After the Close
Equities put in a mixed session today. At the end of trading, the Dow Jones Industrial Average was higher by roughly 68 points, but the broader S&P 500 Index was off eight points, and the NASDAQ was down 73 points (well over 1% for the session). Market breadth was negative, as losers were well ahead of winners on the NYSE. Most equity sectors lost ground, with significant selling in the technology area. In contrast, the financial and energy stocks managed to advance moderately.
Traders received a mix batch of economic news this morning. Specifically, initial jobless claims rose to 268,000 for the week ended November 26th, where analysts had been expecting a somewhat better showing. Meanwhile, construction spending rose 0.5% for the month of October, which was an improvement over the September reading. Further, the ISM Manufacturing Index came in at 53.2 for the month of November, surpassing expectations. Tomorrow, the big news is due out early in the morning, as the government releases the nonfarm payroll numbers for November. Traders will no doubt be watching this report closely.
In corporate news, a couple of retailers posted their quarterly reports today. Specifically, shares of The Kroger Co. (KR) moved up, even though the company put out a mixed report. Things did not go as well for Dollar General (DG), as that issue traded lower after issuing a weak release.
Technically, the S&P 500 Index seems to have encountered some resistance at the 2,200 mark. However, it remains to be seen if the bulls will regroup and intensify their efforts as the year comes to a close. - 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 - 12:15 PM EST
U.S. equities were mostly mixed in the first few hours of December trading. Investors continue to identify growth opportunities in several areas, but the surge of optimism following the Presidential election has selectively faded. Advancing and declining stocks were equal, and five of the ten major market segments had posted aggregate gains at the midday.
This morning’s activity underscores a growing thought process division among investors, with many taking profits after the multi-week advance or tempering their enthusiasm for the incoming Administration’s policies. Financials exhibited more momentum, as recent cabinet announcements underscore what many assume will be a business-friendly tax and regulatory environment. Those areas expected to be impacted the most from the President-elect’s economic strategy – technology and healthcare – shed additional value so far today. Stocks in the former have been hampered by concerns about trade and taxation, while the latter is feeling the brunt of speculation that the Affordable Care Act is on Mr. Trump’s near-term chopping block.
Meanwhile, energy and related sectors got a shot in the arm after OPEC announced its member nations had agreed to curb oil output. The announcement was a boon for shares of blue chip refiners and down drillers, alike, and was particularly beneficial for U.S. crude valuation. The per-barrel price broke the $54 mark for Brent crude on Thursday morning, its highest price in over a year. But while we are encouraged by the resolve of the cartel’s affiliates to strike an accord, the global market is not out of the woods yet. In the coming weeks, OPEC will be tasked with convincing non-member nations to limit output.
Looking out at the month, while consumers gear up for the holidays, investors are anxiously awaiting the Federal Reserve’s decision on interest rates in less than two weeks. The case for a tightened monetary policy has grown louder in recent months, with seemingly every new statement coming from the central bank supporting the likelihood of an increase. Yesterday, Cleveland Fed President Loretta Mester echoed the calls for a modest percentage hike as a means of prolonging the economic expansion. The Ohio bank was one of only five Fed districts to not report economic expansion in yesterday’s Beige Book, so Ms. Mester’s recommendation underpins the growing sense of urgency to raise rates.
So, as we enter the afternoon in New York, we see the Dow Jones Industrial average offsetting softness in other areas. The grouping remains well above the 19,100 threshold, and has hit 19,200 at several points today. The S&P 500 has pared some of the morning’s losses, while the tech-heavy NASDAQ has dropped another 50 points. We expect some more back and forth for the remainder of Thursday’s session, as traders continue to weigh the potential impact of Mr. Trump’s Administration with the pending meeting of the central bank. - 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
November is safely in the history books, and that often difficult month for the bulls was anything but that this year. Indeed, after some up-and-down moves early in the 30-day span, Wall Street spent the final three weeks of the month making a series of higher highs. The buying commenced in the wake of Donald J. Trump's surprising electoral triumph and did not abate for the rest of the month. The optimism seemed to be fueled by hopes for significant tax revisions on both the corporate and individual levels, and by expectations that a new commitment to our infrastructure.
Of course, plans can get derailed, especially if Congress proves to be in less of a spending mood than the President-elect or if tax cutting is less than hoped for. However, at this point, optimism is widespread, and stocks are generally advancing at a good pace. The latest move forward took place yesterday morning. But it was a divided market, as we had seen on Monday and Tuesday. To wit, after three weeks of broad moves higher, some division of thought has evolved. Thus, while the Dow Jones Industrial Average managed to move further above 19,000 early yesterday, the tech-laden NASDAQ moved lower.
But yesterday's early action was fueled less by domestic affairs than by foreign events--specifically oil prices, which jumped in the latest session on indications OPEC was progressing toward a deal to curb crude production. Prices on the home front soared some 8% on that news. We should note that many differences remain and there is no assurance that a sustainable deal can be brokered between Saudi Arabia and Iran, with the latter unlikely to give way easily given that it is now in the early stages of playing catch-up following years in which its exports had been curbed.
In any event, stocks got out of the gate rather quickly on this final day of November. But the gains couldn't be sustained uniformly, to say the least. So, after an indecisive morning, the averages were clearly mixed as we began the afternoon. Thus, about midway through the session, the Dow Jones Industrial Average was ahead by some 70 points, after earlier having been up by just over 100 points, on strength in the oils and financials. But the NASDAQ, under pressure from losses in technology and health care, was off some 35 points. Also weak yesterday, on interest rate fears, were the utilities and the telecom group.
But the big story was oil, with not only the blue chip producers and refiners gaining, such as Chevron(CVX - Free Chevron Stock Report) and Exxon Mobil (XOM - Free Exxon Stock Report), but also some beaten down drillers and oil service plays like Transocean Ltd (RIG) getting into the act. In all, midway through the session, the energy component among the top 10 groups was ahead a dramatic 5%. And this is only on OPEC reaching a consensus on production cuts. Now, the challenge will be to put that accord into practice. That will be a test in the weeks and months to come. In any event, this is the first deal in this regard in years.
Meanwhile, in other news, the Federal Reserve released the Beige Book summation of economic activity at 2:00PM (EST) and there were few surprises. Our sense is that the economic fundamentals and the level of short-term interest rates--namely the 10-year Treasury note, which has gone from less than 1.5% to just under 2.4% since the summer--is now at a point that would warrant the Federal Reserve moving ahead with an interest-rate increase later this month when its FOMC convenes. That would be the first such hike since last December and just the second rise in almost a decade.
As to the equity market down the stretch, the mixed to be persisted and the advance-decline ratio began to favor the bears as the session continued. For now, it would seem as though traders got an early Christmas gift with this seeming oil production accord. Now, the issue becomes just how high can oil go before inflation and interest rate concerns start to build. In any event, stocks weakened into the close, with just the Dow, up nominally, being in the black. The NASDAQ, down 56 points, and the small-cap RUSSELL 2000 led the late retreat.
Looking out to a new day and following yesterday's dispiriting close in New York, the markets are mostly mixed around the world so far today, with Wall Street having one eye on oil, which is up incrementally so far this morning, and another on the labor situation as we await tomorrow's critical release on non-farm payrolls for November. An increase of some 175,000 payrolls is the latest expectation. Any notable deviation from that level, especially on the upside, could engender further interest rate jitters as we look ahead to the mid-month FOMC meeting.
As to our markets, the early read on the equity futures stateside is likewise mixed, with some nominal strength suggested in the Dow but additional weakness on the tech-heavy NASDAQ. - Harvey S. Katz
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
