After The Close
Stocks took a breather on Christmas Eve from their record run, with trading light ahead of an early 1:00 p.m. EST closing. The bond market closes at 2:00 p.m. EST.
There is nevertheless no denying that the positives these days stand in stark contrast to a year earlier, when the threat of tariffs, a tightening Federal Reserve, concerns about a government shutdown, and fears of a global recession loomed large.
The agreement on a trade deal with China and the Fed’s move to the sidelines have clearly led investors to view business conditions in a more favorable light, helping lift stocks to all-time highs in recent days.
Meantime, no economic data was released today, although the pause in the action allowed Wall Street time to reassess the big picture. In that vein, there is some optimism that business spending will pick up after an unimpressive showing in 2019. A release on Monday from the Commerce Department suggested that business investment picked up selectively in November, excluding defense-related and aircraft orders.
The thinking is that improved trade relations and the prospect that interest rates will remain low in 2020 may lead to higher capital expenditures on the part of businesses. Lately, consumer spending has been by far the main driver of economic growth.
The improving backdrop is not completely without concerns, though. Aircraft manufacturing has been hampered by the well-publicized troubles at Boeing (BA – Free Boeing Stock Report). The company recently announced that it will not be taking parts shipments for its embattled 737 MAX for a month. It remains unclear how deep into the new year it will take for Boeing to right the ship.
The slowdown in oil drilling in the Permian Basin of Texas also creates the potential for weakness in orders for steel pipe and related equipment and services.
Oil prices did rise today, boosted by the recent agreement between OPEC and its allies to continue pumping less than all out; the better feeling regarding global trade; and optimism for a drawdown in industry stockpiles this week. Domestic oil prices are around $61 a barrel, off of their best levels of the year, but in an uptrend since October.
As for stocks, the Dow Jones Industrial Average today closed down 36 points; the S&P 500 was off less than a point; but the NASDAQ added seven points. Trading will resume on Thursday morning.
We wish our readers a very merry Christmas and a happy, safe holiday.
– Robert Mitkowski
At the time of this writing, the author did not have positions in any of the companies mentioned.
Before The Bell
After a very strong week for equities in the most recent five-day span, in which additional records were set by the Dow Jones Industrial Average, the Standard and Poor's 500 Index, and the tech-laden NASDAQ, on optimism that a partial trade accord will soon by inked with China, following the issuance of better economic metrics in recent days, and the unfolding of the traditional Santa Claus rally, stocks began the current holiday shortened week on a solid up note. In all, the key indexes rushed out to nice early gains.
As to the latest impetus to buy stocks, in addition to the feel good backdrop for equities, there also was news out of China that the world's second largest economy said that it will cut import tariffs on a wide range of goods, in all totaling more than 850 products. Also, shares of Boeing (BA – Free Boeing Stock Report) climbed after the company fired its CEO amid the 737 MAX crisis. In addition to the good news out of China, Wall Street has also been buoyed by the likely resolution of the long-simmering Brexit crisis.
So, as the Street prepares for the Christmas holiday tomorrow, and ahead of a 1:00 PM (EST) close of trading in the current session, the Dow Jones Industrial Average quickly ran out to a gain of over 100 points yesterday, and the other indexes made good progress as well. But that was pretty much it as the afternoon began and moved along. On point, the morning's early strength, while persisting on all the key market indexes and sectors, did not increase to any degree, as there was little hard news to decipher.
As to the rest of the session, the market's gainers were dominated by a pair of blue chips. Thus, in addition to the aforementioned Boeing, the Dow got a big boost from technology icon Apple Inc. (AAPL – Free Apple Stock Report). That stock’s, already up close to 80% on the year and easily the blue chip composite's best performer, added another $4.56 a share yesterday to close matters at a record $284. Regarding the rest of the market, there was little overall movement, and, in fact, save for Apple and Boeing, the rest of the blue chips did little.
This holding pattern, following the fast start, would continue into the close, so that when all was added up, the S&P 500 Index would be higher by less than three points. More substantial strength would be shown by the NASDAQ (up 21 points) and by the Dow (ahead by 96 points). The small-cap Russell 2000 would be ahead by just over two points on the day. Thus, the Santa rally would seem alive and well as we head into the final session before the Christmas holiday.
Now, a new day begins, and the early read on the equity futures suggest that when trading resumes that it will do so to the upside. Finally, we would like wish our readers a happy and healthy holiday.
– Harvey S. Katz, CFA
At the time of this article’s writing, the author held positions in one or more of the companies mentioned.
