After The Close
Led by a surge in technology stocks, the U.S. stock market pressed higher on Tuesday. Each of the major large-cap indexes set new intraday trading highs, with the NASDAQ 100 posting the biggest single-day advance. After a two-week streak of profit taking, this holiday-shortened week’s optimism has been driven a strong corporate earnings season, solid economic indicators, and a cautiously affirmative belief that tax reform will be close to implementation by the end of the year. In the final hour of trading, advancing shares held a demanding two-to-one lead over declining issues.
The bulls’ accelerated efforts today were supported by favorable updates on the business beat. Chicago’s Fed index of national economic activity rose to 0.65, the highest reading in over a decade. Existing home sales were rejuvenated in October, while median home prices and available inventory in the housing market also moved in favorable directions. This is a positive harbinger heading into the holiday season and, looking further out, next year’s fourth-quarter earnings season.
Meanwhile, while U.S. crude oil rose $0.41 per-barrel, gains were ostensibly capped as traders awaited next week’s decision by OPEC on a production limit extension. Though the commodity’s multi-month rally has been predicated on a 2018 agreement, recent tumult in the Middle East, Russia’s balking at supporting a measure, and stubborn U.S. inventory levels have injected a measure of uncertainty into the market. Moreover, a drilling accord is only as effective as its adherence rate, so coming to an amenable agreement will be a priority for the cartel when it meets next week.
The bulls remained in firm control of trading, with the indexes were all set to finish near their respective session highs. All ten of the major market sectors moved higher. The way this resurgent bull market finishes the year will largely be determined by tax reform, as well as the Federal Reserve’s December meeting, during which the central bank is expected to raise interest rates.
– Robert Harrington
At the time of this article’s writing, the author did not have any positions in the companies mentioned.
Mid-Day Update - 12:20 PM EST
The U.S. equity markets opened higher this morning, hitting new intraday records and extending the across-the-board gains posted throughout Asia/Pacific and Europe.
On the economic front, the Chicago Fed’s index of national economic activity surged to a positive 0.65 in October. That was the highest reading since December 2006. Meanwhile, existing home sales bounced back in October, to an annual rate of 5.48 million, marking a four-month high. The National Association of Realtors also reported that median prices moved up 5.5% from a year earlier, to $247,000, while the inventory of available homes shrank by more than 10% over the period, to 1.8 million homes.
Elsewhere, oil prices are up ahead of this week’s Energy Information Administration’s report on U.S. production and supplies. Looking further ahead, traders are also hoping that the meeting between OPEC members and other producers on the 30th will lead to an agreement on extending cutbacks already in place. Light sweet crude was trading up just over half a percent, to around $56.75 a barrel.
As we passed the noon hour of trading in New York, the major stock indexes are all trading near their highs for the session after all setting new intraday records. The Dow Jones Industrials are up 180 points or about 0.75%, the broader S&P 500 Index is ahead by 18 (0.65%), while the tech-heavy NASDAQ is up 69 points (1.0%.)
All 10 of the major market sectors are in the green, led by technology (up 1.3%), healthcare (1.0%) and basic materials (0.9%) stocks. Unsurprisingly, the traditional safe-havens—telecommunications and utilities stocks--are relative laggards, gaining about one-third of a percentage point each.
Meanwhile, European stocks have also put in a positive showing, with the key European bourses solidly in the green as the afternoon’s closing bell approached. Germany’s DAX led the pack with a gain of just under one percent, while France’s CAC-40 and the U.K.’s FTSE 100 weren’t far behind, with gains of about one-half and one-third of a percentage point, respectively.
— 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
Behind this early move, after two weeks of modest profit taking, was optimism about the ability of the Republicans in Congress to get tax reform passed. As the situation stands now, the House of Representatives passed its version of tax code revision last week, managing to quickly get their tax plan through. Now, it is the Senate's turn, where signs now point to it being a much tougher sell, as the Republicans, assuming no support from the Democrats, can afford very few defections, and some Republicans already have expressed their misgivings.
The market then continued to push ahead as we moved further into the afternoon, with the Dows gain staying near the 100-point mark into the mid-afternoon. As before, the S&P 500, the NASDAQ, and the Russell 2000 all edged upward, but rather cautiously. It seems that the lure of possible tax reform is still able to bring out the buyers, if with somewhat less than full enthusiasm. As we headed down the stretch, we saw that most of the 10 groups were moving higher, but none aggressively so.
Little would change as the session drew to a close, and as throughout the day, the same stocks that were strong earlier stayed that way into the finish line. Interestingly, the consumer non-cyclical group, while featuring several strong food issues, mended matters with no change on the day. In all, seven of the top 10 groups closed higher on the day, while gaining stocks held a solid three-to-two lead on the day. In all, the Dow closed 72 points higher, while the NASDAQ ended ahead by eight points.
Looking ahead to a new day, now, we see that stocks were higher in Asia overnight, while in Europe, the leading bourses are moving ahead, as well, at this time. In other markets, oil, off yesterday, is trading a little higher so far today, while U.S. futures are trading in the green at this early hour, presaging a nicely higher start when trading resumes at 9:30 (EST) this morning.
