After the Close
U.S. equities were mostly directionless today, as investors continued to digest the potential political and economic policies that will define the Trump Presidency. The reaction has been largely positive on the stock exchange, but there appears to be some selective profit taking in several pockets of the market. Overall, advancing and declining issues were mostly even. The Dow Jones Industrial Average and S&P 500 were both down modestly, but were largely range bound throughout the day. Meanwhile, the tech-laden NASDAQ continued to benefit from Apple (AAPL – Free Apple Stock Report), and finished the day up 19 points.
Since last Tuesday’s election, traders have been trying to ascertain the impact of President-elect Trump’s policies. Some sectors, such as industrials and financials, benefitted from what many assume will be a business-friendly regulatory environment. But, the rally appears to have tempered, at least temporarily, as investors mull the timing and likelihood of many campaign and post-election promises. Similarly, those industries thought to be at risk of losing business have posted a slight turnaround in recent sessions. Technology has been among the most impacted in the past week due to the President-elect’s apparent intention to reshape U.S. trade arrangements with China. The technology sector, like the telecom and cyclical consumer goods stocks, has enjoyed modest rallies of late. Unfortunately for healthcare stocks, this industry remains a short-term focus of the forthcoming administration.
Oil prices fell again today, despite the ongoing OPEC-fueled optimism. The drop was mostly due to a surprising rise in domestic stockpile levels, according to the U.S. Energy Information Administration. Inventory grew by 5.3 million barrels last week, a stark difference from the estimate for a decrease of 2 million. Meanwhile, hopes for a production cap from the cartel’s member nations have grown in recent days. Alexander Novak, Russia’s energy minister, indicated that he expected a deal to be struck at the November 30th meeting. At the end of the day, U.S. crude oil was trading at $45.47 per barrel.
In all, most of the major market sectors registered losses on the day. The bears and bulls ought to continue the back and forth for the rest of the week, with the Federal Reserve’s decision on interest rates looming in December. We expect to see a tightening of monetary policy, but developments from the capitol could always alter plans. 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 - 12:25 PM EST
After rallying to record levels in the wake of the Presidential election, equities started the day with a well-earned breather. Although the bulls have tried to get something going, the rallies so far have been modest and short-lived.
It’s been a relatively benign day in terms of economic news. The Labor Department’s latest report on producer prices showed no change for the month of October. Prices were up 0.3% in September, and the market consensus was calling for a similar advance for last month. Overall, lower costs for services offset an increase in the cost of goods. The so-called core number, which excludes food and energy, fell 0.1% in October.
Meanwhile, the U.S. Energy Information Administration’s latest report on inventories showed that domestic stockpiles increased by 5.3 million barrels last week. This compared to industry watchers’ expectations of a two million barrel drop. However, light sweet crude rallied following word that Russia’s energy minister, Alexander Novak, had high hopes that OPEC officials would be successful in cutting back production. The organization was scheduled to hammer out the final details on November 30th. After dipping to below $30 a barrel earlier in the year, the commodity rallied to nearly $54 a barrel after OPEC first said that it would address the global supply glut back in September. After spending much of this morning in the red, the price of light sweet crude briefly jumped to $46.40 a barrel, but has since fallen back to $45.60 per barrel, down about $0.20 from the last close.
As we crossed the noon hour in New York, the Dow Jones Industrials and S&P 500 have failed to show any sense of direction either way, with both reverting back to about where they started the day. The Dow was down 75 points, or 0.4%, while the S&P was off by 6 points, or 0.3%. By contrast, the NASDAQ was able to sustain an early push into the green, and was holding onto a 14-point gain (0.3%). Most of the economic sectors are in the red, led by a 1.3% decline in basic materials, while financials and utilities were each down about 1%. Technology shares have been bucking the trend, rising about three-quarters of a percentage point, with a big assist from Apple (AAPL - Free Apple Stock Report).
Taking a quick look at the European bourses, the major indexes there all hit their peaks early on then fell for most of the day. As the end of the trading session approached, London’s FTSE, Germany’s DAX, and France’s CAC-40 had bounced off their late afternoon lows, but were each sustaining losses of around three-quarters of a percentage point. - 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
Wall Street saw some trends fade, and others reverse, yesterday following the upturn in the markets since the Presidential election a little over a week ago.
In stocks, the NASDAQ outperformed for a change. That tech-laden index had been a laggard since the election, compared to the Dow Jones Industrial Average where more mature companies are domiciled.
In contrast, the financial sector’s sizzling rally, fueled by the prospect of less regulation and higher interest rates under a Trump Administration, cooled to a more normal pace.
A downtick in interest rates reduced some of the push behind financial shares in the last session. The feeling seemed to be that rates had climbed too far, too fast in a week. Bonds sold off owing to the possibility that higher inflation and bigger government deficits might result if spending measures are enacted in conjunction with tax cuts.
Investors stepped back a bit from that line of thinking on Tuesday, though, with the yield on the benchmark 10-year Treasury note falling to 2.23% (bond prices move inversely with interest rates). The past week had seen a breathtaking jump in rates on the 10-year T-note from around 1.80%.
On the upside, utilities gained as interest rates fell. The sector has experienced profit-taking lately after a major run-up earlier in the year.
Meantime, oil prices got back on track after sliding notably in recent weeks from above $50 a barrel to the low-$40s. A barrel of crude rose about $2.40 in New York trading to $45.72. That reinvigorated shares in the energy sector. The latest look at petroleum inventories is due out later today.
In corporate news, shares of Dow-30 component Home Depot (HD - Free Home Depot Stock Report) fell somewhat. The home improvement chain delivered good results, but investors seemed to be expecting more.
Overall, yesterday’s trading was a clear win for the bulls. The Dow Industrials rose 54 points; the NASDAQ gained 57 points; and the S&P 500 pushed ahead 16 points. Advancing issues held a decided edge over decliners.
The day at hand appears as if it will start out with the markets digesting some of their recent gains. The futures are moderately lower on mixed earnings and economic news. - Robert Mitkowski
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
