After the Close
Stocks were up throughout Monday, hitting an intraday trading peak around 11:00 AM EST in New York before easing up some around noon. The rest of the day was a tug of war, with each of the three major indices remaining in positive territory from bell to bell. Seven of ten market sectors moved higher, as strength from telecommunications and technology stocks offset softness in other areas. Advancing shares outnumbered declining issues by a 1.5-to-1 margin, a ratio boosted meaningfully by gains in the mid- and small-cap groupings.
A relative lack of new economic data has left investors to buy on optimism that President-elect Trump’s policies will benefit the market. Since his surprise election, most sectors have exhibited considerable gains. A massive capital injection into infrastructure and national security, as well as the lowering of the corporate tax rate, are some of the promises that have sent prospects soaring across a number of industries. On the other hand, healthcare stocks, which are likely to see pressure from the Trump Administration’s strategies, were down in today’s trading.
A late-in-the-afternoon rally was hurt a little, ironically, by a positive reading on the labor market by Federal Reserve Chief Janet Yellen. Less than a week removed from announcing the central bank’s plan to raise interest rates four times by the end of 2017, Ms. Yellen’s speech on the job market identified a low layoff rate and accelerated wage growth as reasons for optimism. However, this good news could stoke inflation among higher interest rates.
As for oil, U.S. Crude managed to add $0.22 a barrel. Brent crude fell below $55 per-barrel, though, amid uncertainty surrounding the global supply outlook. OPEC is expected to see cooperation from non-member nations when it implements a production cap, but sustained adherence is less certain. Accordingly, the energy sector shed about half a percent today.
Indeed, the post-election run up has ostensibly morphed into a Santa Clause rally. While we expect a modest correction to occur at some point, investors continue to see positive impact from the President-elect’s policies, namely related to the corporate tax rate. Later in the week, existing and new home sales figures will released, and ought to play a bigger role in trading now that the Fed’s interest-rate decision is in the rearview. Bulls are hoping the Dow Jones Industrial Average can break the 20,000-point milestone by yearend. The Dow wrapped the day about 115 points shy of that mark. Stay tuned. – Robert Harrington
At the time of this writing, the author did not have a position in any of the companies mentioned
Mid-Day Update - 11:55 AM EST
Stocks are trading higher to start the next-to-last week of the year. Heading into the noon hour on the East Coast, the Dow Jones Industrial Average is up 27 points; the NASDAQ is 29 points higher; and one of the market’s broader barometers, the S&P 500, is four points to the good. The advance-decline lines on both the New York Stock Exchange and the NASDAQ are showing nearly two stocks rising for every one falling.
The gains seem to be driven by bullish sentiment. There is not much business news until later in the week. On Thursday a slew of economic data is set to be released. But when the market approaches a key milestone, such as the Dow is now, nearing the unprecedented 20,000 mark, investors sometimes become more aggressive to make a new high water mark. That may be part of what is occurring now, with the market at a high valuation.
Then again, Wall Street may well be anticipating some sort of follow through on President-elect Trump’s goal to lower taxes. Lowering the corporate tax rate by 5%-10% could boost earnings per share materially. Stocks are likely reflecting that possibility to a degree. Lower individual tax rates would free up cash to spend on the part of consumers, as well. And since the consumer makes up the biggest part of the economy, hopes for a faster pace of economic growth probably would stand a better chance of being realized.
Most sectors are moving higher today, with tech stocks faring the best. Utilities are not participating in the move up, though, even with a slight rise in bond prices, which utility shares tend to move in tandem with. The yield on the 10-year Treasury note is down to 2.54% from 2.60% on Friday, following a rapid climb in recent weeks.
Fed Chair Janet Yellen is scheduled to give a speech on the labor market this afternoon. She may follow up informally on the Fed’s decision last week to raise interest rates for the first time this year. Elsewhere, oil prices are flat, but are comfortably holding above $50 a barrel, which seems to have become a support level, rather than a point of resistance. – Robert Mitkowski
At the time of this writing, the author did not have a position in any of the companies mentioned.
Before the Bell
The bulls attempted yet one more time to launch a successful assault on Dow 20,000; and once more they were repelled in their quest. Specifically, after ending Thursday at just over 19,850 on the 30-stock Dow Jones Industrial Average, the bulls were out in some force on Friday morning in spite of a lackluster report on November housing starts. On point, even after such building wilted a little more than forecast, after a bid to higher ground during October, the buyers were not dissuaded and by mid-morning the Dow was ahead by more than 70 points. But the gains could not be sustained as the morning concluded.
There was no wholesale selling, to be sure, but the Dow did encounter enough profit taking for its early gains to be fully overcome. Indeed, by the afternoon, that composite was waxing and waning between small gains and modest losses. In all, the Dow stayed in a narrow range of some 100 points. It was a similar story for the other indexes, and for the aggregate basket of stocks which likewise showed a mixed quality.
The back-and-forth, as noted, persisted through the afternoon, as new buying campaigns alternated with some understandable and overdue profit taking to carry this extended market to a mixed close, in which the Dow ended off nine points, the S&P 500 Index shed four points, and the NASDAQ finished off 20 points. The news generally remains upbeat, but the sudden rise in interest rates--the yield on the 10-year Treasury note, a key factor in setting home mortgage rates is up to 2.60%--is somewhat unsettling.
So, here is where we stand as we enter the last fortnight of the year: The Dow, a notable winner since the election, is now up 13.9% for the year to date; the S&P 500 Index is ahead 10.5%; the NASDAQ is better by 8.6%; and the small-cap Russell 2000 in in the plus column by just over 20%. So, even with Friday's minor setback, the market is nicely higher for the eleven and a half months to date. In all, it was a choppy first 10 months, with almost an uninterrupted run to higher ground since the election.
As to the week ahead, there will be plenty of economic news for the pundits to chew on, including data on sales of both existing homes (Wednesday) and new homes (Friday), revised figures third-quarter gross domestic product, where a slight upward revision (from 3.2% to 3.3% is the consensus forecast; and reports on durable goods orders, personal income, and consumer spending. So, it should be a busy week. Also, with the Federal Reserve's FOMC meeting now behind Wall Street, these pending figures could play some role in the market's behavior.
Looking out at the start of this busy week, meantime, we see that stocks were off slightly in Asia overnight, while the principal bourses are down a bit in Europe thus far this morning. In other news, oil prices are up a few pennies a barrel, while the yield on the 10-year Treasury note, which had closed near a two-year high of 2.60% on Friday, is sitting at 2.58% currently, as traders await a speech by Federal Reserve Chair Janet Yellen. As to our futures, the early read is somewhat higher. – Harvey S. Katz
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
