After The Close
On a Tuesday dominated by corporate earnings, the Dow Jones Industrial Average rose to another all-time high level behind quarterly outperformance and subsequent stock price climbs registered by Caterpillar (CAT – Free Caterpillar Stock Report) and 3M (MMM – Free 3M Stock Report). The S&P 500 and NASDAQ, somewhat mirroring the breadth on the broader market, shook off early choppiness and spent the majority of the session in positive territory. By the closing bell, however, the latter composites shed a large portion of their daily highs, while advancing and declining stocks were roughly even. Where the Dow opens tomorrow will partly hinge on AT&T’s (T) results for the recent quarter, which will be published after trading.
Meanwhile, traders are also awaiting developments on tax reform, one of the principal catalysts of the ongoing post-election rally. House Republicans are set to introduce their version of a tax bill next Wednesday, which could steal away some focus from earnings. Recent optimism has stemmed from comments made by Treasury Secretary Steven Mnuchin, further supporting equities on their way to setting historic highs. As the singular most important economic issue for the GOP as midterm election season nears, we expect an aggressive push to occur through the end of the year. Accordingly, financial issues were among the best-performing today.
Another area of strength today was the energy sector. U.S. crude oil advanced 1.1%, to $52.47 a barrel, due mostly to indications from Saudi Arabia that the nation was willing to extend OPEC’s drilling cuts through 2018. The current deal, which requires the cartel’s member nations (plus Russia) to reduce 1.8 million barrels per day, expires in March. Recently, some encouraging comments from Russia and other components have helped to stoke crude prices to their current level. Stateside, analysts are expecting a 2.5 million decline in inventory levels. At 4:30 PM (EST), the American Petroleum Institute will release its weekly supply report, while the Energy Information Administration unveils its data tomorrow.
We expect more strength from Corporate America will spur the averages higher in the coming weeks. While bouts of selling in the form of profit taking are to be expected, this bullish market continues to rely on a gradually strengthening U.S. economy and the hope that tax reform will be enacted. Stay tuned.
— Robert Harrington
At the time of this article’s writing, the author did not have any positions in the companies mentioned.
Mid-Day Update - 12:15 PM EDT
The major stock market averages are moving nicely higher today, as traders digest the latest batch of corporate profit reports. At roughly noon in New York, the Dow Jones Industrial Average is ahead 200 points; the broader S&P 500 Index is up six points; and the NASDAQ is higher by 18 points. Meanwhile, winners are ahead of losers by a somewhat narrow margin on the NYSE, indicating that there may be some stocks that are not fully participating in today’s advance. For example, the energy and industrial issues are pressing ahead, but the healthcare and consumer non-cyclical names are encountering some selling.
There were no important economic news items reported this morning. Tomorrow will be a somewhat busier day. Of note, the new home sales figures for the month of September will be released. Further, we will get a look at the latest monthly durable goods orders. In addition, the EIA is slated to publish the weekly crude oil inventory numbers.
Elsewhere, the third-quarter earnings season continues to gather steam. So far, the reports that we have seen have been generally upbeat. Today, a couple of bellwether companies weighed in with their numbers. Specifically, shares of Caterpillar (CAT – Free Caterpillar Stock Report) and 3MCompany (MMM – Free 3M Stock Report) are moving ahead today in response to encouraging reports. The moves in these names may be lending support to the larger cap names in general. After the market closes today, we will hear from AT&T (T).
Technically, the stock market is pressing ahead again, as traders may be feeling confident that the corporate sector and global economic outlook remain in good shape. Also, on the political horizon, many on Wall Street are watching to see if some progress can be made on tax-reform measures.
— 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
Following up on yet one more record week for the stock market, including a big finish on Friday, Wall Street began the current five-day span with a further modest gain, enabling the major large-cap indexes to race to new records in early trading yesterday. The good news would then selectively continue through the first hour, with the Dow Jones Industrial Average and the S&P 500 both continuing to climb, if just modestly. Behind the ongoing strength is optimism about earnings and the hope for a meaningful tax cut package.
As to earnings, the results so far for the third quarter have been more than satisfactory, as some three-fourths of the companies in the S&P 500 that have reported to date have surpassed the consensus expectations for the period. Meantime, a whole host of large, well-known companies are due to issue their metrics this week. If last week's experience is a guide, the reception should be positive. In addition to earnings, there will be more rhetoric on tax reform, although here, there is unlikely to be any concrete change for several months, at least.
Then, there is the economy and the Federal Reserve. On the former front, we will be getting data on orders for durable goods tomorrow, while on Friday, the government will be issuing its first, or advance, estimate on third-quarter GDP. Growth in the recently ended three-month span was hurt by the succession of devastating hurricanes, and probably limited to about 2.5%. Had there not been such weather disruptions, the increase in growth likely would have been in the 3% range. An uptick in this latter area seems in prospect for the current period.
Meanwhile, the market, after this quick start, faltered as the afternoon began, with the NASDAQ, weak for most of the session continued to fall, while the Dow and the S&P 500 joined it in the red, albeit much less seriously so. The main pressure on the market, in addition to the tech stocks, were the shares of General Electric (GE - Free GE Stock Report). That issue, which rebounded strongly on Friday, even as the company issued disappointing quarterly results, on upbeat hopes for the futures, came crashing down yesterday, on rising fears of a dividend cut next month.
All told, General Electric shares fell more than six percent on the day, closing down by just over $1.50 to $22.32 a share. At this price, the yield is comfortably above 4%. As to the Fed, the central bank will be meeting next week, with almost universal expectations that the bank will hold the line on interest rates. Most now expect a rate hike at the next meeting in mid-December. As to the market down the stretch, it fell further, with little or no buying spurts in between. All of the leading sectors faltered, several notably.
At the close, the market was decidedly lower, with the Dow off 54 points, ending matters at the session lows, while the S&P 500 Index concluded trading with a deficit of 10 points. Larger percentage declines were suffered by the NASDAQ and the small-cap Russell 2000. All told, losing stocks held a formidable lead on gaining issues, by the count of about two to one on the Big Board. On the whole, it was a day for profit taking and some skittishness ahead of further earnings data and economic issuances.
Now, a new day gets under way, and for clues about today's action stateside, we look over at Asia for a glimpse of overnight action. There, the markets were mostly higher in trading overnight. In Europe, the bourses are moving in an upward direction, as well at this hour. As to our futures, the early read is modestly positive.
— Harvey S. Katz, CFA
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
