After The Close
The stock market managed to make some progress today, as we commenced a new week on Wall Street. At the close of trading, the Dow Jones Industrial Average was ahead roughly 72 points; the broader S&P 500 Index was up three points; and the technology heavy NASDAQ was higher by nearly eight points. Market breadth was positive, with winners ahead of losers on the NYSE. From a sector perspective, the industrials and the technology issues pressed ahead, while the energy and utility names retreated.
Meanwhile, there was just one notable economic report released this morning. Specifically, the Index of Economic Indicators advanced 1.2% in the month of October, which was quite a bit better than had been widely anticipated. Tomorrow, existing homes sales for the month of October are due to be released. There will be numerous reports due out on Wednesday, as the Thanksgiving holiday on Thursday will shorten the trading week.
Elsewhere, few companies posted profit reports over the past 24 hours. However, there was some M&A news worth mentioning. Specifically, technology company Marvell (MRVL) has agreed to purchase Cavium (CAVM). Shares of both companies traded higher today on the news.
Technically, the stock market has been holding up reasonably well lately. Looking ahead, with the year drawing to a close, it remains to be seen if the bulls can find the strength to produce a holiday rally.
— 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 - 12:00 PM EST
Stocks are bouncing back today from Friday’s losses in this holiday-shortened week. Right around the noon hour on the East Coast, the Dow Jones Industrial Average is up 90 points; the NASDAQ is higher by five points; and the S&P 500 is slightly ahead. Market breadth is positive on both the New York Stock Exchange and the NASDAQ, which is a good sign that sentiment is more positive.
Last week’s declines in the major averages were driven to a degree by disappointment in developments in Washington, where a great deal of contentiousness over proposed changes in the tax code has taken center stage. The wrangling could delay, or derail, any potential reduction in tax rates.
In addition, some investor fatigue may have taken hold. With stocks rising steadily for quite some time, it is normal to experience periods of profit taking.
Helping sentiment this morning was the report that chipmaker Marvell Technology (MRVL) has offered to buy smaller rival Cavium Inc. (CAVM) for $6 billion. The move has been rumored to be in the works for several weeks, and fits in with the wave of consolidation in the semiconductor industry. Elsewhere in this space, Broadcom’s (AVGO) recent offer to buy Qualcomm (QCOM) was turned down, but that might not be the end of the story.
Notably, industrial conglomerate and Dow-30 component General Electric (GE – Free General Electric Stock Report) stock is down again and among the most actively traded. Wall Street appears to have lost a measure of confidence in GE, which recently reduced its dividend.
In other markets, oil prices are down about $0.70 a barrel to around $55.85 in NYMEX trading ahead of next week’s OPEC meeting in Vienna. The cartel may well attempt to extend output cuts in force among its members and other major global producers, but there is a degree of uncertainty over the outcome of the conference.
Broadly, though, there is still a lot to for investors to like, in terms of the economy and earnings. Interest rates remain tame, as well, even as the Federal Reserve looks set to hike rates next month. There are some concerns that rising inflation will cause a more rapid pace of monetary policy tightening, but notably higher inflation hasn’t materialized yet.
— Robert Mitkowski
At the time of this writing, the author did not have positions in any of the companies mentioned.
Before The Bell
The most recent five-day stretch of trading on Wall Street proved to be a seesaw affair for those long equities. There was a pickup in volatility, with the major averages starting last week on a weak note before responding with a big midweek rally, only to weaken anew over the final few days. The trading was mostly driven by the dealings on Capitol Hill, with the push for the tax reform taking center stage. The aforementioned surge on Wednesday was fueled by news that the Republican-led House of Representatives had voted in favor of tax cuts, but heavy lifting still needed to be done in the Senate, and the latter issue, which may prove difficult, led to some selective selling on Friday. In addition to the news from Washington D.C., investors received some notable data from both the earnings and business beats.
On Friday, a quick look at the major averages would have had most thinking that it was a difficult day. However, it was actually a mixed performance for the U.S. equity market. The Dow Jones Industrial Average (down 100 points), the NASDAQ (off 11 points), and the S&P 500 Index (off seven points) finished the session lower, but the selling in the large-cap area did not spill over into the small- and mid-cap sectors, as the Russell 2000 and S&P Mid-Cap 400 Index (each up four points) finished the day in positive territory. Too, winning issues led losers by a comfortable margin on both the New York Stock Exchange and the NASDAQ. Although the tax news continued to dominate the headlines, some positive data on the economy and some encouraging earnings news from Corporate America provided a level of support for stocks. The House’s tax plan also calls for the lowest taxes for small businesses in 80 years, which likely provided some support for the small-cap dominated Russell 2000.
From a sector perspective, it was a mixture of up and down arrows among the 10 major equity groups. On the positive side were gains in the consumer discretionary, basic materials, and energy areas. Some decent earnings news from the struggling retailing sector, along with an outstanding report on new residential construction, gave a nice boost to the consumer cyclical stocks. Specifically, the Commerce Department reported that privately-owned housing starts in October were at a seasonally adjusted annual rate of 1,290,000, which was 13.7% above the revised September estimate of 1,135,000, while building permits, an even more forward-looking metric, climbed 5.9% sequentially, to 1.297 million. Likewise, better-than-expected quarterly showings from retailers Abercrombie & Fitch (ANF), Ross Stores (ROST), and The Foot Locker (FL), gave a boost to the consumer discretionary group. Conversely, there was some selling in the consumer staples, healthcare, industrial, and technology sectors.
Turning to the week at hand, it will be an abbreviated one, with the U.S. stock market closed on Thursday for the Thanksgiving holiday. That said, before the close of trading on Wednesday afternoon, we will get some notable reports on the economy, including data on existing home sales, durable goods orders, and consumer sentiment. We will also get the minutes from the October FOMC meeting on Wednesday afternoon, which along with the Senate working up to the Thanksgiving holiday, may result in some notable movement on Wednesday afternoon. The Senate is hoping to hammer out the details of its tax bill so it can garner up enough votes to enter the review process with the House’s bill, with the intent of getting a final plan to President Trump before Congress breaks next month for the Christmas. This remains a very fluid situation that is likely to have an impact on trading over the next 30-plus days.
With less than an hour to go before the start of trading on Wall Street, the equity futures are presaging a flattish opening for the U.S. equity market. Overseas, the main indexes in Japan were lower overnight, while the major European bourses are slightly higher as trading moves into the second half of the session on the Continent. European traders have shaken off news of Chancellor Angela Merkel’s failed bid to form a new government coalition in Germany, which may make it harder for her to get her agenda passed. Strong economic data from the euro zone continues to provide support for the equity markets there. Turning back to the homeland, absent some major news on the tax debate in the Senate, we would not be surprised if the major U.S. indexes bounce around the neutral line on a day where the economic and earnings data are light. 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.
