After The Close
Stocks on Wednesday bounced notably from recent oversold conditions. At the close, the Dow Jones Industrial Average soared 618 points; the NASDAQ registered a 209-point gain; and the S&P 500 was up 62 points. The broader market affirmed the advance, with winners topping losers by a wide margin on both the New York Stock Exchange and the NASDAQ. But, in a sign of the damage done by the bearish sentiment over the past several weeks, more stocks hit 52-week lows than highs.
The stock market got a major lift from dovish comments on interest rates from Federal Reserve Chairman Jerome Powell. Mr. Powell seemed to indicate that future rate hikes would be more dependent on economic data than any preset course.
That was music to Wall Street’s ears, since there was a broad line of thinking that the Fed was locked into raising rates at least a few more times over the next year or so. To be sure, it still seems that the central bank will hike rates in December. But Chairman Powell’s discussion suggested that interest rates are close to the level considered neutral for the economy. Those words eased fears higher borrowing costs would continue uninterrupted.
Regarding the economy, the second estimate for September quarter GDP came in unchanged at 3.5%. That is a very good rate of acceleration, but one that will be tough to sustain in 2019 after the initial benefit of tax cuts rolls off.
Another piece of business data was not as upbeat, with the Commerce Department reporting that new-home sales for October fell more than expected from the previous month. Higher prices and more expensive mortgage financing contributed to the decline. New-home sales are still up a slim 2.8%, year to date.
Oil prices fell, too, on news of another weekly inventory build.
As for the stock market, especially good performance was turned in by the technology, consumer discretionary, and healthcare sectors.
Tech stocks had been one of the most heavily sold groups of late, in part as investors took profits from winning positions.
Today’s session was clearly constructive. The next big hurdle for the market could arrive in the form of this weekend’s G20 summit in Buenos Aires, where trade and tariffs will be a hot topic.
- Robert Mitkowski
At the time of this writing, the author did not have positions in any of the companies mentioned.
12:30 PM EST
Hopes that Federal Reserve Chair Jerome Powell would strike a more dovish monetary tone in a speech today were realized and stocks are soaring in trading early this afternoon.
Specifically, the Fed Chair intoned that the central bank was already near a neutral stance on interest rates, fueling speculation that after it likely increases rates next month that it might opt to go more slowly in 2019 on that count.
That possibility, along with speculation that there might well be a thaw on the horizon in U.S.-China trade relations, has been the spark that the Street was hoping for, and as we move a bit further into the early afternoon, we see that the Dow Jones Industrial Average is up 423 points; the S&P 500 Index is better by 37 points; and the NASDAQ is in the green to the tune of 114 points.
- Harvey S. Katz, CFA
At the time of this writing, the author did not have positions in any of the companies mentioned.
Before The Bell
Wall Street came back from the holiday weekend in a buying mood to start the current five-day trading span, as the equity market forged ahead aggressively on Monday. In all, the Dow Jones Industrial Average jumped by better than 350 points on strong Black Friday sales receipts, especially online, and optimism that a deal could eventually be brokered between China and the United States on trade. Festering concerns about tariffs and trade and a host of other global-related issues have combined to take the measure of the Street in recent weeks.
However, that celebratory mood did not last long, as fresh concerns on the trade front, following comments by the President that he planned to go ahead with new tariffs on China in January, pushed the market down again in the first few minutes of trading yesterday. In all, the Dow fell by almost 225 points. But it managed to begin the climb back on optimism that another worry, rising interest rates, may not be as ominous as feared. That was partly because Federal Reserve Vice Chair Richard Clarida said that the bank was much closer to a neutral stance than it was when it started raising interest rates in late 2015.
Meanwhile, in other news yesterday morning, the Conference Board, a private research group, reported that its survey on consumer confidence had eased from 137.9 to 135.7 in November. The survey result was in line with forecasts and did not affect trading very much. The latest result is still a strong sentiment level and augurs well for a holiday shopping season that seems to be off and running, especially over the Internet. The confidence report was all that was on the docket for yesterday. The ebb and flow of trade comments and prospects for a China accord remained the major issue influencing trading once again.
As to the market, the comeback attempt strengthened as the morning ended, with the Dow's loss shrinking as the early afternoon arrived. In fact, as we moved inside the final two hours, the blue-chip composite moved into the positive column, joining the S&P 500 and, for a time, the tech-laden NASDAQ in that regard. However, the S&P Mid-Cap and the small-cap Russell 2000 continued to flounder. Behind this mid-course reversal were reassuring comments from the National Economic Council Director, Larry Kudlow that there was a lot of discussion at all levels on trade, again hinting that some accord was possible sooner rather than later.
The stock market, with earnings season now largely in the rearview mirror, the contentious mid-term elections over, and a crucial Fed meeting and the key monthly report on job creation both days or weeks away, the focus is naturally on trade and the ramifications of that policy dispute. Yesterday's announcement by carmaker General Motors that it planned 14,000 layoffs, because of the impact of the tariffs, and a fast response by the President challenging that planned policy also hurt activity in the market for much of the day. With little in the way of concrete economic news, the back and forth on trade and its impact can have outsized effects.
The gains would then increase for the Dow into the close, with that composite ending the day with a solid 108-point advance. A slightly lesser proportional gain was recorded by the S&P 500, while the NADDAQ, after some renewed backing and filling ended matters with just a nominal uptick. But this was a large-cap showing, as the S&P Mid-Cap 400 and the small-cap Russell 2000 closed with losses on the day. Breaking things down further, there were many more losing issues than gaining stocks on the Big Board yesterday, while there also was a split between rising and falling sectors among the major groups.
Looking ahead to a new day now, we see that shares were up strongly in dealings across Asia during the overnight hours and ahead of the G-20 Summit, while in Europe, the leading bourses are tracking slightly higher thus far this morning. Also, oil prices are flat so far and Treasury note yields, off again yesterday, are now holding fairly steady. Finally, the U.S. equity futures are signaling a higher opening when trading resumes this morning and ahead of comments from Fed Chair Jerome Powell.
- Harvey S. Katz, CFA
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
