After The Close
The stock market got off to a tentative start this morning, but managed to firm up as the session progressed. Of note, news that the government would resume its activities likely aided sentiment and encouraged the bulls. At the close of trading, the Dow Jones Industrial Average was ahead roughly 143 points; the broader S&P 500 Index was up 23 points; and the NASDAQ was higher by 72 points. Market breadth was positive today, as winners outnumbered losers by a comfortable margin on the NYSE. From a sector perspective, the energy and telecommunications stocks forged ahead, while the industrials and basic materials issues lagged the pack.
There were no major economic news items released this morning. Tomorrow will likely be a light day for economic reports, as well. Meanwhile, on Wednesday, existing home sales for the month of December, the FHFA Housing Price Index for November, and the EIA’s latest weekly crude oil inventory figures will be released.
Finally, the fourth-quarter earnings season is now firmly in progress. More recently, we heard from Halliburton (HAL). That stock traded higher today in response to a solid report and an upbeat year-ahead outlook. In addition, shares of WYNN Resort (WYNN) advanced nicely, after the gaming giant delivered encouraging results.
Technically, the stock market is off to a strong start so far this year. However, equity valuations do seem somewhat elevated, and traders may be quick to react to any disappointing news.
— 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 most recent five-day stretch of trading on Wall Street was another winning one for the bulls. Helped by a more-than-300-point advance for the Dow Jones Industrial Average last Wednesday, the major averages finished the week nicely higher, despite some concerns late in the week about a looming government shutdown, which came to fruition on Friday night when the Senate did not get the required 60 votes on a temporary four-week spending bill to fund the government. Earlier in the week, the market climbed further on encouraging earnings news, including a strong report from Dow-30 component and health-insurance giant UnitedHealth Group (UNH – Free UnitedHealth Group Stock Report), and continued good feelings about the reduction in the corporate tax rate. The latter sentiment was aided by comments at the start of the earnings season by JPMorgan Chase (JPM – Free JPMorgan Chase Stock Report) CEO Jamie Dimon, who said that tax reform will be a huge boon for American corporations.
On Friday, the Dow 30, the tech-heavy NASDAQ, and the broader S&P 500 Index finished 54, 40, and 12 points, respectively, with the latter two averages at record highs. Overall, most of the 10 major equity groups were in positive territory, with the leadership coming from the consumer discretionary, financial, healthcare, and industrial sectors. Too, winning issues led losers by more than a two-to-one margin on both the New York Stock Exchange and the NASDAQ.
The news late last week was headlined by the looming—and ultimate—shutdown of the U.S. Federal Government. The inability of the U.S. Senate to come to an agreement on a spending bill to fund the government will lead to the furloughing of government workers this week; essential employees (i.e., military personal) will work, but will not be paid until the government resumes operations. The last major government shutdown occurred in 2013. That work stoppage initially roiled the equity market, but stocks did not take long to recover during the 13-day shutdown. The equity futures today are pointing to a lower opening as the government shutdown enters day three. Another vote by the Senate is expected to take place later this afternoon.
Meantime, the week at hand will bring a slew of earnings reports, as fourth-quarter reporting season kicks into high gear. The slate of earnings reports includes the latest results from nine Dow-30 companies, with four scheduled to be released data before tomorrow’s opening bell. Thus far, the earnings news, save for reports from International Business Machines (IBM – Free IBM Stock Report) and General Electric (GE – Free General Electric Stock Report), has proven mostly supportive for the U.S. stock market. This afternoon, video content provider and original content producer Netflix (NFLX) will report its latest earnings results; the stock is pointing to a slightly higher opening today ahead of the release.
The new week was supposed to bring some important reports on the economy, including the first look at fourth-quarter GDP, but some of those reports remain in doubt with the ongoing government shutdown. In addition to the GDP report, we also are expected to get some important data on the housing market. The existing home sales data from the National Association of Realtors remains on schedule, but the new home sales report, along with the latest snapshot on durable goods orders, will be delayed until an agreement to fund the government is reached on Capitol Hill.
Taking a look at the overseas markets, the main indexes in Asia finished sharply higher overnight, while the major European bourses are trading in mixed fashion in a tight band around the neutral line.
As noted above, our futures are presaging a modestly lower opening for the U.S. stock market, with the ongoing government shutdown playing a part in the likely profit taking at the start of trading. Investors should pay close attention to the latest developments on Capitol Hill, most notably today’s Senate vote on a revised spending bill at 12:00 P.M. (EST), as the outcome of that confab is likely to have the biggest impact on the U.S. equity market. Stay tuned.
– William G. Ferguson
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
