After The Close
The stock market moved nicely higher this morning, fueled by news of a new trade agreement between the United States, Canada, and Mexico. Nonetheless, by the end of the day, the session took on a mixed tone, with the Dow Jones Industrial Average ahead 193 points; the broader S&P 500 Index up 11 points; and the NASDAQ lower by nine points. Market breadth showed a divided session, too, with decliners slightly outpacing advancers on the NYSE. From a sector perspective, the energy and basic materials issues managed to gain ground, while the utility names retreated.
Traders received a few economic news items this morning. Specifically, the ISM Manufacturing Index came in at 59.8 for the month of September, which more or less met expectations. Elsewhere, construction spending increased 0.1% in August, where a slightly stronger figure had been anticipated. Tomorrow we will get a look at the latest monthly motor vehicle sales. Later in the week, the government’s September employment report is due out.
In corporate news, shares of Tesla (TSLA) surged on reports that the company’s founder and CEO reached a settlement with the SEC. In addition, shares of General Electric (GE) moved higher on news that the conglomerate has replaced its CEO. Investors are likely hoping that the new management will be more aggressive about turning things around.
Technically, the stock market has been quite resilient over the past several months. Looking ahead, much will depend on the health of the corporate sector. Of note, we will get a closer look at this in more detail, as the third-quarter earnings season unfolds.
– Adam Rosner
At the time of this article’s writing, the author had a position in General Electric (GE).
Before The Bell
The U.S. equity market delivered a mix performance last week, but the overall tone of trading was slightly more bearish than bullish. On the negative side were respective setbacks for the Dow Jones Industrial Average, the S&P 500 Index, and the small-cap Russell 2000 of 1.1%, 0.5%, and 0.9%. Conversely, the technology heavy NASDAQ Composite produced a gain of 0.7%. The slightly bearish mood was the product of a news week that brought more reports that would shake than embolden investors (see below).
On Friday, the U.S. equity market finished with a flat showing. The Dow 30 and NASDAQ ended slightly higher, while the S&P 500 Index was down nominally, though, as noted, all the indexes were none too far removed from the neutral line. However, there was a bullish undertone to trading, with the small-cap stocks (the Russell 2000 was the best performing index among the major averages) producing the biggest gain on the day. Overall, advancing issues led decliners by a comfortable margin on both the New York Stock Exchange and the NASDAQ. The leadership came from the defensive-minded and higher-yielding utilities, telecom, and consumer staples groups. Some worries overseas about Italy’s financial health prompted the push into more defensive-oriented issues. The yield on the 10-year Treasury note, which moves inversely to the price, retreated a bit on the final trading day of last week.
In general, the news that would be considered market-moving last week was a bit more bearish than bullish, and thus most of the major averages, as noted, finished lower. The trade bickering between the United States and China remains fluid, and President Trump’s “America First” speech before the United Nations General Assembly did nothing to change the situation. Likewise, the Federal Reserve tightened the monetary reins on Wednesday, which is often not viewed favorably by the market. However, last week, the interest-rate hike did not produce a selloff, as the market appears too had already baked two increases (last week and in December) this year. The ongoing contentious environment on Capitol Hill is not great for the market either. Conversely, continued strong data on the U.S. economy, which included an 18-year high reading on consumer confidence from the Conference Board last Tuesday, are providing support for equities.
Looking ahead to the week at hand, the situation in Washington remains fluid, with trade relations between the Trump Administration and China still rather icy. The trade dispute, along with the ongoing fighting on Capitol Hill over President Trump’s pick for the Supreme Court, have the potential to drive trading. With the third-quarter earnings season still about a fortnight from heating up, reports on the economy will take center stage. We will get some very important releases, including the latest data on manufacturing (today at 10:00 A.M. EDT) and nonmanufacturing activity. And, the investment community will be eagerly awaiting the latest reading on employment and unemployment at the end of the busy week. The Department of Labor will release September nonfarm payroll figures at 8:30 A.M. EDT on Friday.
With less than an hour to go before the commencement of the new trading week stateside, the equity futures are presaging a sharply higher opening for the U.S. equity market. The Dow futures were up around 200 points earlier this morning. Overseas, the main indexes in Asia finished higher overnight, while the major European bourses are in the black, as trading moves into the second half of the session on the Continent. What is driving the international stock markets higher was news late last night that trade ministers from the United States, Mexico, and Canada have reached a deal to revamp the North American Free Trade Agreement, which will be renamed if it gets approval from Congress. On Wall Street the accord is being viewed as a big win for the Trump Administration in its effort to revamp the nation’s international trade deals—and the market is responding in kind with the first trading day of the final quarter of 2018 looking to be a very bullish one for traders. Stay tuned.
- William G. Ferguson
