After The Close
After yesterday’s mixed tone to trading, the bulls stormed back on Friday. Each of the major large-cap indexes opened higher, rising to all-time high levels throughout the day. Though a generally positive trend from third-quarter earnings season has helped to prop up the averages for most of the past few weeks, today’s uptick relied heavily on the prospect of tax reform. Still, earnings-related contributions from PayPal (PYPL) and the welcome late-in-the-day rebound of General Electric (GE –Free General Electric Stock Report) shares bolstered the optimistic tilt to the week’s final session. Also contributing to the daylong positivity was the morning’s better-than-expected report on existing home sales for September.
The positive update from Washington that helped to stoke today’s broad-based rally concerned tax reform. Specifically, the Senate approved a $4 trillion budgetary measure, paving the way for a simple majority requirement in passing a new tax code. As the post-election rally nears its one-year anniversary, this development served to encourage investors looking for more optimism on the corporate taxation front. Accordingly, the financials sector was one of several leading industry groupings today. JPMorgan Chase (JPM – Free JPMorgan Chase Stock Report) hit a record price while Goldman Sachs (GS – Free Goldman Sachs Stock Report) neared its own apex, which both supported the Dow’s gains.
Meanwhile, U.S. crude oil exhibited a markedly more moderate, but still positive, trend on Friday. The $0.18 per-barrel uptick was driven primarily by soft export totals in the Middle East, as tensions in Iraqi Kurdistan sow uncertainty into that region’s operations. Moreover, OPEC appears poised to extend cuts through next year. These two tailwinds helped offset weaker domestic demand data. The hope is that this slowdown is temporary, as stronger demand trends remain likely in 2018.
Overall, the 1.4-to-1.0 edge held by advancing stocks over declining issues benefitted from strength in the small-cap market. Looking forward, ongoing outperformance from a majority of companies in their quarterly reports could help to keep averages near their historical peaks, though we expect profit takers will continue to be opportunistic. When the reporting season concludes, the focus will turn to tax reform speculation as well as the Federal Reserve’s December meeting, where it is expected to raise interest rates. (Note: the next Fed meeting is October 31st and November 1st, when no interest rate adjustment is expected.) Stay tuned.
— 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 - 11:30 AM EDT
The stock market opened higher this morning, and has managed to maintain its gains, so far. As we approach the noon hour in New York, the Dow Jones Industrial Average is ahead roughly 79 points; the broader S&P 500 Index is up seven points; and the NASDAQ is higher by 22 points. Market breadth shows some support for equities today, as winners are ahead of losers on the NYSE. The technology and financial issues are displaying leadership, while the healthcare and consumer noncyclical names are lagging.
Meanwhile, traders received just one economic report this morning. Specifically, existing home sales came in at 5.39 million units, annualized, during the month of September. This showing was better than analysts had anticipated and an improvement over the August figure. Of note, despite monthly fluctuations, the housing market, which plays an important role in the broader economy, remains in solid shape.
Finally, the third-quarter earnings season is now in full swing. Over the past 24 hours, a number of widely-held names weighed in with their results. Specifically, shares of General Electric (GE – Free GE Stock Report) are trading lower, after the conglomerate posted weak results and tempered its outlook. However, the company’s new management seems committed to turning the business around. Further, shares of Procter & Gamble (PG – Free P&G Stock Report) are experiencing some selling, in response to a soft top-line showing.
Technically, the stock market continues to edge higher. While we have heard from a number of large companies over the past week, the third-quarter earnings season is far from over. Traders will, no doubt, we 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
After Wall Street had fashioned a modest win on Tuesday--with the Dow Jones Industrial Average nudging a bit past 23,000--only to end up just shy of that milestone at the close, investors really put on a blue chip show on Wednesday. On point, armed with strong quarterly revenue and profit performances from old-line technology behemoth International Business Machines (IBM – Free IBM Stock Report), the Dow moved past 23,000 once again, as IBM shares surged. Only this time, the move above 23,000 was not incremental, as that index rocketed ahead by 160 points on the day. So, it was not overly surprising that some profit taking would set in early yesterday.
And that is exactly what happened. Specifically, after stocks fell back somewhat in Europe earlier in the day, on political concerns in Catalonia, our market opened notably to the downside. In fact, as we approached the first hour of trading, the Dow Jones Industrial average had fallen back by just over 100 points. However, the damage was most severe on the NASDAQ, with that tech-laden index dropping by some 65 points, or about one percent. Things then would get a little better, but the market's undertone stay bearish, with shares of Apple (AAPL – Free Apple Stock Report), falling back by more than four points, leading the Dow and the NASDAQ both lower.
Pushing Apple shares lower were concerns about iPhone 8 sales, as we proceed through the quarter. Elsewhere, the stocks of some of the consumer cyclical concerns were faltering on profit concerns, while the more defensive-minded groups, such as health care, provided somewhat of an offset. Overall, though, the market was exhibiting some overdue weakness as we moved toward the noon hour on the East Coast on this penultimate trading day of the week. Even so, the late-morning comeback by the large-cap indexes persisted into the early afternoon, as the Street was not ready to concede much to the bears.
Meanwhile, there were some issues besides earnings to occupy the minds of investors. For example, after a mixed housing report on Wednesday and ahead of data on existing home sales later this morning, the Conference Board, a private research group, noted that its Index of Leading Indicators, had retreated modestly in September, registering a 0.2% drop. That was the first setback in a year and followed increases of 0.3% in July and 0.4% in August. The Board blamed the rash of September hurricanes for at least some of the surprise decline, as an uptick of 0.1% had been forecast.
Given the outlier status of the latest report, Wall Street did not seem to be overly concerned, so the market's midday comeback continued as the afternoon progressed. In all, the Dow, on some strength in health care, erased much of the earlier-day loss, even as Apple continued to trade sharply lower. The Dow then continued to gain traction as the afternoon wore on, while the NASDAQ remained notably lower, but off its session nadir. Among the other weaker groups were the packaged food companies, on earnings concerns following some disappointment from Unilever (UL).
The recovery then continued into the close, with this resilient market ending matters on a mixed note. Specifically, the Dow and the S&P 500 Index each posting nominal full-day wins, while the NASDAQ ended off nearly 20 points. Still, the NASDAQ's concluding deficit was less than a third of its midday trough. Looking ahead to a new day, now, we see that stocks in Asia were higher overnight, while in Europe the early action in the markets is notably better on upbeat earnings. Finally, Treasury yields, off yesterday, are trending solidly higher thus far this morning, as Federal Reserve Chair Janet Yellen prepares to speak, while the U.S. equity futures are posting strong early gains.
— Harvey S. Katz
At the time of this article's writing, the author had positions in AAPL.
At the time of this article’s writing, the author held positions in one or more of the companies mentioned.
