After the Close
U.S. stocks moved slightly lower on Thursday, continuing their multiday drawdown. For the duration of the day, investors took profits and digested some mixed economic releases. The indices hit their nadir around midday, with the Dow Jones Industrial Average trading below 19,900 for about an hour before recovering some of the losses in the afternoon. The tech-laden NASDAQ grouping posted the biggest losses early on, returning nearly all of the gains earned earlier in the week.
Market watchers are waiting to see if the Dow and, to a lesser degree, the NASDAQ can pass their respective psychological barriers of 20,000 and 5,500. However, many investors appeared to be collecting profits ahead of the Christmas holiday, effectively delaying the crossing of said milestones. This position closing was especially apparent among small-cap equities, which traded a full percentage point lower at one point today. Weakness in the small- and mid-cap groups also contributed to the 1.4-to-1 margin held by declining over advancing stocks on the New York Stock Exchange. The benefits of the post-election and Santa Clause rallies were muted, and failed to rouse any extended buying spree.
On to the economy, the third-quarter GDP reading was revised to a 3.5% growth rate (from 3.2%). But, like yesterday’s positive existing home sales update, the report did little to increase the bullish view on the exchange. Optimism was also probably curbed by the lower-than-expected durable goods order figure and a slowdown in consumer spending. Accordingly, the consumer cyclicals sector was down considerably during the session.
Meanwhile, oil put in a solid day of trading. U.S. crude added $0.46 per-barrel, finishing the day a nickel shy of $53. Prices likely benefited from the above-discussed GDP report. Mounting confidence that OPEC and other oil producers can maintain a production cap has also brightened investor sentiment. Recent statements from Russia and several of the cartel members has bolstered this outlook. The limiting accord aims to reduce the glut of global oil stockpiles. U.S. energy stocks realized the most pronounced aggregate advance today.
As the closing bell neared in New York, neither the Dow nor NASDAQ showed any meaningful attempts at recovery. The former fell back below 19,900 late in the day, before eventually paring its losses to 23 points. Only three of ten market sectors delivered full-day, though modest, gains, while the basic materials stocks showed the widest loss. So, with the 20,000-point benchmark a little further away, the bulls will have their work cut out tomorrow if they are to make a run by year end. – Robert Harrington
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Mid-Day Update - 11:50AM EST
After failing for three straight days in their attempt to crack 20,000 on the Dow Jones Industrial Average, the bulls entered the current session with reasonable hopes of making that climb on their fourth try. However, a slight dip in the early pre-market hours by the U.S. equity futures suggested it might be an uphill effort. But as we neared the open, the futures recovered, so a better start seemed at least possible. In yesterday's trading, the indexes had stayed in their narrowest range in two years, as traders moved to the sidelines ahead of the Christmas break.
Then, the equity market began matters modestly to the downside, and save for some selective early buying in the semiconductor group, stocks carved out a lower path on some additional profit taking. Of course, a weak report on orders for durable goods may have had some role in the early selloff, as could a flat reading in personal income; a modest uptick had been forecast. But a revised third-quarter GDP issuance, which showed an upwardly revised 3.5% rate of improvement from 3.2%--did not hurt the bullish cause.
All told, stocks, hurt by weakness in the health care area and in some other consumer names, pulled back in early dealings. However, there was not much to the initial downswing, and the Dow Jones Industrial Average managed to stay at or just above 19,900 during most of the morning, thereby leaving in prospect another try for Dow 20,000 before week's end. All told, it was one more lackluster session to start out matters on this penultimate trading day of the week.
Things then didn't change much as the morning ended, with a modest downtrend that evidenced little variance, although the averages did move toward the lower end of the day's band as we moved toward the noon hour in New York. In all, the stock market looks tired, as the effort expended to try and get to Dow 20,000 seems to be proving too much for the bulls at this time. In sum, as we headed into the final minutes of the morning, the Dow was off 40 points; the S&P 500 Index was lower by six points; and the NASDAQ was in the red by 25 points.
Breaking things down, we see that eight of the 10 major groups were lower in late morning, led into retreat by the basic materials group with an approximate 1% setback. Also weak were the consumer cyclical issues and the recently strong financial stocks. Looking at the advance-decline ration, meanwhile, we see that losing stocks have better than a three-to-two edge on gaining equities on the Big Board. There is a somewhat wider edge for the decliners on the NASDAQ. All in all, there seems little to encourage the bulls just yet. – Harvey S. Katz
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before the Bell
The bulls took a bit of breather yesterday with some modest profit taking on display throughout much of the lackluster session. Once again, the Dow Jones Industrial Average and the NASDAQ faced some resistance as they attempted to hurdle the respective psychologically significant levels of 20,000 and 5,500. For the day, the Dow 30, which came within 15 points of the milestone, finished 33 points lower; the tech-heavy NASDAQ fell 13 points; and the broader S&P 500 Index was off six points. Although it was a losing day on Wall Street, which has been more the exception than the norm during the post-election and Santa Claus rallies, it was not a very convincing victory for the battered bears. In fact, the split between winning and losing stocks was nearly even on the New York Stock Exchange, and the decliners only held a modest advantage on the NASDAQ.
We did see some sector rotation in play yesterday. The healthcare sector, which is the only group among the top-10 sectors that is currently trading lower than where it was at the start of 2016, was the biggest laggard again. Concerns about future drug pricing policies under the incoming Administration and the possibility that President-elect Trump will push to repeal the Affordable Care Act (a campaign promise) when he moves into the White House, has hurt the healthcare sector. Conversely, the energy stocks continue to rally, helped by the recent jump in crude oil prices, both in New York dealings and on the Continent. Economically sensitive sectors, such as energy, basic materials, financial, and industrial groups, have been the biggest beneficiaries of the post-election rally on Wall Street. Outside of the healthcare, energy, and, to a lesser extent, the technology categories, there were no notable moves among the 10 major equity groups yesterday.
There was some important news from the business beat yesterday—and it was again encouraging. Specifically, the National Association of Realtors reported that existing home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, rose 0.7%, to a seasonally adjusted annual rate of 5.61 million in November. A big surge in the Northeast and a smaller gain in the South pushed existing-home sales up for the third-consecutive month. It marked the highest pace since February, 2007, and was 15.4% higher than the year-earlier figure. That data, coupled with a good quarterly report from shoe and apparel giant NIKE (NKE - Free Nike Stock Report) gave a modest boost to the consumer discretionary category.
The investment community will again be focused on the U.S. economy today, with a number of key reports released this morning. Just minutes ago, the Commerce Department issued its final estimate for third-quarter GDP, which showed that output expanded by an annualized rate of 3.5% during the three-month span. The figure was revised upward from the last estimate of 3.2% and was a big jump from the 1.4% tally recorded in the second quarter. Conversely, the Commerce Department, in a separate release, reported that new orders for manufactured durable goods in November decreased $11.0 billion, or 4.6%, to $228.2 billion. The decrease comes on the heels of four-consecutive monthly increases.
With a short time to go before the commencement of trading stateside, the stock futures are pointing to a flat—and likely mixed—opening for the U.S. equity market. Investors, though, should note that the futures were lower earlier this morning, but have comeback some as we get closer to the opening bell. Thus, it would not be overly surprising if the bulls attempt to make another run at the 20,000 mark on Dow Jones Industrial Average sometime today. Stay tuned – William G. Ferguson
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
