After The Close
The stock market started in the green today, as generally good economic news combined with strong earnings results boosted trader sentiment. Positive economic data included fewer-than-expected initial job claims, while the Philadelphia Fed Survey showed stronger growth in the area. Additionally, a few large banks recorded robust earnings results. These factors helped the Dow Jones Industrial Average rise to an all-time high, while the other indices reached new apexes, as well. The markets continued to expand its gains once the U.S. Senate approved the USMCA trade agreement. The markets trended slightly higher throughout much of the day, ending near its high point. All told, the Dow closed higher by 267 points, the S&P was up 28 points, and the NASDAQ rose 98 points.
Moreover, market breadth was very positive, as advancers outpaced decliners by a 2.5-to-1.0 ratio. Technology stocks were among the strongest performers today, while consumer staples equities were among the weakest, though only on a relative basis.
In commodity news, oil prices were slightly higher, as the signing of the USMCA improved traders’ expectations regarding future oil demand. Meantime, U.S. Treasury bond yields were higher today, as demand for the safe-haven asset waned. The VIX Volatility Index was lower though, as traders bought less options protection.
Looking ahead to tomorrow, a lot of economic data, including building permits and housing starts for December, are scheduled to be released; this ought to give some insight into the housing market. Additionally, the University of Michigan Consumer Sentiment Index for January will also be on the docket. On the earnings front, several large financial companies and a few transportation companies will release quarterly results. Overall, we think these factors, along with any change in positioning ahead of the three-day holiday weekend, will affect trading tomorrow.
– John E. Seibert III
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, up decidedly on Monday and relatively little changed on Tuesday, began the middle session of the trading week with further nifty gains. The latest impetus to buy evolved from the much-heralded signing of a phase-one trade accommodation with China. Although this is a limited deal and will not result in the cancellation of existing tariffs on goods shipped from that nation, it is a critical first step in lessening trade tensions with the world's second largest economy. Now, there will need to be a phase two deal to be negotiated. That will be a more involved process and could well take beyond this November's election.
As for the stock market, just the expectation of a trade deal has been enough to lift sentiment further on Wall Street, with the latest session seeing the Dow Jones Industrial Average rise past 29,000 and the S&P 500 Index approach 3,300 in the morning alone. Both composites, along with the NASDAQ, posted record highs in the process. Also helping stocks was corporate earnings season, which commenced on Tuesday and continued to provide welcome news, most notably from the banking sector. The promise of another tax cut, coming from a high Administration official, also boosted the market yesterday morning.
All told, the Dow rose by more than 185 points as the trade pact signing hour approached. Regarding earnings, banking behemoth Bank of America (BAC) posted better-than-forecast results for the fourth quarter. Not all of the news from Corporate America was good, however, as retailing giant Target (TGT) shares sold off after the company said that holiday same-store sales were on the disappointing side. Also, China's media speculated that phase two trade talks would not start anytime soon. But for now, at least, traders were being mollified by the successes on trade one.
The bullish beat would carry over into the afternoon, although there was a brief giveback as traders returned from lunch. However, as we reached the final two hours of the session, the profit taking had ceased and stocks were again on the move. In fact, after the Dow, up some 188 points in the morning, lost about half that amount in the early afternoon, the blue-chip composite turned higher once again, rising by more than 150 points in mid-afternoon, before starting the profit taking process once more as we entered the final hour of trading. The outlook is still strong, but prices are overextended.
The late selling would continue into the final hour, with the NASDAQ turning negative for a time on renewed profit taking, especially in the technology group. The final-hour pullback might also have been a case of buy the rumor and sell the news, in which stocks ran up ahead of the trade pact's signing, only to give back some ground after the agreement was actually inked. Whatever the case, the stock market did not falter by very much, with the Dow remaining in the green. In fact, that composite would gain ground anew in the final few minutes, closing the session with an advance of 91 points.
After that volatile, but ultimately higher session, which also included gains of six and seven points, respectively for the S&P 500 Index and the NASDAQ, respectively, the market appears set to press higher at the open this morning after the signing of the trade deal with China.
– Harvey S. Katz, CFA
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
