After the Close
U.S. stocks traded mostly lower on the final day of a week that saw investors juggle earnings reports, economic data, and a bevy of freshly signed executive orders from newly inaugurated President Trump. And while each of the major indices spent some time in positive territory early on, only the NASDAQ showed signs of recovery as the afternoon progressed. Some investors likely took some selective profits following the rally earlier this week.
Of course, the headlining story of the week was the Dow Jones Industrial Average’s crossing of the 20,000 threshold. The psychologically relevant milestone had been elusive for several weeks, temporarily stalling the multi-week rally that followed the business-friendly Trump’s surprise election victory. But, investor sentiment was boosted by the policy declarations from the President. While an executive order does not guarantee a law, it indicates to the market that campaign promises were being followed through early on. Authorizations of the Keystone XL and Dakota Access Pipeline, infrastructure strategy updates, and other decrees all contributed to the bullish trend seen in trading earlier in the week. Continued optimism of a cut to the corporate tax rate has been a boon for trading, as well.
The flurry of activity from the White House came just as earnings season started heating up. Already, investors parsed through the corporate earnings from a number of industries. Today saw Dow component Chevron (CHV - Free Chevron Stock Report) miss on earnings and hint at some asset sales in the future, which sent its shares several percentage points lower. This worked to offset positive market reactions to yesterday afternoon’s quarterly reports from technology giants Microsoft (MSFT - Free Microsoft stock Report) and Intel (INTC - Free Intel Stock Report). Accordingly, the energy sector was the biggest laggard among the 10 major equity groups, while technology was one of only two major market sectors to deliver full-day advances, helped by the aforementioned blue-chip companies. Earnings will continue to play a large role in trading over the next few weeks.
As for U.S. economic data, the Department of Commerce released its fourth-quarter GDP estimate. The 1.9% annual rate was below consensus expectations, and a notable deceleration from the third quarter’s 3.5% reading. Positive activity in personal consumption expenditures, residential and nonresidential fixed investment, and higher spending at the state and local levels of government were modest silver linings. Also of note, the University of Michigan’s January reading on consumer sentiment was very strong.
A spate of selling in the final hour saw many equities set new intra-day lows, with a more than 1.5-to-1 advantage for declining issues at the end of the session on the NYSE. As was the case earlier in the week, market breadth is being held back by the mid- and small-cap issues. In all, though, the midweek run-up was more than enough for each of the three major indexes to hold on to full-week gains, despite today’s pullback in the S&P 500 and Dow. As the new Presidential Administration continues to establish its priorities, investors will look for more follow through on certain policies in order to maintain the market’s overall momentum. – 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 - 12:15 PM EST
Stocks are putting in a somewhat sluggish performance today. At just past noon in New York, the Dow Jones Industrial Average, the broader S&P 500 Index, and the technology heavy NASDAQ are all about flat. Market breadth shows some underlying weakness to the session, as decliners are outpacing advancers on the NYSE. Most equity groups are trading in negative territory, with notable losses in the energy and consumer issues. Meanwhile, the healthcare and technology names are managing to move higher.
Today’s economic news was not too encouraging. Specifically, the advance reading for fourth-quarter GDP showed the economy expanding at 1.9%, where analysts had been looking for a better showing. Elsewhere, durable goods orders dipped 0.4% in the month of December, where a small increase had been anticipated. On a brighter note, the consumer still feels upbeat, according the latest University of Michigan consumer sentiment reading.
Elsewhere, in the corporate arena, a number of leading names posted their results over the past 24 hours. Specifically, in the technology sector, shares of Microsoft (MSFT – Free Microsoft Stock Report) and Intel (INTC – Free Intel Stock Report) are trading higher, in response to solid reports. In the consumer space, shares of Starbucks (SBUX) are off after the coffee seller delivered a soft report.
Technically, the stock market has managed to make some progress during the first weeks of 2017. Of note, the fourth quarter earnings season has started, and so far the results have been decent. However, there are still many more corporations to report and traders will likely be watching carefully. – 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
To say it was a busy week for investors would be an understatement, as Wall Street has had to digest a plethora of information over the last four days, and that will continue again today. In addition to the heavy dose of earnings reports released this week, which for the most part has surprised to the upside, the investment community has received some important news on the economy and has been focused on President Trump’s actions and words during his first few days in office. In general, the investment community’s reaction has been quite positive, as each of the major U.S. equity indexes set new all-time highs this week, including the Dow Jones Industrial Average rising passed the psychologically significant 20,000 mark for the first time.
However, yesterday, the market took a bit of a breather after a landmark performance earlier in the week, with some selective profit taking on display during a rather directionless session. The Dow Jones Industrial Average ended the session to the upside, adding 32 points, to finish slightly above 20,100. The tech-heavy NASDAQ and the broader S&P 500 Index were relatively flat, falling by one and two points, respectively. The broader small and mid-cap sectors were the weak areas yesterday, which, along with data showing declining issues leading advancers on both the New York Stock Exchange and the NASDAQ, contributed to the slightly negative undertone to trading during much of yesterday’s session. Most of the 10 major equity groups finished in negative territory, lead lower by the basic materials and consumer staples stocks.
There is no rest for Wall Street during the final day of this trading week. The investment community is in the process of delving through a number of earnings reports this morning. After the close of trading yesterday afternoon, we received the latest quarterly results from a number of industry bellwethers, including technology giants Alphabet (GOOG), Microsoft (MSFT), Intel (INTC), as well as Starbucks (SBUX) and PayPal (PYPL). At first blush, the results look mixed. Then this morning, Dow-30 component and Oil giant Chevron (CVX) reported its quarterly results, which is also expected to receive a lot of Wall Street’s attention. Our sense is that the earnings news will play a big role in the performance of the stock market today.
Meanwhile, the investment community also is keeping close tabs on the business beat. Just minutes ago, the Department of Commerce reported its first estimate for fourth-quarter GDP. Specifically, real gross domestic product increased at an annual rate of 1.9% in the fourth quarter of 2016. That figure, which fell short of consensus expectations, reflected positive contributions from personal consumption expenditures, private inventory investment, residential fixed investment, nonresidential fixed investment, and state and local government spending. Those gains were partly offset by negative contributions from exports and federal government spending. Imports, which are a subtraction in the calculation of GDP, increased. For all of 2016, GDP increased 1.6% in 2016, compared with an increase of 2.6% in 2015. The deceleration in GDP from 2015 to 2016 reflected a downturn in private inventory investment, a deceleration in personal consumption, a downturn in nonresidential fixed investment, and decelerations in residential fixed investment and in state and local government spending that were offset by a deceleration in imports and accelerations in federal government spending and in exports. In separate news, the Commerce Department reported that new orders for manufactured durable goods in December decreased $1.0 billion or 0.4%, to $227.0 billion. The decline follows a 4.8% decrease in November. These two reports cap off a week that brought mixed readings on the housing market. On Tuesday, the National Association of Realtors reported that existing home sales came in at the highest level in nearly a decade, but yesterday’s data from the Commerce Department showed that new home sales fell by more than 10% sequentially last month.
Meantime, the news from Washington D.C. will continue to grab some of Wall Street’s attention, as new President Donald Trump, who will meet with Britain Prime Minister Teresa May to discuss a number of issues, including trade relations between the two allies, is expected to issue some more executive orders before the conclusion of this busy trade week. As we have seen earlier this week, the news from the White House has the potential to push the stock market in either direction. That said…
With less than an hour to go before the commencement of trading stateside, the equity futures are presaging a mixed opening for the U.S. equity market. This is not overly surprising, as it may take the investment community some time to draw conclusions about the heavy dose of economic and earnings reports we have received since the close of trading yesterday. 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.
