After The Close
The stock market started positively today, as the Santa Claus rally continued. The upbeat price movement occurred despite a few lackluster economic reports, including higher-than-expected initial jobless claims and lower-than-estimated existing home sales. However, few companies, including a few food producers and semiconductors companies, issued good earnings reports and favorable outlooks. The Dow Jones Industrial Average rose throughout the day alongside the other two major indices. They all reached record highs. Overall, the Dow closed higher by 138 points, the S&P 500 rose 14 points, and the NASDAQ was up 59 points.
Moreover, market breadth was rather positive, as advancers outpaced decliners by a 1.5-to-1.0 ratio. REITs were among the best performers on the day, while energy stocks were among the weakest.
In commodity news, oil prices were higher, as sentiment rose for global trade. Meantime, U.S. Treasury bond yields fell almost across the board today, and the yield curve flattened a bit, which suggests traders are moving into the safe-haven asset. The VIX Volatility Index was slightly higher today, as demand for options protection rose a bit.
Looking ahead, tomorrow will have a good amount of economic data released, including the third estimate for third-quarter GDP and the final University of Michigan Consumer Sentiment Index for December. Too, a few companies will report quarterly earnings results, both after the bell today including Dow-component NIKE (NKE – Free NIKE Stock Report), and before the open tomorrow. Additionally, we think that trading will be affected by any news in the 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
Buoyed by solid economic metrics issued earlier in the week, which were headlined by increases in housing starts, building permits, industrial production, and factory utilization, the Dow Jones Industrial Average, the Standard and Poor's 500 Index and the NASDAQ all jumped to record highs in early action yesterday. This latest gain, which saw incremental improvement across the board came in spite of a looming vote in the House of Representatives on whether to impeach the President. Meanwhile, the major reason for the late-year strength, is of course, the hammering out of an agreement on trade between our country and China.
This so-called phase one deal, which has been agreed upon, but not yet signed as details must still be worked out by the parties, should lead to lower tariffs and more purchases by China of U.S. agricultural products. Nevertheless, efforts to fashion a long-term arrangement with China likely will take many months and tough negotiations. Still, this partial truce is a constructive first step along the road to a more equitable trade arrangement. As to the expected vote on impeachment--which would be just the third in U.S. history--the consequent trial would be conducted in the Senate, most likely starting in January.
As to individual issues, FedEx (FDX) saw its stock drop sharply early in the session on disappointing quarterly results. Both earnings and revenues missed analyst targets for the latest three months, setting up a notable decline in the stock's price. That setback led to a sharp retreat in the Dow Transportation Index. Meanwhile, after that unprepossessing start for the market, the indexes began to strengthen somewhat, with the Dow climbing by 40 points and the NASDAQ gaining some 20 points as the morning waned. The slight uptick would carry over into e afternoon, with all three large-cap staying slightly in the black.
Regarding other economic news, after a light session yesterday, today's session will see the release of figures on the sale of existing homes for November; a slight retreat is forecast there. Also, at the same time, the Conference Board will issue data on the leading indicators. That survey, which showed a nominal decline a month ago, is forecast to indicate a very slight upturn for the month of November. The week will conclude tomorrow with the release of the third and final estimate of third-quarter GDP. The expectation there is that GDP will show no change from the 2.1% rise posted a month ago.
Meanwhile, the stock market continued to drift as the afternoon wound down, with just a hint of profit taking evolving late in the day, which would lead to a slight retreat for the Dow Industrials. All told, the blue chip composite would ease by 28 points while the S&P 500 would give back a point. The NASDAQ, though, would sustain a four-point gain, while the S&P Mid-Cap 400 and the Russell 2000 would nudge slightly forward. It thus was a divided session at the close, with the advances and decliners showing little edge to either side.
Looking ahead to a new and data driven day, the early signs point to a higher opening for Wall Street when trading resumes a bit later today.
– Harvey S. Katz, CFA
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
