After The Close
The equity markets opened higher this morning, and managed to make selective progress during the afternoon. At the end of trading, the Dow Jones Industrial Average was ahead about 153 points; the broader S&P 500 Index was up 10 points; and the NASDAQ was higher by 21 points. Market breadth was supportive, as advancers easily outnumbered decliners on the NYSE. From a sector standpoint, the healthcare and basic materials issues displayed some leadership, while the telecommunications and energy names weighed on the market.
Meanwhile, there were a few upbeat economic reports released this morning. Specifically, the ISM Manufacturing Index advanced to a reading of 60.8 during the month of September, surpassing analyst expectations. In addition, construction spending increased by 0.5% in the month of August, which was also a positive development. Tomorrow will be a light day for economic news. Although, auto and truck sales for the month of September are due to be released. Looking ahead, the government will deliver the latest monthly employment numbers at the end of this week, and that issuance may well influence trading over the next few days.
Finally, few corporations released financial reports today. However, shares of Cal-Maine Foods (CALM) moved up after that company’s report. In the M&A space, shares of Nordstrom (JWN) headed lower today, on news that the upscale retailer’s efforts to be taken private may be hitting a speed bump.
Technically, stocks continue to move higher, with some of the major averages near new high ground. Despite problems on some fronts, traders are likely optimistic about the direction of the economy and may be looking for progress on the tax reform issue. - 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 - 12:40 PM EDT
The major U.S. equity indexes started the month of October where they left off September, which is in positive territory, as investors are hoping that President Donald Trump's tax reform could make some headway in Washington, D.C. this week. However, like what we saw quite often last month, the averages are still not too far removed from the neutral line. Our sense is that investors may be waiting for third-quarter earnings season, which is about a fortnight away from commencing, before making any major moves in either direction. It is worth noting the S&P 500 Volatility Index (or VIX), also known as the “fear gauge,” sits below 10, a level that suggests investors are clearly not shying away from risk these days.
As we move past the midday hour on the East Coast, all of the major averages are in positive territory, with the gains actually widening in the last 90 minutes, likely prompted by a strong report on the U.S. economy this morning (see below). The leadership is coming from the small-cap stocks too, which is a good sign that today’s move higher may have some sustaining power to the closing bell. As far as the large-cap indexes go, the Dow Jones Industrial Average, the NASDAQ, and the S&P 500 Index are sporting respective gains of 56, 17, and 4 points. Overall, advancing issues are outpacing decliners on both the Big Board and the NASDAQ, with the spread widening on both exchanges.
As we noted in our pre-market commentary, the investment community would be looking closely at the U.S. economy this week—and this morning the data made for a nice reading. Specifically, the Institute for Supply Management, a Tempe, Arizona-based trade group, reported that manufacturing activity expanded by 60.8% in September, an increase of 200 basis points from the August reading and nicely above the consensus expectation. It marked the 13th consecutive month of growth in manufacturing and is the highest reading since May, 2004. The advance, which included growth in 17 of the 18 manufacturing industries, was driven by significant increases in new orders, prices, and supplier deliveries. In all, it was a terrific report on manufacturing and is providing some support for stocks.
Looking at trading from a sector perspective, we are seeing mostly up arrows among the 10 major equity groups, with the leadership coming from Friday’s biggest gainers: healthcare and technology. There also is some interest in the basic materials sector, with the aforementioned strong manufacturing report helping the basic materials stocks. Conversely, we are seeing some profit taking this morning in the energy and telecom groups. The higher U.S. dollar is taking some starch out of the energy stocks, while higher fixed-income yields are hurting the telecom issues.
Looking ahead to the second half of the session, the bulls are holding the modest upper hand. That said, we think they are in good shape, with the highest-weighted technology sector leading the way higher today. 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.
Before The Bell
The month of September, a historically difficult one for those long equities, proved to be anything but this year. The typical volatility was nowhere to be found during the 30-day stretch, as the major averages traded in a tight band around the neutral line. In general, there seems to be a bit of complacency among traders, with not much of an impetus to push the indexes much higher from their already lofty perches, though for the month, the Dow Jones Industrial Average, the tech-heavy NASDAQ, and the broader S&P 500 Index did rise 1.8%, 1.0%, and 1.9%, respectively.
With the earnings beat rather quiet, traders looked for news from other places, but never got anything that would be considered major market-moving events. The three things of interest last month for investors were the political scene in Washington D.C., the United States’ escalating tensions with North Korea, and the Federal Reserve’s latest monetary policy decision. Although the environment on Capitol Hill is still very fractious, there were no developments that upset Wall Street. Senate Republicans were unable to muster enough votes to repeal the Affordable Care Act. Likewise, the Federal Reserve’s monetary policy decision did not move the markets much, as the central bank did as expected and kept the federal funds rate steady at 1.00% to 1.25%. However, that dovish move was offset somewhat by the announcement that the lead bank will begin reducing its bloated balance sheet this month and growing continued sentiment that an interest-rate hike is now quite possible in December if the economic data (see below) were to operate. Thus, trading was rather muted following the conclusion of the FOMC meeting last Wednesday.
On Friday, it was more of the same for the U.S. equity market, as the major averages never strayed too far away from the breakeven line. For the session, the Dow 30, NASDAQ, and the S&P 500 Index gained 24, 43, and nine points, respectively, with the leadership coming from the NASDAQ. After a weak stretch, the technology stocks rallied on the final trading day of September, which worked in the favor of the NASDAQ. Overall, it was a bullish session for stocks, with the small- and mid-cap sectors finishing the day in the black. Advancing issues led decliners on both the New York Stock Exchange and the NASDAQ, and nearly all of the 10 major equity groups finished the session with up arrows, led by the healthcare and technology areas. The only laggard was the utilities sector, and the selling was quite muted there.
Looking to the week at hand, the attention of the investment community will turn to the economy, as we are still a few weeks away from earnings season beginning in earnest. On the business beat, we will get data manufacturing activity (10:00 A.M. EDT today), vehicle sales, private-sector payrolls, and nonmanufacturing activity. And the much anticipated report on employment and unemployment data from the Labor Department will be released this Friday. The data will be scrutinized for more clues about how the central bank will proceed with regard to monetary policy. Investors should note that the Federal Reserve will commence its next two-day FOMC meeting on the final day of October.
With less than an hour to go before the start of trading stateside, the equity futures are presaging a higher opening for U.S. stock market. The month of October, which at times has proven difficult for stocks, will begin to the upside. So far today, we have seen the U.S. dollar rise, as fixed-income yields hit their highest level since mid-July. News of a violent police crackdown on an independence vote in Catalonia, Spain rattled investors on the Continent and led to a spike in Spain’s borrowing costs. Meantime, Americans are waking up this morning to news of another devastating attack on U.S. soil. A gunman at a high-rise hotel opened fire on a country music festival on the Las Vegas Strip late last night, killing at least 50 people and wounding more than 200 in the deadliest mass shooting in modern American history. Our hearts go out to the victims and their families this morning. 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.
