After The Close
The markets began the day with a push to the upside, and stocks went on to set all-time highs.
On the economic front, the U.S. Census Bureau estimated that October retail sales were up 0.3% from the previous month and 3.1% higher than the year before. Elsewhere, industrial production took a hit last month, falling 0.8%. This marked the largest drop since May of last year. However, much of that was due to the 40-day work stoppage at General Motors (GM). Excluding the auto industry, production would have been down 0.5%, in line with consensus expectations.
However, the markets looked past these reports and the impeachment hearings in Washington. Instead, investors’ attention remained fixed on trade talk developments. On that front, traders were encouraged by White House economic adviser Larry Kudlow’s mention that phase one of a trade deal between the U.S. and China was once again making progress.
When all was said and done, the Dow Jones Industrial Average crossed the milestone 28,000 mark for the first time, closing the session with a gain of 222 points. Meanwhile, the broader S&P 500 was ahead by 20 points, and the tech-heavy NASDAQ gained 61 points. Most of the 10 major market sectors were in the plus column for the day, with the biggest gains coming from healthcare (+1.8%), technology (+1.0%), and energy stocks (+0.7%). Consumer cyclicals and consumer noncyclicals were the laggards for the session, ending just below breakeven. Altogether, advancing issues led decliners by nearly two-to-one on the New York Stock Exchange.
Meanwhile, oil prices rose, with light sweet crude up 1.8%, to around $57.80 a barrel. Prices reacted favorably to the potential progress between the U.S. China and word from Baker Hughes (BKR) that the active number of U.S. oil drilling rigs was down for a fourth-straight week. Notably, the commodity has rebounded more than 9% since a month ago.
Lastly, investor sentiment was also positive across the pond. Gains ranged from just around half a percent for France’s CAC 40 and Germany’s DAX, while the U.K.’s FTSE 100 edged modestly higher.
– Mario Ferro
At the time of this article's writing, the author did not have positions in any of the companies mentioned.
Before The Bell
The stock market, which saw the Dow Jones Industrial Average race ahead strongly on Wednesday on a more-than-10 point surge in the shares of entertainment giant Walt Disney (DIS – Free Disney Stock Report), with that issue running up on good subscriber news from its streaming service, could not put an encore in place at the open yesterday. On point, the market sold off a bit from the outset and continued on a losing path over the balance of the morning. The modest retreat, meantime, accelerated to the downside for a brief span late in the morning when the Dow Jones Industrial Average tumbled to a session-worst loss of just over 100 points.
Still, as we ended the morning and began the afternoon, there was some scattered buying, which helped the core indexes pare their losses to a degree. To wit, the NASDAQ, under pressure for much of the morning would cut a 40-point deficit to less than half that. As to the causes for this pullback early in the day, there was some profit taking following the sharp run-up in recent sessions. Also, there were concerns about the persistently slow pace of trade negotiations with China, as early optimism about a quick partial deal seems to be fading somewhat.
Moreover, the market was under some pressure from selling in shares of Cisco Systems (CSCO – Free Cisco Stock Report), which saw investors turn on the stock after a disappointing revenue guidance release. That news offset a stronger-than-forecast quarterly result. On the data front, the session saw the release of a higher figure for jobless claims, with that tally climbing to 225,000 in the latest seven-day span, the highest figure since June. Overall, the market seemed poised to perhaps move toward the breakeven mark, or possibly better as the afternoon's trading began.
But that bullish trend never evolved, and even though the earlier losses did not return, the market could never mount a constructive charge as the afternoon continued. Overall, the Dow, a weak link on the day did no better than erase most of its losses, amid added concerns that the hoped-for phase one trade arrangement with China was proving elusive. Our sense is that such an accord might still be forthcoming in the near term, but that a more definitive long-term trade deal may not transpire until after the 2020 election. Whatever the case, the equity market could do no better than tread water for a time, finally closing the day mixed.
In all, the Dow would finish off two points; the S&P 500 would gain three points; and the NASDAQ would lose that much. Now, a new day is upon us and we see that stocks were mostly higher in Asia overnight, while in Europe, the leading bourses are showing early gains this morning. In addition, oil prices are off slightly and Treasury note yields, down for several days in succession, now are trending a bit higher at this hour. Finally, on a fairly busy day for economic data, including the release of a report on industrial production this morning, we see that the U.S. stock market is poised for early solid gains on trade optimism.
– Harvey S. Katz, CFA
At the time of this article’s writing, the author held positions in one or more of the companies mentioned.
