After The Close
The stock market moved sharply higher this morning and held most of its gains through the session. Today’s advance was likely fueled by hopes that trade relations between the U.S. and China are gradually improving. At the end of trading, the Dow Jones Industrial Average was ahead 336 points; the S&P 500 Index was up 35 points; and the NASDAQ was higher by 73 points. Market breadth was quite favorable, with advancers easily ahead of decliners on the NYSE. Most of the market sectors made progress, with notable gains in the energy and technology names. Meanwhile, the defensive utility issues failed to participate in today’s rally, as traders were likely busy moving capital into riskier stocks.
In economic news, industrial production increased 0.3% during the month of December, which was in line with analyst expectations. Meanwhile, the University of Michigan’s Consumer Sentiment Index delivered a preliminary figure of 90.7 for the month of January, which was a weaker-than-expected showing.
Elsewhere, the fourth-quarter earnings season continues to take shape. Over the past 24 hours, we heard from a few widely held names. Specifically, shares of Netflix (NFLX) traded lower today, after the media services company put out a mixed report. In addition, shares of American Express (AXP - Free American Express Stock Report) lost some ground, but later recovered, after the financial giant posted softer-than-anticipated results. In contrast, things went a bit better for V.F. Corp. (VFC). Investors were pleased with the apparel company’s outlook, sending that stock notably higher.
Technically, the stock market rally that started a few weeks ago continues to gather steam. Of note, the S&P 500 Index is now back above its 50-day moving average, located at the 2,625 mark. Hopefully, the bulls can keep their buying campaign in place. Much will depend on the quality of the numerous corporate reports soon to be released. Further, a reduction in tensions between the U.S. and China would be a plus for the market.
– 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
As for influences, Morgan Stanley reported revenues and earnings that both fell short of Wall Street estimates. Results particularly dragged down by weakness in trading and wealth management activities. The stock backtracked modestly. Most other banks have performed well so far, which, as noted, has helped to firm up the equity market. In addition to earnings, the stock market was being influenced early in the day by the economic headwinds out of Beijing and by the long government shutdown in Washington. This latter event stands to clip more than 0.1% from first-quarter GDP each week.
Aside from the Dow, which was still off about 50 points after we passed the first hour of trading, the S&P 500 and the NASDAQ were flat-to-slightly positive. As such, this was a very unimpressive bout of profit taking to that point. The market then started to firm up as we neared the lunch hour in New York, with the averages then dancing around the unchanged level until the moved inside the final two hours. It seemed, at that point, as if we would put in a ho-hum session in which the ebb and flow of minor news items and selective earnings releases kept things near dead center.
Then, came a report that the United States was considering easing tariffs on China as part of the two countries’ ongoing trade negotiations. That bit of hopeful news caused stocks to spike higher, with the Dow going from being little changed to up more than 265 points in a matter of moments. The idea was put out there by the Treasury Secretary. However, news that the U.S. Trade Representative was resisting that idea caused stocks to ease back somewhat. In all, less than half of that erstwhile 270 gain remained as we moved inside the final half hour.
What this spike in prices did show, however, is the importance of trade issues on Wall Street sentiment. Just the suggestion of some movement in this long impasse can have a major impact on prices. The market then would stiffen its resolve again, and while the highs for the day would not be approached, stocks would end matters strongly to the upside. All told, the Dow would finish ahead by 163 points; the S&P 500 would gain 20 points; and the NASDAQ would climb 50 points. Gaining stocks would hold a solid lead over declining issues on the NYSE, as well.
So, after the U.S. stock market posted the proverbial hat trick yesterday by advancing for three sessions in a row, we see that stocks posted gains in Asia overnight. In Europe, where the British Prime Minister had earlier survived a no confidence vote, the bourses are climbing so far today. Also, oil prices are up and Treasury yields, up nicely yesterday, are rising further so far this morning. Finally, as some critical earnings releases are made and optimism grows on a trade deal with China, U.S. equity futures now are suggesting a higher opening when trading resumes this morning.
