After The Close
The stock market started in the green today, as a few economic indicators were better than expected. Homebuilding increased more than forecast, as housing starts rose 3.2% to 1.365 million annualized units. Additionally, building permits reached a high not seen since May, 2007. The Dow Jones Industrial Average rose in the first portion of the session, while the other indices were up too, only less so. Eventually, all three major indices rose to reach all-time highs. However, momentum tapered off in the second half of the day, as the market gave back a portion of its gains. The final hours of the session included a move up, though it did not reach as high as their prior top. The up move was partially attributable to a U.S. Congressional House Committee approving the USMCA trade agreement. A vote here is likely later this week. Overall, the Dow closed higher by 31 points, the S&P 500 was up one point, and the NASDAQ rose nine points.
Moreover, market breadth was somewhat positive, as advancers outpaced decliners by a 1.6-to-1.0 ratio. Financial stocks were among the best performers on the day, while REITs were among the weakest. This pairing is somewhat unusual given that interest rates fell.
In commodity news, oil prices rose today, as sentiment improved regarding global trade. Meantime, U.S. Treasury bond yields were mostly lower as a move into the safe-haven asset occurred. The VIX Volatility Index was slightly higher today, as demand for options protection increased.
Looking ahead, tomorrow will have a good amount of economic data released, including the Energy Information Administration’s weekly report on crude oil inventories. Additionally, several larger companies are slated to report results, both after the bell today and before the open tomorrow, including FedEx (FDX), which may indicate how the Christmas selling season is doing. Still, any developments concerning U.S. trade negotiations with China will likely affect the market.
– 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
The stock market, which rose, fell back, and was all over the place this past Friday on rumors and then denials of an imminent trade deal with China, was up from the start of trading yesterday and never really looked back. Once more, the key impetus for the gain was trade, and what appeared to be the agreement on a phase one transaction with China. That limited deal, which was long on promise and short on specifics, was enough to whet the appetite of the bulls. So, stocks roared ahead at the open with the Jones Industrial Average jumping by over 200 points.
In truth, it appeared to be more than the limited trade agreement that set off the bulls. It also was data showing some unexpected improvement in China's economy. On point, the early melt-up in the market, which pushed the leading indexes to fresh all-time highs, was helped by upbeat domestic business figures from that fast-growing country, including a pair of reports showing that industrial production and retail sales growth had accelerated in November, suggesting some notable resilience in China's expansion, despite the continuing trade war.
As to the trade deal, it is supposed to suspend tariffs, which were due to have gone into effect this past Sunday, on a variety of consumer products including iPhones. Not surprisingly, shares of tech behemoth Apple (AAPL – Free Apple Stock Report) shot up further on this news, eclipsing the $280 mark for the first time ever. The leading chipmaker stocks also gained for the session. As to the market, not only did the Dow jump by the aforementioned 200 points during the morning, but the NASDAQ pushed up by 100 points in the early buying frenzy.
The early bounce would see some profit taking as the morning concluded and the afternoon got under way, so that by 2:00 PM (EST), the Dow's gain had been cut back to just below 140 points. Still, the advance was meaningful at that time, with the NASDAQ still up by some 90 points. The market then would meander about during the final two trading hours, but still retain most of its earlier gains, finally closing the day with a solid advance, albeit somewhat off of its intraday peaks. Even so, it was another banner day for those long equities.
All told, the Dow would hang onto 100 points of its 202 point gain; the S&P 500 would add 23 points; and the NASDAQ, in part on the Apple strength, would surge by 79 points. Gaining stocks also held a nice lead, as the combination of a partial trade accord, good economic data from China, and optimism about a Brexit deal in the wake of the recent UK Parliamentary elections all contributed to the day's gains. As to the new day, we would expect the market to open Tuesday's session with little material change.
– Harvey S. Katz, CFA
At the time of this article’s writing, the author held positions in one or more of the companies mentioned.
