After the Close
U.S. equities made further progress today. At the close of the session, the Dow Jones Industrial Average was higher by 36 points; the broader S&P 500 Index was up 10 points; and the NASDAQ, which led the pack, was higher by 39 points. Market breadth suggested a somewhat mixed performance, with winners about even with losers on the NYSE. From a sector perspective, the consumer cyclical names moved sharply higher. The technology issues also forged ahead. In contrast, the energy sector moved lower, as crude oil prices dipped to $45 a barrel in New York.
There were numerous economic reports for traders to digest today. Specifically, the Consumer Price Index rose 0.4% in October, matching analyst expectations. Housing starts rose to an annual rate of 1.3 million units in October, which was a solid reading. On the employment front, initial jobless claims dipped to 235,000 for the week of November 12th, displaying a solid improvement from the prior week. Finally, the economy in the greater Philadelphia region held up well in October.
Meanwhile, quite a few corporations posted earnings reports over the past 24 hours. Specifically, shares of Cisco (CSCO – Free Cisco Stock Report) traded lower after the networking giant posted respectable results, but tempered its business outlook. Further, shares of Wal-Mart (WMT – Free Wal-Mart Stock Report) slipped in response to a mixed report.
Technically, stocks continue the rally that started roughly two weeks ago. The S&P 500 Index is now at about 2,187, and will soon be closing in on the 2,200 mark. Of note, as stocks hit resistance at this level in August and September, it may be an area to watch closely. - 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 - 12:10 PM EST
The bulls had a slight edge in trading this morning, evidenced by the market’s slim but encouraging 1.5-to-1 advancing-to-declining issues ratio. The major indexes show a similar split. The S&P 500 continues to get a boost from its large-cap components, while the NASDAQ has outperformed the market through the morning hours. The tech-laden group had struggled in the wake of last week’s election results, with investors concerned that President-elect Trump’s trade policies could spell for a slew of operational and financial headaches for technology firms. Those fears appear to have been tempered somewhat, with the index gaining roughly 2% since Monday’s close. The Dow Jones Industrial Average, which benefitted considerably following Mr. Trump’s victory, continued to show signs of a correction for most of the day so far. But, as the midday neared, the index rallied and managed to exit the morning in the plus column.
Economic data releases have been largely positive in recent sessions, with weekly unemployment numbers coming in much lower than anticipated this morning. The 235,000 tally was likely inflated by the inclusion of Veterans' Day, and weeks with holidays tend to overstate economic strength. Still, the four-week moving average shows a reading of 253,500 jobless claims, a 6,500 decrease from the prior week and below the consensus market estimate of 257,000. The labor market continues to point to a strengthening labor market, which ought to put further pressure on the Federal Reserve to tighten its monetary policy in December.
On that note, Federal Reserve Chair Janet Yellen told Congress this morning that a rate hike would be appropriate “relatively soon.” Coupled with increasingly strong statements from fellow Fed members over recent days, Ms. Yellen’s stance suggests to us that a moderate increase is to be expected when the central bank meets in December. Boosting the case was an encouraging new construction report from the housing market, which revealed that U.S. housing starts increased to a more than nine-year high in October, easing investor concern’s for what has been a lagging growth sector for several quarters.
Meanwhile, the sentiment in global energy markets remains tentatively, even cautiously, positive. OPEC is set to meet in Vienna at the end of the month, and signs continue to indicate that the cartel will strike a deal to limit production. A cap would likely be a much-needed boon for U.S. crude prices, as domestic inventory levels grew by over 5 million barrels last week, according to the Energy Information Administration. As we approached the noon hour, per-barrel quotations were up about $0.23 in value.
All but one of the ten major market sectors posted a gain during morning trading, with telecommunications leading the way. We expect to see similar actions play out for the rest of the day as investors juggle plenty of political, regulatory, and economic developments. - 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 stock market consolidated Wednesday after a post-election rally that pushed the Dow Jones Industrial Average to an all-time high. Yesterday’s session saw the Dow fall 55 points and the broader S&P 500 give back three and a half points. The NASDAQ gained 19 points, though, as the tech-heavy index did some catching after underperforming for much of the past week. In a good sign, market breadth slightly favored advancing issues over decliners.
Positive economic data regarding domestic manufacturing was tempered by a continued rise in the U.S. dollar. The ISM reported a .2% gain in manufacturing in October, matching September’s tally. But the dollar’s strength raised questions about the sustainability of export levels on the part of the multinational companies. When the dollar surges, investors sometimes favor companies without as much foreign exposure, whose stocks are often of the small or mid-cap variety.
Meantime, inflation data at the wholesale level was non-existent in October, according to the Labor Department, with the Producer Price Index registering an unchanged reading. So-called core inflation, which excludes the volatile food and energy components, fell .1% last month, although that measure did show a modest 1.6% gain over the preceding 12 months.
The inflation data did little to move the bond market, although the interest-rate sensitive utilities stock resumed their bearish trading trend. Federal Reserve Chair Janet Yellen has given strong indications that a rate hike is coming soon.
Earnings news was mixed with respect to a couple of big-name retailers. Discounter Target (TGT) shares jumped on surprisingly good results, but home improvement chain Lowes’ (LOW) stock dipped on disappointing store traffic.
In the oil market, quotations dipped $0.24 a barrel, to $45.57, but it could have been worse. A report showed that oil inventories rose 5.2 million barrels after a drawdown had been expected. But oil is up this morning, apparently on renewed optimism that OPEC can forge an agreement to limit production when it meets in Vienna late this month.
Heading into Thursday’s open, stock market futures are little changed. But some disappointing elements contained in earnings releases from Dow components Cisco Systems (CSCO - Free Cisco Stock Report) and Wal-Mart (WMT - Free Wal-Mart Stock Report) are weighing on shares of those companies in pre-market trading. - Robert Mitkowski
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
