After The Close
Stocks edged higher today following reassuring commentary by the Federal Reserve that economic conditions remain favorable.
At the close, the Dow Jones Industrial Average rose 30 points; the NASDAQ climbed 38 points; and the broader S&P 500 advanced nine points.
Before the opening bell, data from the Labor Department showed that the headline number used to calculate inflation rose somewhat above expectations in November. The consumer price index climbed by 0.3% during the month, although the ``core’’ rate (excluding food and energy prices) advance of 0.2% matched expectations.
Investors mostly shrugged at the news, since the Federal Reserve policy board, which concluded its two-day meeting today without changing interest rates, gives more weight to the personal consumption expenditures (PCE) price index as an inflation measure. The PCE for November is due out next week, and has been coming in below the CPI lately.
The takeaway from today’s Fed meeting is that the central bank is on hold, and has signaled that it plans to remain on the sidelines in 2020. Wall Street has taken inspiration from the Federal Reserve’s shift to a more accommodative policy this year, which has seen three rate reductions. That is in sharp contrast to a year earlier, when a series of rate hikes contributed to a downturn in stocks. The market rose slightly at 2:00 p.m. EST when the Fed confirmed the view that no changes in interest rates are looming.
But while inflation and interest rate policy are largely viewed as nonthreatening these days, the market is less confident about trade policy. The lack of a trade accord between the United States and China has created uncertainty that another round of tariffs set to go into effect on goods from China on December 15th can be avoided.
The lack of clarity on trade may continue to weigh on business spending in the coming months. Even if a Phase One trade deal is attained and the next set of tariffs is avoided, the difficulties in discussions thus far suggest a drawn-out negotiating process on other issues lies ahead. That would not necessarily be bad for stocks, since the market is inclined to look on the bright side as long as both sides are talking. But it could eventually weigh on the market if declining business investment hurts hiring and consumer spending.
For now, though, most of the economic trends in place remain positive.
– Robert Mitkowski
At the time of this writing, the author did not have positions in any of the companies mentioned.
Before The Bell
After a dispirited start to the new trading week, in which the Dow Jones Industrial Average dropped 105 points to begin matters on Monday, the selling continued during the first few minutes of yesterday's session. On point, the Dow shed another 100 points as trading began one day ago. But that further sojourn into minus territory was short-lived, and as the first half hour passed, the major indexes all had turned positive, if grudgingly so. The rest of the morning then was spent going in and out of the plus column, but never moving too far in either direction.
In essence, this modicum of change reflected the fact that investors were skeptical of news that the United States might postpone the implementation of additional tariffs on goods coming out of China, but not ready to seriously unload equities. A deadline for reaching some sort of limited understanding on trade is this Sunday. So far, neither of these parties, the United States or China, has blinked. The latest conflict appears to be focused on how much in the way of U.S. agricultural products will be purchased by China. The United States is reportedly pushing for a quarterly review of the prosed purchases to see if the agreements are followed.
So, stocks meandered about with little direction following last week's big move, which culminated in a better than 300 point gain in the Dow on Friday after the government reported that a surprisingly strong 266,000 new jobs were added last month. Doubts about consummating a trade deal could keep some pressure on stocks this week unless there is a breakthrough before Friday. In any event, eyes also were focused on the Federal Reserve, which began its FOMC meeting. The near-unanimous consensus is that the central bank will hold the line on interest rates when the two-day gathering concludes this afternoon at 2:00 PM (EST).
In all, as the noon hour arrived, the stock market was just grudgingly higher, with the Dow and the S&P 500 virtually at breakeven, while the NASDAQ was sprinting ahead nicely. That would not change much as the afternoon got going and the major averages would go back and forth around the neutral line. That choppy pattern would carry through much of the afternoon, or until we entered the final hour and saw some modest selling. All told, the market would close off its lows, but whatever movement there was generally was to the downside.
In the end, the Dow would surrender 28 points and the S&P 500 and the NASDAQ would give ground grudgingly. Advancing and declining issues would fight to a near standstill; Treasury note yields would edge nominally higher on the 10-year instrument; and the VIX volatility index would nudge slightly higher. It was an undistinguished session by most accounts. Looking ahead to a new day now, we see that the Fed and trade will be the headline grabbers in all likelihood. As for the market, the opening bell is likely to bring little significant movement.
– Harvey S. Katz, CFA
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
