After The Close
The stock market started the new year quite positively, on improved sentiment about the economic environment. Specifically, initial jobless claims were lower than expected, suggesting good strength in the job market. The Dow Jones Industrial Average, S&P 500, and NASDAQ reached all-time highs within the first few moments of the trading session. The composites then lapsed somewhat after making new highs, giving back a substantial portion of the gains in short order. Over the rest of the day, the market rebounded from the brief profit taking and even took out the prior daily highs. The indices ended not too far from their new apexes. All told, the Dow closed higher by 330 points, the S&P increased 27 points, and the NASDAQ rose 120 points.
Moreover, market breadth was modestly positive, and advancers outpaced decliners by a 1.4-to-1.0 ratio. Technology stocks were among the best performers on the day, while REITs were among the weakest.
In commodity news, oil prices were marginally higher, as sentiment for global trade improved a bit. Meantime, U.S. Treasury bond yields were mostly lower across the board as a move into the safe-haven asset occurred. Too, the VIX Volatility Index was lower today, as demand for options protection fell some.
Looking ahead to tomorrow, a decent amount of economic data will be released, including the Energy Information Administration’s weekly reports on both crude oil and natural gas inventories. These were both delayed from their usual release due to the New Year’s holiday. Additionally, the ISM manufacturing index will be released for December. The earnings docket is bereft of quarterly reports, but this will pick up next week as the start of earnings season begins in earnest. Overall, we expect the broader market to respond to any news stories or general changes in sentiment tomorrow.
– John E. Seibert III
At the time of this article’s writing, the author held positions in one or more of the companies mentioned.
Before The Bell
Another year has come to a close--and what a year it was. On point, the past 12 months saw the Dow Jones Industrial Average gain just over 22%; the S&P 500 add over 28%; and the tech-lifted NASDAQ surge some 35%. The main ingredients for this banner performance, especially late in the just-ended year, were a trio of interest rate reductions from the Federal Reserve and hopeful progress in forging a limited trade understanding with China, which soon should be signed. In fact, a good chunk of these gains evolved late in the year when the news flow turned more positive, in particular with respect to China.
However, such strength notwithstanding, the week thus far has been nothing to write home about, with the Dow declining by 183 points on Monday and heading lower in the morning on Tuesday. A similar pattern was woven by the NASDAQ. The main impetus for the early week selling was profit taking--particularly in the Dow. However, news that the President had signaled that Iran was the party responsible for an attack on the U.S. embassy in Iraq also contributed to some of the mild selling. Still, even with this late sloppiness, the S&P 500 Index concluded its best year since 2013, when that composite added nearly 30%.
It also was a big year for some individual stocks, with the Dow bolstered by dramatic wins in shares of Apple (AAPL – Free Apple Stock Report) and Microsoft (MSFT – Free Microsoft Stock Report). These were, respectively, the best and second best stocks of the year in that composite. Also in the winner’s circle were several of the chip stocks and assorted retailers, such as Target (TGT). To be sure, the year included some losers, but these were distinctly in the minority. Indeed, what a difference a year makes, as 2018 was one of the poorest of the past decade. Thus, as we look out to a new year, the prospects for 2020 are reasonable, even if the market is rather pricey.
Meanwhile, after that unimposing start, the market continued lower for the balance of the morning, with the Dow heading into the noon hour off 50 points, with lesser setbacks in the other key averages. At no point during the morning did a second selloff of the week appear all that likely, as few seemingly wanted to unload stocks en masse. The modest move lower would continue in the Dow and the S&P 500 into the mid-afternoon, but the NASDAQ, the S&P Mid-Cap 400, and the small-cap Russell 2000 would gain. This weaker pattern then would continue in the blue chips into the final hour.
But, as has been the case so often, the bulls would make a stand, and as the final 60 minutes got underway, not only would the NASDAQ gather additional steam and bring along the heretofore stronger S&P 400 and the Russell 2000, but the Dow and the S&P 500 would go from red to green in a fairly substantial way, as institutions wanted to fill up on goodies to conclude the year. At the close, the Dow-30 would be 76 points higher and the S&P 500 would climb nine points. A more solid proportionate increase was tabulated by the NASDAQ (up 27 points) as on the best year of the long bull market ended.
Also gaining on this last day, but still down sharply for the year, were bond yields, as investors sought out riskier plays, such as equities. In all yields on the 10-year Treasury note concluded matters at 1.02%--off sharply from the 2.68% in place a year ago. As to the final day, mist groups rose, with advancing stocks nicely in the lead. Looking out at a new day and new year, it will be hard to fashion an encore, but with a trade pact soon likely to be signed, earnings and the economy gaining, and the Federal Reserve likely on hold, the bulls should persevere in the end.
Meanwhile, we hope all of our readers had a joyous and happy new year and we wish all a healthy and prosperous 2020. As for the day ahead, the new year is poised to start trading strongly to the upside.
– Harvey S. Katz, CFA
At the time of this article’s writing, the author held positions in one or more of the companies mentioned.
