After the Close
U.S. stocks spent most of the morning well into positive territory, a welcome change of pace from the cautious tone that has typified most of the week. Though earnings season is under way, and updated select economic data were released throughout the week, today’s inauguration ceremony has been the primary concern for investors. But, as trading began and the bears and bulls jostled for control, the latter asserted dominance. Investors appeared to be more optimistic in the hours leading up to the transition of executive power in Washington, DC, with each of the three major indexes holding onto respectable gains as lunch neared on the East Coast.
Then, at noon, the protectionist tone in President Trump’s inauguration speech led to a broad-based reduction of the morning’s gains. The shift in sentiment hinged largely on a focus on an evolving policy, as it pertains to trade, defense, and the country’s overall role in the geopolitical realm. Mr. Trump’s vow to narrow our global focus was especially hurtful to the tech-driven NASDAQ, which nearly fell into the red in the immediate aftermath of the address.
The Dow Jones Industrial Average was the most resilient index during the up-and-down session, but not solely due to developments in the political arena. Rather, the market’s reaction to a pair positive earnings releases, from IBM (IBM - Free IBM Stock Report) and Procter & Gamble (PG - Free Procter and Gamble Stock Report), respectively, are buoying the gains. While a disappointing quarterly update from General Electric (GE - Free General Electric Stock Report) somewhat offset enthusiasm, the index’s 95-point Dow gain is an encouraging start to the presumably business-friendly administration’s reign.
Ultimately, despite the volatility seen early in the afternoon, most stocks remained in black ink for the day. At the closing bell, market breadth favored advancing issues by a 1.7-to-1 margin, thanks in no small part to strength amongst the mid- and small-cap equities. The S&P Mid-Cap 400 Index, in fact, boasted a wide bell-to-bell improvement. In the coming weeks, traders expect some follow through on the President’s promises from the campaign trail. Until then, it is unlikely we will see the same type of sustained rally that characterized the massive buying spree that followed November’s election. – Robert Harrington
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Mid-Day Update - 12:10 PM EST
Stocks are trading modestly higher today, as traders review a fresh batch of corporate reports, and prepare for political change in Washington. At just past noon in New York, the Dow Jones Industrial Average is up roughly 100 points; the broader S&P 500 Index is ahead ten points; and the technology heavy NASDAQ is higher by 24 points. Market breadth shows widespread support for equities today, as winners are nicely ahead of losers on the NYSE. Leadership can be found in the energy and basic materials issues. On a related note, the price of crude oil is up over 2%, to almost $53 a barrel, today. The telecommunications names are also having a constructive session. Meanwhile, the defensive utility stocks are underperforming, as traders may be willing to move capital into riskier, but possibly more rewarding, areas of the market.
Investors received no major economic news items this morning. However, many on Wall Street will be looking closely at the events now taking place in Washington, as they try to get a sense of the new administration’s policies.
Elsewhere, in the corporate arena, a number of Dow Jones Industrials posted results over the past 24 hours. Specifically, shares of International Business Machines (IBM – Free IBM Stock Report) and Procter & Gamble (PG –Free P&G Stock Report) are moving up, suggesting that investors are relatively pleased with the news coming from those heavyweights. Meanwhile, shares of General Electric (GE – Free GE Stock Report) are slumping, as investors are likely feeling less positive about that company’s issuance.
Technically, the stock market has been somewhat range bound lately. No doubt, traders will be closely watching the many corporate earnings reports coming out over the next few weeks. In addition, they will probably be looking for assurances that the new government will support the nation’s ongoing economic expansion. – 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
Wall Street opened the final full day of Barack Obama's tenure in office on a mixed note, with the recently all-too-familiar pattern of a strengthening NASDAQ being offset by a weakening Dow Jones Industrial Average. In all, the latter index, once on the cusp of the 20,000 mark, is now falling below 19,800. That would seem to put another attempt to cross that threshold out of reach until after Donald Trump's accession to the Presidency. Uncertainties engendered by the likely changes in Washington appear to be behind the market's recent indecision.
Regarding yesterday's start, after the Dow got off to a nominally higher opening, and the NASDAQ pushed ahead to an early gain of some 15 points, the session saw mid-morning weakness evolve, with the Dow heading lower by 35 points or so, while the NASDAQ and the S&P 500 Index fell slightly into the red. Meanwhile, unlike many recent sessions, that modest retreat was joined by the small-cap Russell 2000 and the S&P Mid-Cap 400. One additional concern, aside from the ongoing uncertainties in Washington, was the sudden jump in bond yields.
To wit, after bond yields had crested a number of weeks ago, as returns on the 10-year U.S. Treasury note had crossed the 2.60% mark, yields fell back to about 2.30%. In recent days, however, they have climbed back up, and yesterday morning, they moved above 2.47%. Then, there is earnings season, which is just getting under way and thus far has been reasonably good, although probably not strong enough to light a fire under the bulls. In other news on this penultimate trading day of the week, jobless claims fell sharply in the latest week. Housing starts, meantime, jumped 11.3% in December, surpassing consensus estimates.
Meantime, stocks weakened further as we headed toward the noon hour in New York, with the Dow falling to a loss of between 40 and 50 points by late in the morning, before regrouping again and paring that deficit somewhat as we reached lunch time. Red ink also persisted in the other large and small-cap indexes, while losing stocks held a formidable lead on gaining issues and most of the top 10 equity groups were then in retreat. It seemed as though uncertainty was running rampant on the Street and was starting to take a toll on market sentiment.
Then, after meandering about for a couple of hours, the stock market tumbled for a time in the mid-afternoon, with the Dow falling to an intraday loss of just over 125 points. The other averages weakened, as well, as nervousness ahead of the inauguration increased as the session wound down. The stock market then sought to mount a late charge, and although a recovery of sorts did evolve as the clock ticked down, a sizable turnaround proved too much to hope for and stocks ended the session on the minus side, albeit not dramatically so.
In all, at the conclusion of the trading day, the Dow was lower by 73 points, ending just above 19,730. The S&P 500 fell eight points and the NASDAQ shed 16 points. The S&P Mid-Cap 400 and the Russell 2000 also fell and a little more sharply on a proportionate basis. Breaking things down further, we see that eight of the ten leading equity groups fell, with heath care and the utility sectors leading the way down with losses of nearly a percentage point, while on the aggregate market, the NYSE saw nearly three times as many losing issues as gaining stocks.
Now peering out at a new day, we see that stocks were mixed in Asia overnight, but are edging higher thus far this morning in Europe. Also this morning, oil is ticking a bit higher; gold and other metals are little changed; but Treasury yields are ominously rising ahead of the Presidential inauguration, with the yield on the 10-year Treasury note climbing just past 2.50%, some 20 basis points above where it stood just days ago. We are about 10 basis points from the note's 12-month high yield. Finally, U. S. equity futures are gaining narrowly at this hour. – Harvey S. Katz
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
