After The Close
The bulls were off and running at the opening bell and scarcely looked back, driven by a row of strong earnings from the technology sector. The NASDAQ 100 and S&P 500 indexes each reached historic highs and remained there through the closing bell, with the former boasting an impressive 142-point gain. Google-parent Alphabet (GOOG) and Amazon.com (AMZN) were two of the top gainers today.
The Dow Jones Industrial Average shook off early choppiness behind a surge in the buying of Intel (INTC – Free Intel Stock Report), Microsoft (MSFT – Free Microsoft Stock Report), and, to a somewhat lesser degree, Apple (AAPL – Free Apple Stock Report) stock. The Dow was by no means buoyant across the board, however, with a cyberattack report overshadowing Merck’s (MRK – Free Merck Stock Report) profit performance and General Electric (GE – Free General Electric Stock Report) continuing its five-day slide.
As outlined in our midday commentary, the daylong upturn in trading was also partly inspired by the business beat. A better-than-expected quarterly GDP report and a decent consumer sentiment reading helped bolster the bullish tilt to today’s market. Though the Federal Reserve is unlikely to increase interest rate levels at next week’s meeting, a hike at their December summit is highly likely.
Today’s optimism was nearly ubiquitous, with only the basic materials and noncyclical consumer goods sectors closing the session in negative territory. While the aforementioned momentum from the tech sector was the main force on Friday, the consumer cyclicals, energy, and utility aggregates also enjoyed sizable run ups. Small-cap trading was upbeat as well, with overall market breadth showing a 1.6-to-1.0 lead by advancing shares.
Meanwhile, oil rallied again on reassurance from Saudi Arabia that the nation supported an extension of OPEC’s drilling accord. The affirming comments from the Crown Prince echoed similar statements from Russia, and helped drive U.S. crude oil prices 2.4% higher on Friday. OPEC-related optimism also helped to offset concerns about rising domestic production. These worries adversely hurt the price of Dow-component Chevron (CVX – Free Chevron Stock Report), which contributed to the relatively choppy pattern of the blue chip index.
Looking ahead, the dominant story next week will be earnings season, with some updates from the Federal Reserve also playing a part. We would not be surprised to see some midweek tug-of-war occurring, as some investors look to collect profits with many equities at or near their all-time highs. Also of note is Wednesday’s planned tax reform proposal from the House GOP, which traders hope will offer some transparency as government leaders race to implement a policy change by the end of the year. 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 - 12:00 PM EDT
The stock market is advancing again today, helped by a series of upbeat earnings reports in the technology sector. At roughly noon in New York, the Dow Jones Industrial Average is ahead about 30 points; the broader S&P 500 Index is up 19 points; and the NASDAQ, which is displaying leadership, is higher by 121 points. Meanwhile, market breadth indicates some unevenness in today’s session, as advancing issues are just moderately ahead of decliners on the NYSE. As we mentioned, technology stocks are up sharply. And some of the energy names are also making progress. In contrast, the consumer non-cyclical stocks and the basic materials issues are areas of weakness.
Traders received a couple of economic reports this morning. Specifically, according to the advance estimate, the nation’s GDP increased at an annualized rate of 3.0% during the third quarter. This showing was better than analysts had anticipated. Elsewhere, the University of Michigan’s consumer sentiment figure for the month of October was finalized at 100.7, which while slightly lower than expected, was still a respectable reading.
Elsewhere, the third-quarter earnings season is in full swing. We heard from a number of technology giants over the past 24 hours. Specifically, shares of Alphabet (GOOG), Amazon.com (AMZN), Microsoft(MSFT – Free Microsoft Stock Report), and Intel (INTC – Free Intel Stock Report) are all moving up, in response to encouraging profit reports. In contrast, shares of Gilead Sciences (GILD) are off, as Wall Street was unimpressed with the biotechnology operator’s results.
Technically, the stock market continues to press ahead. The rally may continue, too, as the third-quarter earnings season is not yet over.
— 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
Once again, corporate earnings were the big story, as Wall Street also waits for progress on tax reform to evolve. On that latter count, House Republicans are due to release the details of their long-anticipated tax proposals next Wednesday. Ahead of that submission, optimism reigns supreme on the Street. As to earnings, upbeat results from Twitter (TWTR) sent that stock soaring, gaining better than 11% in early dealings yesterday. Also of note, there was a report out that suggested Federal Reserve Chair Janet Yellen was out of the running to get another term as central bank head. Her tenure is up next year.
So, the Dow continued to rise notably as the morning moved along, retaining a gain just north of 100 points through much of the first hour of trading. The market then picked up a little momentum as we moved more deeply into the morning, with the NASDAQ, which earlier had turned negative, moving back on the plus side of the ledger as we hit the noon hour in New York. The rally then continued into the afternoon. To be sure, the Dow did move off of its triple-digit win, while the other indexes stayed just gingerly in the plus column. Still, given where stocks are, this was a welcome and reassuring performance to that time.
As to influences, traders also remained focused on the economy, where the government has just issued its first, or advance, report on third-quarter gross domestic product. Expectations had been that the nation's growth would tick down from 3.1% in the June period to 2.6% last quarter. Actual results, which are subject to revision next month, came in at a much better-than-expected 3.0% (more below). But the main story remains earnings and the varied responses by the investment community to these releases. In addition to Twitter, the Street also had to deal with a sharp earnings-related retreat in Celgene Corporation (CELG) yesterday.
Meanwhile, the gains eased back somewhat as we entered the final hour, leaving the Dow ahead by a more modest 71 points. Also, the S&P 500 Index edged up just two points, while the NASDAQ eased by seven points. As to winning and losing groups, eight of the 10 major sectors rose in price yesterday, with most of the gains narrow, while a large loss was sustained by the health care sector, influenced no doubt by biotechnology leader Celgene. Also, gaining stocks held just a narrow 15 to 14 lead on declining equities, in a session that was barely better than mixed.
Looking out to a new day now, and glancing overseas, we see that stocks in Asia were higher overnight, while in Europe the key bourses are tracking upward, as well, at this hour. In the bond market, higher yields are becoming an issue, and yesterday, the return on the 10-year Treasury note ticked a bit higher, ending matters at 2.45%. The yield is now up to 2.46%. Finally, following the GDP release and some additional profit issuances, the trend in the U.S. equity futures is now positive, especially on the NASDAQ, where some upbeat profit news was delivered by Microsoft (MSFT - Free Microsoft Stock Report) and Intel (INTC - Free Intel Stock Report). Finally, as noted, GDP growth came in at 3.0% in the third quarter, a period affected only modestly by the earlier rash of hurricanes.
Regarding the GDP report, the economy exhibited material resilience during the period, as it gained the aforementioned 3.0%. That nearly matched the 3.1% inked during the strong recovery in the April-to-June period. In fact, the small economic headwinds created by the deadly storms--which clearly were not reflected in the tragic loss of life--should be offset in the final period, with GDP growth now looking as though it might be a little north of 3%. The big bump should come from increased consumer spending in the current period, as many residents of the hurricane-affected regions play a little catch-up in the weeks to come.
Finally, the increase in third-quarter GDP came principally from higher consumer spending, private inventory investment, nonresidential fixed investment, and exports. All in all, it was a solid upside recovery, which should help the stock market and earnings going forward.
