After The Close
The equity markets delivered a mixed-to-weaker performance today in a highly volatile trading session, as Wall Street returned from a holiday weekend. Specifically, stocks opened sharply higher this morning, but the gains fizzled as the day progressed. At the close of trading, the Dow Jones Industrial Average, after breaking through the 26,000 mark earlier today, ended down 10 points; the broader S&P 500 Index was off 10 points, as well; and the NASDAQ was lower by 37 points. Market breadth was negative, as decliners outpaced advancers by almost two to one on the NYSE. From a sector perspective, sizable losses in the energy and basic materials issues were somewhat offset by selective strength in the consumer and healthcare names.
There was just one economic news item reported this morning. Specifically, the Empire Manufacturing Index (a measure of business conditions in the greater New York region) slipped to a reading of 17.7 during the month of January. Analysts had been looking for a better figure. Tomorrow will be a busier day for economic news. The industrial production figures for the month of December will be released early in the day, and the Federal Reserve will deliver its latest Beige Book summation in the afternoon.
Finally, the fourth-quarter earnings season has just commenced, and traders will likely be busy combing through the numerous reports being released over the next few weeks. More recently, we heard from UnitedHealth Group (UNH – Free UnitedHealth Stock Report). That stock traded higher in response to a solid set of numbers. Further, shares of Citigroup (C) moved up, after the banking giant provided an encouraging outlook.
Technically, the stock market is off to a decent start in 2018. However, it is too early to tell how the full year will play out. Much will depend on the year-ahead guidance that corporations provide in the coming weeks. No doubt, traders will be closely evaluating the benefits of the new tax measures.
— 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 first half of the month of January proved no different from what we saw throughout most of 2017, which was with sustained interest in equities and the major averages continuing to set and then break all-time highs. The same factors that were in play last year have spilled over into the New Year, highlighted by the continued euphoria over the largest reduction in the U.S. corporate tax rate in decades, a move that many pundits think will make American companies more competitive in the global marketplace. That, along with continued strong economic data, signs that the Federal Reserve will be measured with regard to interest-rate hikes in 2018, and what many investors think will be a solid fourth-quarter earnings season, is emboldening investors to pour more money into stocks and ETFs despite valuations looking stretched.
On Friday, the bulls were at it again, pushing the market to record levels once again. Specifically, the Dow Jones Industrial Average, the NASDAQ, and the S&P 500 Index rose 228, 49, and 19 points, respectively. Overall, advancing issues led decliners on both the New York Stock Exchange and the NASDAQ, and nearly all of the major equity groups finished in positive territory. The leadership came from the consumer cyclical, energy, and industrial sectors. The consumer discretionary stocks got a boost from a nice reading on retail sales for the month of December.
Speaking of the U.S. economy, the abbreviated trading week will be rather light on news from the business beat. That said, we will get a few important reports over the next four days, including data on industrial production and housing starts. Investors also will receive the latest Beige Book summation of economic conditions from the Federal Reserve at 2:00 P.M. EST tomorrow.
The attention of the investment community will likely shift to Corporate America this week, with the fourth-quarter earnings news beginning to roll in. The reporting season got off to a good start on Friday, with an encouraging report from JPMorgan Chase (JPM – Free JPMorgan Chase Stock Report). The market reacted positively to comments from JPMorgan Chase CEO Jamie Dimon about the impact of the reduction in the U.S. corporate tax rate (from 35% to 21%). Specifically, Mr. Dimon called tax reform "a significant positive outcome for the country" in a statement released with the bank's earnings report. He said, "U.S. companies will be more competitive globally, which will ultimately benefit all Americans. The cumulative effect of retained and reinvested capital in the U.S. will help grow the economy, ultimately increasing jobs and wages." Those comments from the leader of the largest bank in the U.S. emboldened investors and got the earnings season off to a strong start. This holiday-shortened week will bring a lot of earnings news, led by reports from four Dow-30 Companies. The latest quarterly snapshot from UnitedHealth Group (UNH – Free UnitedHealth Group Stock Report), which is making for a very good reading this morning, highlights today’s slate of earnings reports.
With less than an hour to go before the start of the new trading week stateside, the equity futures are presaging a sharply higher opening for the red-hot U.S. stock market and an above 26,000 start for the Dow Jones Industrial Average. Thus far this week, we have seen overseas buying push the main indexes in Asia to new highs, and the major European bourses keep moving to the upside, with Germany’s DAX leading the charge higher this morning. Today’s trading is certainly shaping up to be another feather in the cap of the bulls. 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.
