After The Close
The U.S. stock market got off to a mixed start earlier this morning, but fell into negative territory as the session unfolded. Investors seemed to be looking for assurances that trade negotiations with China are making progress, and that additional tariffs can be avoided. At the end of the day, the Dow Jones Industrial Average was down roughly 105 points; the broader S&P 500 Index was off 10 points; and the NASDAQ was lower by 35 points.
Meanwhile, market breadth showed a dividend session, with decliners just about even with advancers on the NYSE. From a sector perspective, the healthcare and industrial names retreated, while the basic materials issues managed to advance.
Elsewhere, it was a light day for economic reports, and the lack of news on our shores may have sent traders looking more closely at the developments taking place overseas. Tomorrow will be relatively quiet, as well. However, the pace should pick up on Wednesday. In the morning, the Consumer Price Index (CPI) for November will be released, and in the afternoon the FOMC will conclude its two-day meeting with an interest-rate decision and some prepared remarks. Most analysts on Wall Street are not expecting that the Federal Reserve will take any further action at this time.
In the corporate arena, there has been some M&A news to report. Specifically, pharmaceutical giant Merck (MRK – Free Merck Stock Report) has agreed to acquire ArQule (ARQL), a small biotechnology company, in an effort to advance its oncology offerings. Shares of ArQule surged on the news. Meanwhile, Sanofi (SNY) agreed to buy Synthorx (THOR), sending that stock higher, as it too looks to remain competitive.
Technically, the stock market continues to hold up reasonably well, despite some periods of volatility. Looking ahead, the economy on our shores remains in good shape. However, investors will likely want to see the trade situation with China improve and for some stability on that front.
- 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
The phrase “a game of two halves” could best be used to sum up the first week of trading in December. Indeed, the major equity averages started the five-day stretch with two losing sessions, with another weak report on manufacturing activity from the Institute for Supply Management and fears that the progress toward a partial trade deal between the United States and China had hit a few snafus on commentary from President Trump to blame. Then the major indexes regrouped on Wednesday, helped by a solid report on nonmanufacturing activity, and the final trading day of the week rallied notably on a strong jobs report from the Department of Labor (more below). At the end of the week, the major averages were little changed from where they began, with the Dow Jones Industrial Average and the NASDAQ Composite down nominally, while the broader S&P 500 Index was slightly higher.
On Friday, the bulls were out in full force from the commencement of trading to the closing bell. For the session, the Dow 30, the NASDAQ Composite, and the S&P 500 Index advanced 337, 85, and 28 points, respectively. The buying was broad based, with advancing issues leading decliners by a considerable margin on both the New York Stock Exchange and the NASDAQ, to the tune of nearly three to one on the Big Board. It was also nearly a clean sweep for the bulls among the 10 major equity groups, with a slight decline in the defensive-oriented utilities accounting for the only laggard. The leadership on a week dominated by news from business not surprisingly came from the economically sensitive sectors, most notably the energy, industrial, technology areas.
The big news on Friday was a very strong report on the U.S. labor market. Specifically, the Labor Department reported that nonfarm payrolls increased by an eye-catching 266,000 positions, well above the consensus of estimates, and the unemployment rate fell further, narrowing to 3.5%. The overall data made for a Goldilocks report on Wall Street, as the job growth was taken as a sign that the U.S. economy is still strong, while the modest uptick in the average hourly wage did stoke any inflation concerns, as the central bank is scheduled to hold its final monetary policy meeting this week. To no surprise, as noted, the major equity averages jumped on the strong labor market data.
Turning to the week at hand, the focus of the investment community will continue to be on the trade developments between the United States and China, with the implementation of additional tariffs on goods from China looming on December 15th, and the U.S. business beat. On the latter front, all eyes will be on the Federal Reserve and its monetary policy statement on Wednesday afternoon at 2:00 P.M. (EST). The overwhelming consensus is that the central bank will hold interest rates steady after three 25-basis-point hikes in the previous meetings. The investment community will also get some important data on pricing and the retailing sectors. On Friday, November retail sales data will be closely monitored for clues as to how the consumer is feeling during the all-important holiday shopping season. The November report will include the Black Friday shopping receipts. Accordingly, investors may want to keep close tabs on the consumer discretionary sector later this week, as those stocks may be active depending on the results of retailing sales report.
With less than an hour to go before the commencement of the new trading week stateside, the equity futures are pointing to a rather flat opening for the U.S. stock market. So far overseas, the trading has been nondescript. The main indexes in Asia finished relatively unchanged overnight, while the major European bourses turning in a similar performance as trading moves into the second half of the session on the Continent. Typically in the trading days immediately preceding the Fed’s announcement, market participants are reluctant to make any major moves in either direction, and while that is the case so far this morning, whether that continues will likely depend on the fluid trade negotiations between the world’s top-two economic superpowers. Stay tuned.
– William G. Ferguson
