After the Close
The stock market delivered a somewhat uneven performance this morning, but firmed up nicely in the late afternoon. At the close of trading, all of the major averages were in positive territory. Specifically, the Dow Jones Industrial Average was ahead roughly 54 points; the broader S&P 500 Index was up 16 points; and the NASDAQ, which assumed leadership, was higher by 57 points. Market breadth was favorable, as advancers led decliners by a healthy margin on the NYSE. Almost all of the major equity groups made progress today, with large gains in the energy and technology names. However, the basic materials issues did not participate in the advance.
There was plenty of economic news reported today. Specifically, retail sales increased 0.8% during the month of October, which more or less matched expectations. Meanwhile, the Empire Manufacturing Survey, which tracks economic conditions in the New York region, provided a reading of 1.5 in the month of November, which was much improved from the October figure. Finally, business inventories rose 0.1% in September, coming in a bit below expectations. Tomorrow will be a busy day for economic reports, too. Specifically, we will get a look at the Producer Price Index, the industrial production figures, as well as a report on housing prices.
Meanwhile, a few large corporations weighed in with their quarterly financial reports. Shares of The Home Depot (HD –Free Home Depot Stock Report) moved lower today. The building supply retailer delivered a solid report, but investors had concerns about the outlook for the housing market. Elsewhere, shares of Advance Auto Parts (AAP) surged in response to an upbeat release.
Technically, the stock market rally that began last week continues to move ahead. The S&P 500 Index is now at about 2,180. Pushing this index past the 2,200 mark will likely be the next key challenge for the bulls. - 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 - 12:20 PM EST
The U.S. stock market’s uneven performance continued this morning, with investors still processing the potential short- and long-term impact of President-Elect Trump’s administrative policies. Equities had an up-and-down first hour of trading, before the majority of stocks climbed higher until the noon hour in New York. As a break from the recent norm, the Dow Jones Industrial Average has been a laggard today. Dragged down by struggles in the industrial sector, the index had lost 20 points by the time we reached midday. The S&P 500 has delivered a modest gain so far in the day. But the advance has been driven by larger equities, while the small- and mid-cap components have been more mixed. The tech-laden NASDAQ added 1% earlier today as concerns about Trump’s trade policy with China abated somewhat.
Sector-specific performance has varied since last week’s election. Generally, financials, industrials, and basic materials have been the biggest benefactors of the so-called “Trump rally.” Technology and healthcare have been the most impacted by expected policy decisions. But, this morning, many of these trends have been corrected somewhat, with Trump-friendly industries shedding some value. Investors are probably taking some profits. The technology group ticked considerably higher today on the belief that a trade war with China is ultimately unlikely. Healthcare has been immune to the changing fortunes, and has been down since the opening bell today.
The ongoing OPEC oil-production saga took a surprisingly bullish turn this morning. Prices per barrel soared in the morning hours after news broke that the cartel is nearing an agreement to reduce mounting oil supplies. Previously, oil prices fell to multi-month lows, driven by fears that OPEC would be unable to ink an accord when it meets at the end of the month. With optimism seemingly growing regarding the chances for an output-limiting deal, U.S. crude is up over 4% this morning.
And on the economic front, October retail sales underscored continued strength of the U.S. economy. The Commerce Department reported that shoppers in the States spent 0.8% more last month than in the same period of the previous year; the group also upwardly revised its September numbers. Sales were up an impressive 1% in September, versus the initially reported 0.6% growth rate. This news should bolster the case of those in favor of a near-term interest rate hike. Prepared statements from several Federal Reserve officials in recent days have supported a tighter monetary policy, which will likely be discussed at the December meeting.
Thus, the remainder of the day ought to see more sector rotation as this post-election rally continues. Looking further into the future, as President-Elect Trump’s administration begins to take shape, some of the bullishness seen in the past week ought to temper. - Robert Harrington
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before the Bell
The first day of the new trading week was a directionless one for Wall Street. Depending on what index or market fundamental investors looked at, it may have caused them to draw different conclusions about the overall performance of the U.S. equity market. For much of the session, the large-cap Dow Jones Industrial Average (up 21 points on the day) and the broader S&P 500 Index (relatively unchanged) bounced in and out of positive territory, never straying too far away from the neutral line. The NASDAQ Composite (down 19 points), though, was weak throughout the session, with most of the damage done by the struggling technology stocks (more below). Conversely, the small-cap dominated Russell 2000 and the S&P Mid-Cap 400 Index turned in very strong performances, ending the session with respective gains of 1.3% and 1.6%. The small-cap sectors have done very well since the election of Donald Trump last Wednesday morning, as investors sense that his win will be a boon for the smaller U.S. companies.
In general, the U.S. Presidential election has led to a whole lot of sector rotation on Wall Street. The biggest winner thus far has been the financial sector, where the prevailing thought is that the new administration is going to quickly dial back on the number of regulations in place next year. This, along with sentiment that the Federal Reserve is going to raise interest rates when it convenes next month, is music to the ears of those invested in banking stocks. The banking sector has been very much in favor in recent sessions on such sentiment. Yesterday, the basic materials stocks were among the winners, as investors are betting that President-Elect Trump will increase spending on infrastructure, which will result in the consumption of more raw materials, including steel, aluminum, cooper, and lumber. Conversely, the higher-yielding equities were out of favor again, as the recent rise in bond yields (the benchmark 10-year Treasury finished yesterday above 2.20%) makes higher-yielding equities less attractive to income-oriented investors. That said, the biggest losers yet again yesterday were the technology stocks, which have suffered the most since the election on fears that there may be a trade war brewing between the U.S. and China. Such an event would hurt the businesses of many of the technology behemoths, including Apple (AAPL - Free Apple Stock Report).
The election news once again dominated the spotlight, with little economic or earnings news of note to keep the investment community’s attention away from the U.S. political scene. However, we did get some commentary yesterday afternoon from a few high-ranking Federal Reserve officials. The prepared remarks by Dallas Fed President Rob Kaplan, Richmond Fed President Jeffrey Lacker, and San Francisco Fed President John Williams did nothing to quell the prevailing thought that the central bank will begin to tighten the monetary reins when it meets next month. This may have thrown a bit of cold water on the recently emboldened bulls. As for today, the economic news will pick up. Just moments ago, the Commerce Department reported that retail sales for the month of October rose by 0.8%, which was slightly better than the consensus expectation. Too, the September figure was revised upward, from 0.6% to 1.0%. Overall, it was a solid report on the retailing sector, and a good sign about how the consumer is feeling ahead of the all-important holiday shopping season, which begins in earnest next week. For this reason, investors may want to keep close tabs on the consumer discretionary stocks when trading kicks off at 9:30 A.M. (EST). The consumer cyclical sector was among the winning groups yesterday.
With less than an hour to go before the commencement of trading stateside, the equity futures are presaging a modestly higher opening for the U.S. market. Our sense is that sector rotation will once again be the narrative on Wall Street today, as investors continue to react to last week’s U.S. Presidential election. 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.
