After the Close
The U.S. stock market traded strongly higher today, breaking out of its recent holding pattern. At the close of trading, the Dow Jones Industrial Average was ahead about 113 points; the broader S&P 500 Index was up nearly 15 points; and the NASDAQ was higher by 48 points. There was widespread support for equities today, as winners easily outpaced losers on the NYSE. Most of the major stock groups made progress, with the energy and basic materials issues displaying leadership. Meanwhile, the healthcare and telecommunications issues traded lower, failing to participate in the rally.
Traders received just one notable economic report this morning. Specifically, existing home sales came in at 5.49 million units, annualized, for the month of December. This reading was lower than the November figure, and also fell slightly short of analyst expectations. Tomorrow, the Federal Housing Finance Agency (FHFA) will release its housing price index for the month of November. In addition, for those following the commodity markets, the Energy Information Administration (EIA) is set to deliver its latest weekly crude oil inventory numbers.
Meanwhile, the fourth-quarter corporate earnings season is currently in progress. Over the past 24 hours, a handful of names in the Dow Jones Industrial Average posted their results. Specifically, traders did not react too favorably to the reports issued by Johnson & Johnson (JNJ – Free J&J Stock Report), Verizon (VZ - Free Verizon Stock Report), 3M Company (MMM - Free 3M Stock Report), and Travelers (TRV – Free Travelers Stock Report), given that those issues retreated today. In contrast, traders seemed more encouraged by the news from DuPont (DD - Free DuPont Stock Report), as that stock headed notably higher.
Technically, stocks are holding up relatively well, as corporations provide traders with recent quarterly results, and, in many cases, guidance for 2017. Meanwhile, Wall Street is also getting used to the nation’s new Administration in Washington. – Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Mid-Day Update - 11:30 AM EST
After a late comeback yesterday, which helped pare the day's worst market losses, and a solid showing today on the Continent, as most of Europe's bourses rose in price, our stock market started the current day modestly to the upside on some apparent bargain hunting after a number of declines over the past fortnight. And unlike some recent sessions after a faster start, this rally has not faded. In fact, as we move late into the morning, the indexes are all still higher, with disproportionate strength in the mid- and- small-cap indexes.
All of this is coming on a day, which is featuring a deluge in earnings reports, as fourth-quarter profit season remains in high gear. As to the tenor of the market, most of the 10 leading equity groups are higher, with the basic materials sector now leading the way forward, with a roughly two percentage point increase. As to earnings, several stocks domiciled in the Dow Jones Industrial Average saw their earnings top expectations, but fell short on the revenue side. And, in general, these stocks are lagging the market. This groups would include Johnson & Johnson (JNJ - Free Johnson & Johnson Stock Report) and 3M Company (MMM - Free 3M Stock Report).
Also, telecom giant Verizon (VZ - Free Verizon Stock Report) disappointed the Street with its showing, and that stock also is weaker. So, even though the Dow is higher in morning dealings, the blue chip composite is underperforming the market. Meanwhile, the better tone aside, most equities continue to largely trade in a sideways pattern of late, as investors await further details of President Trump's suggested policies. He has promised tax cuts and lessening regulations, for example, but has given few hints on timing. Also, his program includes massive infrastructure spending hikes, with this last item likely meeting some opposition from Republicans in Congress.
Going forward over the rest of the day and week, and in addition to earnings, we will have several key economic reports to focus in on, including this morning's issuance on sales of existing homes. That metric showed a modest 2.8% decline in December, largely on limited inventories of available houses for sale. Nevertheless, the 2016 result was the best in a decade and better than 2015. The executives at the National Association of Realtors credited the generally healthy performance to solid job creation and sustained low mortgage rates. However, continued low inventories could spell trouble down the road.
In addition to the expanding volume last year, the median price of a home continued to climb, gaining 4.0% in the past year. On the other hand, inventories fell sharply at the end of December, to their lowest level since the NAR began tracking the supply of properties for sale in 1999. Inventories, which fell 6.3% in 2016 alone, are now down for 19 consecutive months on a year-to-year basis. Even so, demand generally remains firm, with sales off only modestly in several regions, which is still a solid showing given the paucity of supply.
In addition to existing home sales, we also will be getting figures on the leading indicators and new home sales on Thursday and on orders for durable goods, fourth-quarter GDP, and consumer sentiment on Friday. GDP, which gained 3.5% in the third quarter, is expected to have climbed by 2.2% in the final period of last year. We would expect a similar showing in the current three months and an average increase of 2.5% for the new year, as a whole. Taking the whole economic outlook into view, we think the basic underpinnings should be supportive to the market.
Finally, in trading through late morning, we see that the stock market is strengthening into the noon hour with the Dow up 52 points; the S&P 500 Index ahead six points; and the NASDAQ rising by 14 points. In all gaining stocks are overwhelming declining issues on the Big Board to the tune of almost three to one. It is a very strong day shaping up, for the most part. – Harvey S. Katz
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before the Bell
Following a difficult performance in Europe to start the day, a further fall in oil, and some jitters on the metals front, our stock market started the new day and week off on a modestly weaker note. To be sure, traders were pleased that the new President again promised to cut back on regulations. But they were less than happy that his other pronouncements and promises on economic change were very short on specifics. It also was unclear whether his infrastructure spending initiatives would meet with approval in Congress.
So, stocks wilted after the first few minutes of trading and any attempts at early buying were met with resistance as concerns also were raised by President Trump's moves toward protectionism. Then, as the morning moved on, the selling intensified, with the Dow Jones Industrial Average sinking to a morning-worst decline of almost 100 points. The NASDAQ, which has been holding up somewhat better of late, joined the decline, as did the small-cap Russell 2000. It was a broad-based early selloff.
As we reached the noon hour in New York, the averages were just incrementally above their lows, and a decidedly negative tilt to the session was in place. All told, the common theme for this early week selloff was concern that Mr. Trump's ideas were very short on details and timing. And such uncertainty never plays well on Wall Street. Then, however, some buying occurred and the losses were pared further, with the Dow briefly regaining about two-thirds of its earlier losses.
The market then drifted lower again, but without the intensity of the morning hours, and, not surprisingly, late in the day the selling once more abated somewhat. The market then firmed into the close, but the averages still closed lower, with the Dow edging down by 27 points, and the S&P 500 closing off by six points. The loss in the NASDAQ, however, was just two points. As to the other indexes, the small-cap Russell 2000 fell two points, while gaining stocks edged out losers on the NYSE, but winning stocks lagged losers on the NASDAQ.
Further breaking things down, about half the 10 leading equity groups ended the session lower, led by energy, while the basic materials sector, with a better-than-one percent increase was in the vanguard of the gaining groups. In any case, with the Dow ending off the 27 points, that industrial composite is now fractionally below 19,800. It would seem that 20,000 is not on the immediate horizon. In the meantime, it was another day of limited economic news. Going forward this week, the headline event is Friday's data on fourth-quarter GDP.
Looking out at a new day now, the markets were mixed in trading in Asia overnight, but are higher on the Continent so far this morning. Oil, meantime, is up a few cents, as are Treasury yields. All of this is adding up to what seems likely to be a modestly higher opening on our shores when trading resumes shortly. – Harvey S. Katz
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
