After The Close
Stocks opened the final session of the week and the last Friday during 2019 continuing the strong rally that was set in motion weeks ago, with some further advances. On point, just minutes after the open, the Dow Jones Industrial Average was already up close to 80 points, while the tech-heavy NASDAQ, boosted by early strength in some high-profile names, was ahead by about 30 points. Both indexes, along with the S&P 500, reached additional all-time highs in the process. At that time, it seemed as though we would move steadily and definitively forward in uneventful fashion to close out the week.
But that early strength would not last for very long, and as we passed the half hour mark of trading, an overbought NASDAQ and an equally pricey S&P 500 Index had each given back their gains and dipped slightly into the red, while the Dow Jones Industrials clung to just a modest rise. Trading volume, meantime, was subdued, as it has been for the better part of the past couple of weeks. As to motivations to buy, it has been the same story, trade progress with China, a supportive Federal Reserve, steady economic growth, and the calendar, which often favors the bulls at yearend.
Overall, investors have been embracing riskier assets and shunning Treasuries, as optimism builds that the recent seeming progress on the global front, with respect to trade, will gradually evolve into a definitive longer-term accord with that fast-growing nation. For now, investors appear satisfied that a détente with China appears in the works. Regarding the morning backtracking, momentum for serious profit taking failed to build at that time and the market pushed along in mixed fashion. In fact, after that brief respite, the bulls, in unsurprising fashion, commenced a second wave of buying, which would again push the indexes upward.
That follow-up strength would extend into the lunch hour, and be boosted by the report of notably higher online sales from Amazon (AMZN) during the holiday season. Stocks then steadied at the higher levels, in all, as the 1:00 PM hour arrived, the Dow and the S&P 500 were holding onto modest gains, while the NASDAQ, the big winner on the year, was off a bit, as was the small-cap Russell 2000. Amazon, a big winner, itself, yesterday, was up more modestly today at that point. The equity market clearly is overbought, but there seems to be no clear cut reason for investors to sell just yet.
The stock market would move sideways, but at modestly higher levels on the Dow and the S&P 500, for much of the afternoon, while the NASDAQ, the S&P Mid-Cap 400, and the small-cap Russell 2000 generally remained lower. In all instances, the moves were modest, as the market has started to look a little tired after weeks of almost unrelenting gains and additional record highs. At the close, the Dow, despite some very late selling, was still up 24 points; the S&P 500, in the plus column by more than 29% this year, was essentially flat; and the NASDAQ was down 16 points.
Looking ahead to next week, the key issuances will be data on consumer confidence on Tuesday and the monthly issuance on manufacturing activity on Thursday. Both reports will be scrutinized carefully, with the confidence data a likely harbinger of future spending plans, while the manufacturing survey has been weak for months. The Fed also will be out with the minutes from its last FOMC meeting that day.
– Harvey S. Katz, CFA
At the time of this article's writing, the author did not have positions in any of the companies mentioned.
Before The Bell
Wall Street returned yesterday morning from what we hope was a joyous Christmas celebration for our readers, and promptly started to buy again, as the Dow Jones Industrial Average quickly moved out to a better-than 50-point increase. The S&P 500 Index and the NASDAQ also advanced as the yearend rally seemed set to continue. The three large-cap indexes have been adding to their string of record highs in recent weeks, with the broad-based S&P 500 and the tech-lifted NASDAQ both ahead by around 30% for the full 12 months.
Meanwhile, in economic news, the U.S. Labor Department reported that jobless claims had decreased by 13,000 to 222,000 in the latest week. That was in line with expectations and was another piece of evidence that the nation's economy was ending the year on a firm note. In other key news, the United States and China seemed to be edging closer to signing a limited trade pact. We expect the current trade understanding to be formalized and signed by early 2020, unless last-minute snags develop. With the next earnings season still a few weeks away, the focus on trade gets even bigger.
After that initial bounce forward, the market would continue higher, with the NASDAQ edging closer to a record 9,000. The other indexes also stayed higher, led by shares of Apple (AAPL – Free Apple Stock Report), which seems relentlessly headed toward $300 a share. Whatever weakness there was appeared to be limited to the basic materials and some industrial groups. The economic calendar also was very light, save for the aforementioned jobless claims data. News releases will be sparse again today, but there will be some heating up next week with reports on consumer confidence and manufacturing scheduled.
The end of the morning and the beginning of the afternoon hours brought little change. Indeed, if anything, the bulls seemed to be strengthening their grip somewhat, as the Dow tacked on a few added points, while the NASDAQ topped the 9,000 mark on the strength in Apple, which added nearly $5.00 a share by early afternoon. Also helping the Dow today are a pair of giant financials, Goldman Sachs (GS – Free Goldman Sachs Stock Report) and JPMorgan Chase (JPM – Free JPMorgan Chase Stock Report). Conversely, the big Dow loser was Boeing (BA – Free Boeing Stock Report), with that stock, already under pressure, falling a bit more. Also falling were bond yields.
The market would continue to move higher down the homestretch. Indeed, the gradual ascent would continue into the final few minutes of the session, when some spirited late buying occur, which would drive prices notably higher, enabling the key indexes to close the session at their respective highs for the day. In all, the Dow led by a near-$6.00 surge in Apple, would rise by 106 points, ascending to 2,860. The S&P 500 would add 17 points and the NASDAQ would jump 70 points, or nearly a percentage point, to close above 9,000 for the first time ever.
Looking ahead to a new day now and after a mixed close in Asia overnight, the U.S. equity futures, still enjoying a late-year rally, seem poised to start the session to the upside when trading resumes this morning.
– Harvey S. Katz, CFA
At the time of this article’s writing, the author held positions in one or more of the companies mentioned.
