After The Close
The stock market started briefly in the red today but quickly moved into the green, as conflicting reports about the U.S. trade deal with China were released. Once the dust had cleared, the deal included a halt to new tariffs on goods from China and a rollback of some of the prior tariffs. The Dow Jones Industrial Average rose by 159 points at its peak, and the three large-cap composites reached all-time highs.
However, the market became quickly overbought, and the indices all returned to the red. The rest of the day could be characterized by choppy sideways action, though the NASDAQ was able to regain a notable portion of its earlier strength. All told, the Dow and the S&P 500 closed near breakeven, and the NASDAQ closed higher by 18 points.
Moreover, market breadth was largely directionless on the day, favoring neither the advancers nor decliners by a large amount. Utility stocks were among the best performers of the day, while materials equities were among the weakest.
In commodity news, oil prices rose as sentiment for global trade improved some. Meantime, U.S. Treasury Bond yields were largely lower across the board as traders moved into the safe-haven asset. The VIX Volatility Index was lower today, as demand for option protection fell a bit.
Looking ahead to next week, a good amount of economic data will be released, which includes the Empire State Manufacturing Survey and the U.S. housing starts. Additionally, Dow-component NIKE, Inc. (NKE – Free NIKE Stock Report) is slated to release its quarterly earnings results, while several smaller companies will also be on the docket. Still, we think most eyes will be looking toward U.S. trade negotiations with China.
– John E. Seibert III
At the time of this article's writing, the author did not have positions in any of the companies mentioned.
Before The Bell
It is back to being all about trade. Thus, after a several-day pause in the stock market's sharp November and early December rise, a tweet from the President that the United States and China are now very close to a major trade deal with each other, equities soared anew in early trading yesterday. On point, after a momentary dip in prices on some discouraging news on the jobless claims front, the aforementioned tweet hit the airwaves and within minutes, the Dow Jones Industrial Average had sprinted out to a gain of more than 300 points, and to another all-time high in the process.
The President's tweet came just three days before a December 15th deadline that, if not met, was to have resulted in the possible introduction of new and stifling tariffs. Then, after the Dow surged the aforementioned 300 points, there was some backtracking, that cut the gain by a third as we hit the 90-minute mark of the trading day. Stocks then would continue higher as the morning hours wound down, but what once had been a better-than-300-point advance in the Dow was reduced to well under 100 points, before some early afternoon firming would evolve and lift the Dow to a gain back above 100 points.
The market then would drift into the afternoon, and with some 90 minutes left to the trading day, the Dow would be up about 125 points, having given up almost two-thirds of its earlier advance. Then, just as quickly, earlier skepticism had started to wane and the stock market again shot up to close to its session highs on a report that a phase one deal had been reached in principle. That report lifted the Dow back to a gain above 200 points, before that index gave ground one more time. The S&P 500 and the NASDAQ also shot higher, but still traded the blue chips on a percentage basis.
Meantime, among other news developments, all of which took a back seat to the trade report, we saw that first-time jobless claims surged to a two-year high, rising by 49,000 to 252,000. That was the highest level since late September of 2017. However, that jump in jobless claimants did not upset the applecart for very long, as the tweet on trade clearly took center stage. Stocks then would continue to hold comfortably in the green as traders bet that some accord may yet be reached before the Sunday deadline.
That optimism pushed the market to strong gains at the close. In sum, the Dow would add 221 points; the S&P 500 would climb 27 points; and the NASDAQ would press forward by 63 points. Now, after this apparent breakthrough, we will need to see an actual agreement be reached. That could come very soon.
Looking ahead to a new day now, and with the possible trade pact on the horizon, it seems as though the equity market will open matters strongly to the upside when trading resumes in an extension of yesterday's dramatic rally.
– Harvey S. Katz, CFA
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
