After the Close
Stocks got off to a good start on the first day of the new week. At the close of trading, the Dow Jones Industrial Average was ahead 89 points; the broader S&P 500 Index was up 16 points; and the NASDAQ, which displayed leadership, was higher by 47 points. Market breadth was highly supportive, with advancers well ahead of decliners on the NYSE. All of the major equity groups forged ahead, with pronounced gains in the energy and basic materials names. Of note, the price of crude oil was up almost 4%, to over $47 a barrel today, and this likely helped shares of companies that serve the broader energy sector. Further, investors may be optimistic that the upcoming OPEC meeting, due to take place at the end of the month, will go well. While still higher for the session, the financials lagged the broader market.
There were no important economic news items issued today. Tomorrow will be a fairly light day, too. However, we will get a look at the existing home sales figures for the month of October. New home sales will be released on Wednesday, along with many other reports. Of note, there will be no news on Thursday, in observance of the Thanksgiving holiday.
Meanwhile, a few corporations delivered their quarterly profit reports over the past 24 hours. It is worth mentioning that shares of Tyson Foods (TSN) declined, after the chicken producer posted disappointing results. Elsewhere, in the M&A area, shares of LifeLock (LOCK) climbed on reports that the company has agreed to be purchased by Symantec (SYMC).
Technically, stocks continue to advance. With today’s buying, the S&P 500 Index is at roughly 2,198 and will soon be closing in on 2,200. Pushing stocks meaningfully beyond this point will be a key feat for the bulls, in our view.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Mid-Day Update - 11:45 AM EST
The major U.S. equity averages, which entered the week near record levels, are moving higher again today after Friday’s modest profit taking. During the first half of the session, we have seen the tech-heavy NASDAQ, similar to Friday, establish an all-time intra-day high, on the strength of the technology sector. The gains in the NASDAQ are being matched lockstep by the broader S&P 500 Index, which itself hit a new intra-day high this morning after flirting with it for much of last week. The gain has been a bit more modest for the Dow Jones Industrial Average and the small-cap Russell 2000, which has been white-hot over the last fortnight, is flat as we approach the noon hour.
Driving the market higher today is reaction to the outcome of November 8th U.S. Presidential election. Investors believe that incoming Trump Administration will propose a number of business-friendly policy changes, including a drastic reduction in the U.S. corporate tax structure. That sentiment, along with a sharp jump in oil quotations both in New York dealings and on the Continent, continues to embolden the surging bulls. The S&P 500 Volatility Index (or VIX), also known as the “fear gauge” sits at a level that suggests investors are throwing all caution to the winds these days.
From a sector perspective, there are many options for those long equities, as all of the 10 major equity groups, save for healthcare, are comfortably in positive territory as we approach the midday hour on the East Coast. The leadership is coming from the energy stocks, which are getting a boost from the aforementioned jump in crude prices. Growing sentiment that OPEC will reach an agreement this month to cut output is driving oil prices higher. The energy sector, much like the basic materials group, also is being helped by the retreat in the U.S. dollar, which is down for the first time in 11 days. The technology stocks are higher again, with the move upward being led by the shares of Facebook (FB); the social networking giant announced a shareholder friendly $6 billion share-buyback program this morning.
Meantime, we did get some merger and acquisitions news this morning, which is another sign of a healthy equity market. Specifically, Symantec (SYMC) has agreed to buy identity theft protection services company LifeLock (LOCK), while construction and building products maker Headwaters (HW) has agreed to be bought by Australia-based Boral Ltd. On the earnings front, investors punished the stock of Tyson Foods (TSN) after the meat processing company reported lower-than-expected profits and announced that its CEO will step down. As we noted in our pre-market commentary, there is no news on the economy today.
Looking ahead to the second half of the session, we would not be surprised to see the bulls stay in command to the closing bell, as there is little negative news of note to move the needle in the favor of the recently battered bears. The main indexes in Asia finished higher overnight and the major European bourses are strengthening into the closing bell on the Continent. 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.
Before the Bell
The major U.S. equity indexes, notwithstanding some modest profit taking on Friday, start the abbreviated trading week at some lofty perches. (The U.S. stock market is closed on Thursday for Thanksgiving and is open for a half-day on Friday.) Indeed, the Dow Jones Industrial Average is not too far below the 19,000 mark; the broader S&P 500 Index is come close to its all-time high; the tech-heavy NASDAQ hit a record intra-day high during the early portion of Friday’s session; and the small-cap Russell 2000 continues to push into rarified air.
The most recent bull run on Wall Street been primarily fueled by the U.S. Presidential election. The fears that Donald Trump’s win would roil the U.S. equity market have proven unfound, at least so far, with investors sensing that the President-elect’s pro-business agenda will be a boon for U.S. companies, particularly those that do most of their business on the homeland. Hence, the remarkable run by the aforementioned Russell 2000 and the S&P Mid-Cap 400 Index.
In addition to the election news, there have been some other positive developments recently to help make a case for investors to add more risk to their portfolios. The fast-concluding third-quarter earnings season, which is now down to mostly October-period reports from the retailers, has proven relatively supportive and there is building sentiment that the final quarter of 2016 will be even better. Too, the economic news has been encouraging, with solid data on retail sales and housing starts issued last week. This holiday-shortened week will be jammed packed with news from the business beat, highlighted by the Wednesday’s schedule, which will include reports on new home sales, durable goods orders, consumer sentiment, weekly unemployment claims, and the minutes from the last FOMC meeting.
Interestingly, the current bull run has come despite all signs pointing to the Federal Reserve raising interest rates by 25 basis points at its mid-December monetary policy meeting. Historically, a monetary tightening has not been good news for stocks. However, it seems that the investment community may be thinking that a monetary tightening now may be a sign that the central bank feels the U.S. economy is strengthening. Too, the prevailing expectation is that the Fed will take a cautious and guarded stance on tightening the monetary reins in 2017, not looking to upset the applecart all that much. Further, as noted above, the likely monetary actions may well be counterbalanced by a pro-business Trump Administration, which, among many things, will look to lower the corporate tax structure drastically when it takes office in late January.
With less than an hour to go before the start of trading stateside, the equity futures are indicating a higher opening for the U.S. equity market. U.S. investors are looking to continue the buying that began overnight in Asia and that is taking place right now on the Continent. Given the quiet day it will be on both the earning and economic fronts, the bulls may have little in the way of their attempt to deliver another winning session on Wall Street today. 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.
