After The Close
Equities opened lower this morning, but managed to selectively recover as the day progressed. Traders took a somewhat cautious stance earlier today, possibly reacting to the tense climate in the Middle East. However, by the end of the session, sentiment seemed somewhat improved. Specifically, the Dow Jones Industrial Average closed up 69 points; the broader S&P 500 Index was ahead 11 points, and the NASDAQ was higher by 51 points.
Market breadth showed a divided session, with advancers just slightly ahead of decliners on the NYSE. The technology and basic materials sectors made some progress, led by strength in energy-related issues. However, the financials lagged the pack.
Meanwhile, it was a light day for economic news. The lack of information may have had traders concentrating on the situation abroad. Tomorrow, the pace should pick up a bit. We will get a look at the November trade balance, as well as the latest monthly factory orders. In addition, the ISM Non-Manufacturing Index for the month of December is due to be released. Looking toward the end of the week, on Friday morning, the government will weigh in with December employment report, and that issuance will likely be widely watched by those on Wall Street.
In corporate news, few widely held companies posted their quarterly reports today. However, 2019 is now over, and in the weeks ahead many companies will be posting their fourth quarter and full year numbers. Furthermore, fresh financial guidance for 2020 will be provided and that will be of some interest.
Technically, it is likely too early to know what 2020 will hold for the stock market. 2019 was certainly a very impressive year, and it remains to be seen if the bulls can keep the rally going.
– 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
Traders coming back from the New Year’s Day holiday had little time to savor a phenomenal performance on Wall Street in 2019, one that saw the Dow Jones Industrial Average, the NASDAQ Composite, and the broader S&P 500 Index deliver respective 12-month advances of 22.3%, 35.2%, and 28.9%. Indeed, the first two trading days of 2020 were busy ones, with a number of market-moving events at the end of last week. On Thursday, the world equity averages surged on reports that China’s central bank had cut the reserve requirements for banks. The move is designed to pump more money into China’s economy and boost sagging GDP growth. Then on Friday, the major indexes reversed course on reports that the United States had completed an airstrike on Iran, killing that country’s top general Qassem Soleimani, who was linked to the killing of Americans overseas. The heightened tensions in the Middle East unnerved investors and pushed oil prices higher.
As noted, the bears were out from the get-go on Friday after reports surfaced Thursday night that the United States had killed Iran’s leading general, who was supposedly planning another attack against American interest. That event unnerved investors, who are worried that the tensions in the Middle East could potentially disrupt the world’s oil supplies and ultimately the performance of the world’s largest economies. The major averages started the bearish session notably to the downside, tried to stage a rally, but ultimately finished with sizable losses that wiped out a portion of Thursday’s outsized gains. At the closing bell, the Dow 30, NASDAQ, and S&P 500 Index were down 234, 71, 23 points, respectively. The domestically dominated small-cap Russell 2000 fared a bit better, but finished in the red too. From a sector perspective, nearly all of the 10 major equity groups finished in negative territory, save for the energy and defensive-oriented utilities. There was clearly a “flight-to-safety” strategy invoked by many investors during the week’s final trading session.
Meantime, the news on the U.S. economy did not provide investors with much to cheer about either on Friday. At 10:00 A.M. (EST), the Institute for Supply Management reported that manufacturing activity contracted in December, falling from 48.1% in November to 47.2% last month. It marked the fifth-consecutive monthly contraction, and the weakest reading since June 2009. The disappointing news on the economy short-circuited a brief early morning comeback on Wall Street after the large initial selloff on the escalating geopolitical tensions.
Speaking of the economy, it will be a busy week of reports from the business beat. The companion ISM report on nonmanufacturing activity and the latest trade gap data will be released tomorrow. Then at the end of the week, investors will get the latest figures on employment and unemployment from the Labor Department. The consensus expectation is that December nonfarm payrolls expanded by 155,000. Last month the market got a boost from a surprisingly strong November jobs creation. Investors should note that before we receive the labor market data on Friday, we will get commentary on monetary policy from several Federal Reserve presidents and FOMC voting members.
With less than an hour to go before the commencement of the first full trading week of 2020, the equity futures are indicating another lower opening for the U.S. stock market. The escalating concerns about the rising tensions in the Middle East has investors worried. The CBOE Volatility Index (or VIX), the measure of fear in the market, jumped 26% on Friday and is likely moving higher again at the start of this week’s first trading session. So far overseas, the mood has been bearish, with the main indexes in Asia finishing lower overnight and the major European bourses in the red as trading moves into the second half of the session on the Continent. 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.
