After The Close
The stock market advanced nicely this morning and managed to selectively hold onto its gains through the afternoon. An encouraging batch of corporate reports and optimism about better trade relations with China likely helped fuel today’s advance. Breaking news during the day that the government shutdown appeared likely to end on at least a short term basis did not seem to register much of a reaction from Wall Street. At the end of trading, the Dow Jones Industrial Average was ahead 184 points; the S&P 500 Index was up 22 points; and the NASDAQ was higher by 91 points. Market breadth showed broad based participation, with advancers well ahead of decliners on the NYSE. Leadership was found in the technology and basic materials names, while weakness was seen in the high-yielding utility stocks.
In economic news, looking ahead to next week, things will be eventful. Specifically, on Wednesday, the FOMC will wrap up its two-day meeting with an interest-rate decision and some prepared remarks. We do not anticipate a further rate hike at this juncture. On Friday, the employment situation will be in the spotlight, as the government delivers the January jobs report.
Meanwhile, the fourth-quarter earnings season is still taking shape. So far the results have probably been a bit better than some investors may have expected. Over the past 24 hours, we heard from a few widely followed companies. Specifically, shares of Starbucks (SBUX) moved up, after the coffee giant delivered encouraging results. However, in the technology area, shares of chip maker Intel (INTC – Free Intel Stock Report) moved lower on concerns about the outlook.
Technically, the stock market advance that commenced at the beginning of this year remains in place. From here, the next key challenge for the bulls will be to push the S&P 500 Index back above its 200-day moving average, now located at the 2,740 area.
- 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 market would then follow this early selective selloff with an attempt at a mid-session recovery and meet with some success in the effort. That was especially so with the NASDAQ, which would jump ahead to a late-morning gain of more than 50 points, on the aforementioned strength in the chip stocks, which were led by an outsized gain in shares of Texas Instruments (TXN). Indeed, for a time, this was a tide that was lifting all boats, as the Dow and the S&P both went positive for brief spells. However, as the afternoon began, the sellers returned and the Dow would drop by more than 150 points at one stage.
Holding recovery efforts at bay were the comments by the Commerce Secretary on trade relations with China. His suggestion that the two nations were still far apart on a deal runs counter to some prevailing cautious optimism on the subject. Recent rallies in the market, in fact, have followed more upbeat trade pronouncements. Wall Street also was under some pressure after comments by another Administration official, released on Wednesday, that there could be no growth in the current quarter should the shutdown last through the end of the period.
Helping to mitigate the midday losses in the market were additional strong corporate results, with chipmaker Texas Instruments posting solid numbers. As noted, that stock rose nicely on the day, bringing other similar companies along for the ride. Overall, results are coming in largely as forecast, on both the top and bottom lines. Finally, there is the contentious government shutdown, which continues in place and for which there seems no satisfactory short-term answer. Even if the shutdown were to end fairly soon, and there is some optimism on that count this morning, the damage to the economy would be rather measurable.
The market would then continue on an uneven, but largely positive, track into the close. In all, as the final bell sounded, the Dow Industrials, on those trade concerns, would be off by just 22 points, while the S&P 500 Index, the NASDAQ, and the smaller composites would all end higher on the day, while advancing stocks would hold a nice lead on decliners. Then, after the bell, chip making giant and Dow component Intel (INTC – Free Intel Stock Report) would release its results. That stock, up sharply in regular hours trading, fell back sharply in the after hours as results were reported, which came up short on revenues and guidance.
The Intel miss, meantime, appears unlikely to have an effect on trading this morning. Indeed, shares in Asia were higher in the overnight hours, while in Europe, the bourses are trending upward, as well. Also, oil quotations are essentially flat and Treasury note yields, off yesterday, are trading with early gains this morning. Finally, U.S. equity futures are suggesting a nicely higher opening on some optimism that the government shutdown may end sooner rather than later.
