Before The Bell
Once more yesterday, optimism on the fiscal stimulus front was on the rise. And that sentiment gave stocks an early lift. On point, one day after some initial bullishness had been seen in that area, only to be dashed by a return to late-in-the day pessimism, the bulls were at it again and stocks were on the rise.
To recap, after several weeks of back and forth on the stimulus side, House of Representatives Speaker Nancy Pelosi put in a 48-hour deadline on reaching a pact in Congress. That imposed deadline sent both sides looking aggressively to reach a deal by day's end. If an accord was not reached, a pact would have to wait until after the election, something for which neither side wanted to take the blame.
As the morning proceeded, no agreement had been struck, but the stock market did manage to retain solid gains into the early afternoon, with the Dow Jones Industrial Average retaining an advance of some 180 points as we passed the noon hour in New York. Then, after the Speaker said that a deal was possible by the day's end, the averages pushed to their session highs, with the Dow climbing by about 300 points.
Meanwhile, in other news yesterday, the Commerce Department issued data housing that both housing starts and building permits had risen further in September, as low interest rates and cramped supply sent builders in a rush to put up new homes. Then, after Ms. Pelosi voiced optimism that a deal could get done by the deadline, stocks got a further lift, and by just after 1:00 P.M. (EDT), the Dow was up by 380 points.
That mid-session surge would prove to be the day's peak as would talks on the stimulus front. Of course, it also is earnings season, and a number of heavyweights reported their results during the day. Two we would like to focus on are Procter & Gamble (PG) and IBM (IBM). P&G, which did well on the top and bottom lines, edged higher during the deadline. That it did not do better may have been the fact that the issue was already near its 52-week high.
IBM, though was another, missing expectations on the top line. That news was poorly received and the stock dropped more than eight points or 6.5%, bringing the issue down to its lowest point since July. Then, after the close Netflix (NFLX) reported and missed on subscriber growth and the bottom line, sending the stocks down sharply in afterhours trading.
As for the market, it would end higher, but well off of its best levels of the day, with the Dow concluding matters in the green by 113 points. The S&P 500 would add 16 points and the NASDAQ would be better by 38 points, breaking a mini-losing streak. Finally, after yesterday's talks, no agreement had been reached by the evening and Ms. Pelosi and the Treasury Secretary will speak again today, thereby extending the Speaker's deadline.
Then, after Washington had raised hopes during the day for a deal and no one was forthcoming, stocks did little overseas during the night. It is much the same story on our shores this morning, with equities rather flat. Finally, Tesla (TSLA) will report its results after the close today. Stay tuned.
– Harvey S. Katz, CFA
At the time of this article's writing, the author did not have positions in any of the companies mentioned.
