Chicago PMI came in at 63.9 in November, meeting expectations. Tomorrow we will get a look at the latest monthly ISM Manufacturing Index, construction spending, and automotive sales.
Meanwhile, a few corporations posted their financial reports over the past 24 hours. In the retail arena, shares of The Kroger (KR) moved up, in response to a solid release. Elsewhere, shares of PVH Corp.(PVH) slipped, even though the apparel maker provided a decent report. Meanwhile, in the M&A space, shares of Juniper (JNPR) fell on news that Nokia (NOK) is not planning to merge with the networking company.
Technically, the stock market continues to move strongly higher, with the Dow Jones Industrial Average now past the 24,000 mark. While equity valuations are elevated, traders seem content with the nation’s economic progress.
The tax plan, too, is likely playing a role in the market’s rise.
– Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before The Bell
After a surge on Tuesday, which led the Dow Jones Industrial Average, the S&P 500 Index, and the NASDAQ into record territory, the stock market started out yesterday's session once more to the upside. Behind this latest surge, in addition to optimism regarding tax reform efforts (which we may learn more about today), was the release early yesterday morning of a report from the Commerce Department showing an upward revision in third-quarter gross domestic product growth. In all, the GDP increase, which initially had been reported at 3.0%, was revised up to 3.3% for the latest period.
The optimism on the economy was about more than just the latest GDP figures. It also reflects a bet being made by investors that the business strength now being shown will continue in the current quarter and into 2018. Early fourth-quarter figures on industrial output, factory usage, housing starts, home sales, and consumer confidence, along with upbeat reports on Black Friday retail sales patterns, especially online, suggest that growth in the current three-month span will reach or surpass the 3% mark. All of this is good news for corporate earnings.
Thus, buoyed by favorable economic news, stocks rose nicely at the open, with the Dow again leading the way with a triple-digit advance. However, unlike some recent sessions, it was not a tide that lifted all boats, as the S&P 500 barely headed higher, while the NASDAQ, on weakness in shares of Autodesk (ADSK), and a number of high-profile tech names, fell sharply. Meantime, the rally on the industrials side was being fueled by strength in the consumer non-cyclical issues, in particular the food processing stocks, with Campbell Soup (CPB) and Kraft Heinz (KHC) leading the early charge.
The divide between the Dow and the small- and mid-cap composites increased as the morning moved along, with the blue chip composite holding onto a near triple-digit gain, while the NASDAQ tumbled, at one time, by some 80 points. The divided market would then continue into the afternoon, and as we approached the 2:00 PM (EST) time for the release of the Federal Reserve's Beige Book economic summation, the Dow was still up by more than 75 points, while the S&P 500 was marginally lower and the NASDAQ was in the red by some 90 points.
The Beige Book, meantime, noted that economic activity across the country was continuing to advance at a modest to moderate pace, with this business compilation pointing to a December interest rate increase. Stocks did not change direction after the release, retaining its solid advance in the Dow, while holding onto a sharp setback in the NASDAQ. This likely reflects the fact the outlook for an interest rate increase in mid-December, when the Fed next holds its FOMC meeting, remains strong. After that projected hike, we would expect two to three additional tightening moves in 2018.
Stocks moved little as we entered the homestretch, and as we inched closer to a possible vote later today on the Senate's version of the tax reform bill. Our sense is that a tax cut will get passed, if not by yearend, then in early 2018. Wall Street has built up major expectations here, and a pullback is likely should Congress not get a deal done. As the closing bell sounded, we saw that the Dow ended 104 points higher, while the NASDAQ tumbled 88 points. Breaking things down, there was roughly an even divide between gaining and losing stocks and equity sectors, with technology--off almost 3%--being the lone mover of note among the groups.
Looking out to a new day, we see that stocks are trading higher in Europe so far this morning, following a lower close overnight in Asia. Also, oil is higher on news that OPEC has voted to extend its output cuts through 2018, and interest rates, up sharply yesterday, are now moving slightly higher in early dealings, as potential passage of a Senate tax bill looms. Finally, U.S. equity futures are now moving up strongly in the pre-market, with an eye toward Dow 24,000.
— Harvey S. Katz, CFA
At the time of this article’s writing, the author held positions in one or more of the companies mentioned.
