After the Close
The bulls held control of the market for most of Friday, a welcome break from the volatility that typified most of the week’s trading. Mixed-to-positive economic releases on producer prices, retail activity, and business inventories helped to instill a mostly positive tone that revealed itself in the large- and small-cap equity markets alike. At the closing bell, gaining shares had a 1.5-to-1 edge over declining issues.
The major indexes were more mixed, however. The Dow Jones Industrial Average, save for a brief surge at the morning bell, failed to crack that 20,000-point milestone once again. Recent reluctance can largely be attributed to the political sphere. Specifically, investors likely hoped for more economic clarity during President-elect Trump’s press conference yesterday. But, uncertainty regarding the timing of several promised measures, such as corporate tax reform and deregulation of industry, emboldened the bears for most of the afternoon. UnitedHealth (UNH - Free UnitedHealth Stock Report) has accordingly been among the biggest downside contributors in the 30-company grouping. Still, the S&P 500 added nearly four points on the day, while the tech-driven NASDAQ finished 5,57, achieving its second consecutive week of positive growth and setting a new record high.
As earning season commences, confidence in the banking industry drove trading higher in the financial sector. JPMorgan Chase (JPM - Free JPMorgan Chase Stock Report), Bank of America (BAC), and PNC Financial (PNC) each outperformed consensus profit estimates, as did asset manager BlackRock (BLK). Even Wells Fargo (WFC), which disappointed in its quarterly results, saw its shares increase over 1% on sector buoyancy.
Meanwhile, oil got a reality check today. Optimism over OPEC’s production cap has waned somewhat, with fears that demand from China could compel several cartel members to break from the accord. There have been silver linings in this arena though, including Saudi Arabia’s plan to cut output drastically in February. But worries that the world’s second-largest economy may cause a failure to adhere to output limits was enough to hand U.S. crude oil its first full-week loss since early December. Accordingly, the utility sector posted the widest full-day sector loss on Friday.
A late-in-the-day rally almost saw the Dow join its counterparts in positive territory, before ultimately finishing the day down five points, at 19,886. But, with Mr. Trump’s inauguration just one week away, we believe traders will require further updates on the timing of policy implementations before allowing the index to crack the 20,000 benchmark. The President-elect’s transition ought to keep playing a major part in trading going forward, while corporate earnings are also expected to hold a bigger influence in the coming weeks. – Robert Harrington
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Mid-Day Update - 12:05PM EST
The U.S. stock market is moving modestly higher today, as the fourth-quarter earnings season starts up. At just past noon in New York, the Dow Jones Industrial Average is up 14 points; the broader S&P 500 Index is ahead six points; and the technology heavy NASDAQ is higher by 34 points. Market breadth shows a degree of support for equities today, with advancers leading decliners on the NYSE. From a sector perspective, the financial and healthcare issues are forging ahead, while some of the consumer names and the utility stocks are lagging.
Traders were sifting through a mixed batch of economic news this morning. Specifically, producer prices rose 0.3% in December, more or less meeting expectations. Retail sales increased 0.6% in December, which was not overly impressive, as most of the gain came from higher auto and gasoline sales. Elsewhere, business inventories edged up 0.7% in November, which was in line with the consensus view. Finally, the University of Michigan’s consumer sentiment report came in with a preliminary reading of 98.1 for the month of January, which was a respectable showing.
The fourth-quarter earnings season has started, as a number of large banks have reported results over the past 24 hours. In the Dow Jones Industrial Average, shares of JPMorgan Chase (JPM – Free JPMorgan Stock Report) are up slightly, in response to an encouraging release. Also in the broader financial area, shares of Wells Fargo (WFC) are trading higher, as investors remain optimistic, despite a somewhat weak report.
Technically, the stock market has been holding up well. Traders will closely be watching the numerous corporate reports being issued over the next few weeks, as they look for a clearer sense of market direction. – 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 trio of failed attempts this week to crack 20,000 on the Dow Jones Industrial Average, the stock market didn't make a fourth effort to do so yesterday, as stocks fell from the opening bell. To wit, apparent disappointment that President-elect Donald Trump did not lay out specific plans to deal with earlier suggested policy changes on taxes, spending, and deregulation caused Wall Street traders to unload pricey stocks from the start. So, the Dow, which ended Wednesday's dealings just 45 points from the 20,000 mark, fell some 180 points in the early going.
To be sure, Wall Street is still optimistic about these likely policy adjustments on corporate and personal taxes and also on spending, but many traders also want to hear the details and the expected timing of such changes. With such assurances not yet at hand, stocks fell sharply from the outset, with the NASDAQ and the Russell 2000 leading the way lower. And, seemingly, what traders and investors did hear on protectionism and criticism of the drug industry wasn't what they wanted. What strength there was yesterday came in gold, which rose to a seven-week high and bond prices, as yields fell once again.
So, stocks fell sharply early on. Wall Street also was concerned about what a number of Federal Reserve speakers, which are scheduled to give their opinions on monetary issues during the session, would say regarding central bank policy initiatives. The Fed is to meet late this month. A second straight rise in interest rates could come out of that scheduled gathering. One early Fed speaker during the day, Philadelphia Fed President Patrick Harker, a voting member of the lead bank, opined that three interest rate hikes this year would be appropriate. Such commentary did not go down well with the Street.
Stocks, meantime, continued to sell off, with the leading averages all down near session lows as we approached the noon hour on the East Coast. In all the Dow was generally holding in a range of down 150-180 points, while the NASDAQ was off by 50-60 points, or about 1%. Larger proportionate losses were then in place on the Russell 2000 and the S&P Mid-cap 400. Also, losing stocks were overwhelming gaining issues by almost three to one on the NYSE and by four to one on the NASDAQ. As to the various groups, all save for the utility sector were lower then, with industrials and technology leading the way down.
Then, after the morning meltdown, the buyers crept back in, apparently not ready to sell this market with any seriousness. Thus, what had been a 180-point plunge in the Dow was reduced by some two-thirds as we moved inside the last hour of trading. Stocks then steadied themselves into the final bell, with neither any further damage nor any additional recovery taking hold. All told, the Dow ended off 63 points; the S&P 500 Index was lower by five points; the NASDAQ was down 16 points; and the Russell 2000 was off by 13 points. Breaking things down, more stocks and groups were lower than not on the day.
Going forward after yesterday's modest backtracking, we see that stocks were mixed in Asia overnight, while in Europe, the bourses are tracking higher at this time. In other markets of note, oil is down; gold is lower; bonds are weaker; and U.S. equity futures are up modestly. Finally, in other news, the government just released data on producer prices and retail sales. As for inflation, the PPI showed that prices rose by 0.3% in December, which was in line with expectations. Backing out food and energy, to get the so-called core PPI, we see that pieces nudged up just 0.1%. That, too, was no surprise.
Regarding the retailing sector, the period in question, which covered the all-important Christmas season showed that sales were up 0.6% last month, just under the 0.7% expectation. Sales were up 3.3% for the past year. So, it is clear that the consumer is still in there plugging away. That should help stock market sentiment somewhat. – Harvey S. Katz
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
