After the Close
U.S. equities ended a strong week on something of a mixed note, with advancing and declining shares roughly equaling each other throughout the day. The Trump-stoked rally has benefited several sectors since last week, like basic materials and industrials, but those gains tempered over the past two days. Meanwhile, financials have climbed higher due to what many expect will be a more lax regulatory environment. On the other hand, the healthcare sector ought to continue to feel pressure at the Exchange, as the Affordable Care Act seems likely to be an early target of the new administration.
The major indexes were also slightly down today, save for some early-morning back and forth. The mid- and small-cap groupings continued to serve as bright spots for buyers up to the closing bell. Still, the first full week since Donald J. Trump’s election was characterized by a largely bullish reaction to what many investors believe will be a business-friendly administration. The Dow Jones Industrial Average set an all-time high this week. The NASDAQ, whose tech-centric components were ostensibly threatened by some of the trade and economic proposals peddled by the President-elect on the campaign trail, has rebounded significantly over the past several sessions.
There was little in the way of economic data reports for investors to digest today. On the earnings front, retailers Foot Locker (FL) and Abercrombie & Fitch Co. (ANF) delivered divergent results, with the former ticking slightly higher and the other shedding about 15% of its market value on weak results and a lowered outlook. GAP (GPS) also saw a stark decline at the stock exchange today, as another down sales quarter sent the equity downward.
But, as earnings season nears an end, the market will be increasingly focused on the central bank and its monetary policy. For several months, the case for an increased interest rate has grown louder. The Federal Reserve demurred from making a move at its November meeting, due to the proximity to Election Day and an unwillingness to potentially destabilize the markets ahead of the vote, but everything since then has signaled toward a year-end tightening at the December meeting. Fed officials, from regional heads to Chair Janet Yellen, have been more direct in their statements in recent weeks.
Meanwhile, oil prices wrapped up the week on a high note. Cautious optimism that OPEC will strike a production-capping deal at its upcoming summit has helped fuel prices tick higher, despite elevated inventory levels, a strong dollar, and, as reported this morning, a rising U.S. oil rig count. The cartel meets in Vienna at the end of the month, and recent signs have suggested that its member nations can see eye-to-eye on stabilizing the global energy market by implementing a drilling cap. Some countries within the group are apparently ready to offer flexibility to Iran, which has been a major point of contention in recent months. The country has indicated that it might be open to an output freeze, at around 4 million barrels per day, terms that have inspired some positive reactions. The deal, which has been tacitly supported in recent days by both Russian and Saudi Arabian officials, would be the first of its kind since 2008. By the close, U.S. crude was up $0.27 per barrel, its first weekly gain in a month.
So while the bears wrested some control back today, the bullish case was ultimately louder for the weeklong period. The early surges of the post-Trump rally have moderated a tad, but we still see plenty of optimism in several industries. Coupled with the tentative hope emanating ahead of OPEC’s meeting, and a tightening of the monetary policy looming, and there is plenty for investors to analyze in the coming weeks. - 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 major U.S. equity indexes approach the final session of another bullish week of trading on Wall Street, with the large-cap Dow Jones Industrial Average and the S&P 500 Index flirting with their all-time highs, which have been set within the last week of trading. The index of 30 bellwether companies, which was able to overcome weak performances from components Cisco Systems (CSCO - Free Cisco Stock Report) and Wal-Mart Stores (WMT - Free Wal-Mart Stock Report) (shares of both companies fell yesterday on their latest quarterly results), starts the day less than 100 points below the 19,000 mark. Over the last week of trading, the move higher has been led by the technology heavy NASDAQ Composite (a relative laggard last week) and the small-cap Russell 2000, with the former now less than 0.2% from its record high and the latter index closing at an all-time high yesterday.
The bulls have had their way since last week’s presidential election, with hawkish talk on monetary policy from several Fed officials, including Fed Chair Janet Yellen, not even putting a lid on buying. Some encouraging news on the economy this week, including strong data on retail sales and housing starts (two important sectors of the economy), has proven supportive to the bulls, as well. Yesterday was another winning session on Wall Street, with the Dow Jones Industrial Average, the NASDAQ, and the S&P 500 finishing with respective gains of 36, 39, and 10 points. Market breadth also showed winning issues leading losers on both the New York Stock Exchange and the NASDAQ, with a larger spread on the latter exchange.
From a sector perspective, the majority of the major equity groups finished in positive territory. The leadership came from the economically sensitive areas, with a more-than-1% gain registered by the consumer discretionary stocks. A strong quarterly report from consumer electronics retailer Best Buy(BBY) ahead of the all-important holiday shopping season, which begins in earnest a week from today with Black Friday, gave a boost to the consumer cyclical stocks. That group will get a lot of attention from the investment community in the next week, with a number of retailers, department stores, and apparel companies set to report their October-period results. Other groups that did well yesterday were technology, financials, and industrials. Conversely, there was some modest selling in the utilities and energy categories.
Looking ahead to the day at hand, the earnings news will be light on headline reports, though we did get the latest results from retailers Foot Locker (FL) and Abercrombie & Fitch (ANF) this morning—and the stocks of both companies are lower in pre-market action. The business beat will be even quieter, with no reports of significance on the docket today. Against this backdrop, we would not be overly surprised if the major equity indexes traded in a tight band around the neutral line for much of today’s session. And on point, with less than an hour to go before the start of trading stateside, the equity futures, which having been bouncing in and out of positive territory, are indicating a flat opening for the U.S. equity market. That said, our sense is that on a quiet day for economic news, the recent sentiment, which has led to the Dow 30 finishing higher in eight of the last nine trading sessions, will eventually give a boost to the surging bulls. 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.
