After The Close
The stock market made some solid progress today, helped by a batch of constructive corporate profit reports. Although stocks eased a bit in the final hour of trading, the Dow Jones Industrial Average still ended the session ahead 142 points; the S&P 500 Index was up six points; and the technology-heavy NASDAQ was higher by 11 points. Market breadth showed fairly broad participation, with winners outpacing decliners by a comfortable margin on the NYSE. From a sector perspective, the financial issues led the market higher today. In contrast, the noncyclical consumer names took a step back.
It was a light day for economic news. However, import prices showed a 1.0% decline in the month of December, after a retreat in November. Export prices were also quite tame during the month. These figures suggest that inflationary pressures are not yet building, even at that this late stage in the economic expansion. Tomorrow, we get a look at the latest weekly initial jobless claims.
Meanwhile, the fourth-quarter earnings season has just started. We recently heard from a number of large financial institutions. Of note, shares of Bank of America (BAC) and U.S. Bancorp (USB) moved nicely higher today, in response to positive releases. Tomorrow, American Express (AXP – Free American Express Stock Report) will weigh in with its numbers after the closing bell. Further, we will hear from media services giant Netflix (NFLX). In the M&A space, shares of First Data Corp. (FDC) surged on news that the company has agreed to be acquired by Fiserv (FISV). Given that many stocks had pulled back sharply in late 2018, particularly in the technology space, some companies may be looking to make acquisitions to lift profits in 2019.
Technically, the stock market has firmed up nicely over since the start of 2019. Today, the S&P 500 Index approached its 50-day moving average, located at the 2,628 level. This area may present some resistance, especially given the gains achieved lately. Pushing equities past this level will likely be a key challenge for the bulls. Some favorable corporate reports, constructive negotiations with China, and an end to the government shutdown, may also serve as catalysts.
- 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 stock market, under some modest pressure to start the week on Monday, having been held in check by concerns about slowing economic growth in China and the lingering partial government shutdown at home, got off on the right foot yesterday morning. To be sure, these headwinds persist, but a jump in shares of technology favorite Netflix (NFLX) helped boost not only some high-profile names in that sector, but in the stock market at large. In fact, after just modest gains in the first half of the day's session, the stock market took off nicely as the afternoon began.
Specifically, the Dow Jones Industrial Average, which had been meandering about in just a modestly positive range until the lunch hour, suddenly jumped ahead as the afternoon got started, and in virtually no time that index was ahead by some 190 points, rising past the 24,000 level, in the process. Optimism on earnings, after Netflix said that it would raise its monthly membership prices, was the principal fuel for this mid-month rally. But it was the NASDAQ, with its preponderance of technology names, that really set the pace, with that composite gaining almost 120 points, or 1.7% at its intraday high that set the fast mid-session pace.
This strong showing would then carry on until the final two hours, when some rethinking would evolve, and take the bloom off of the rose. In the meantime, the Netflix price surge would help carry the other big tech names to nice session gains. As for the rest of the market, the other indexes would soon regain some of their momentum. One problem for the Street early in the day was that Dow-30 component, JPMorgan Chase (JPM – Free JPMorgan Chase Stock Report) would report disappointing results for the fourth quarter. As far as Wall Street goes, investors had come into earnings season with some doubts, and that helped to spark the late-year selloff.
As for corporate results, expectations have been decent, for the most part. Now the challenge will be to match or exceed those forecasts. That may be not be easy, albeit it likely will be easier than in succeeding quarters when moderating economic growth could make the attempts even more difficult. Meanwhile, trade headwinds kept the stock gains in check, as trade negotiators on our side apparently have seen little progress in forging a deal with China. Then, there is the Brexit vote, where Prime Minister Theresa May suffered a stringing, but unsurprising, defeat yesterday afternoon when the Parliament voted down her Brexit plan.
The defeat for Ms. May, and subsequent call for a no confidence vote, momentarily gave our markets a chill. But some stability soon returned and the markets firmed up again into the close. As for the Brexit situation, the government now has three working days to present a revised deal. In other news, the U.S. Labor Department reported that the Producer Price Index fell by 0.2% in December, twice the 0.1% drop forecast. The core PPI (i.e., less food and energy), meantime, gained a token 0.1%. So, this report had little impact on the markets, which continued higher into the close.
In all, the Dow would conclude matters with a final rush to gain 156 points. The S&P 500 Index and the NASDAQ would add 28 and 118 points, respectively, The S&P Mid-Cap 400 and the small-cap weighted Russell 2000 also would gain nicely on the day. But the real star was the technology driven NASDAQ. Finally, in some sobering news, the Administration estimated that the government shutdown would cost 0.1% in GDP per week. Originally, that estimate had been 0.1% every two weeks. That could well add up and take what likely will be a difficult first-quarter showing that much more disadvantageous.
Looking ahead to the middle day of the trading week and to action overseas, we see that the major indexes were mixed in Asia in the overnight hours; in Europe, the bourses are now trading with early small gains. Also, oil, a gainer yesterday, is trading down slightly so far today, while Treasury note yields, up yesterday, are gaining anew. Finally, ahead of a batch of earnings reports and some key economic metrics, the U.S. equity futures are posed for early increases.
– Harvey S. Katz, CFA
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
