After The Close
Stocks fell in light trading on Monday as investors took profits on the next-to-last day of the year. At the close, the Dow Jones Industrial Average was down 183 points; the NASDAQ slipped 61 points; and the broader S&P 500 declined 19 points.
The market had a tough time from the outset this morning and remained under pressure for the balance of the session. But it is not unusual to see Wall Street lock in gains after a big run. Stocks hit a series of all-time highs in recent weeks, with little volatility along the way.
There wasn’t much to get excited about in terms of economic data, either. The Chicago PMI (Purchasing Managers Index) for December came in at 48.9, suggesting continued backsliding in the region. The business indicator did come in better than expected, but readings below 50.0 still point to contraction.
The Midwest has been hard hit by the trade war with China due to its reliance on heavy manufacturing and agriculture. Uneven product demand and higher input prices arising from the trade spat have hurt those sectors. Even so, the trend in the Chicago PMI has been improving since October, when it fell to its lowest level since 2015.
Importantly, there are signs that the long-awaited “phase one” trade accord with China will be signed in early January.
The hope is that further trade negotiations will be fruitful, and not prove disruptive to the economy.
Meanwhile, today’s selling was broad-based, with most sectors pulling back. The energy sector showed some relative strength for much of today, but gradually pulled back. Sentiment toward the group has nevertheless improved lately as crude oil inventories have declined.
Tomorrow, stocks will be open normal hours for investors to get in any last-minute trades on the final day of 2019, while the bond market will close early at 2:00 p.m.ET.
A reading on Consumer Confidence for December is due out on Tuesday, and a rise from November is the expectation. It would be hard to expect otherwise, given the low unemployment and steady, if overall moderate, wage gains that workers are enjoying these days.
Later this week, economic data due out on Friday is projected to show an increase in Construction Spending for November, but lingering sluggishness in the ISM manufacturing index for December.
On the whole, today’s trading marked some consolidation in the broad upturn stocks have been experiencing.
– Robert Mitkowski
At the time of this writing, the author did not have positions in any of the companies mentioned.
Before The Bell
It was an often seesaw session on Wall Street as the last full week of December concluded, with modest gains early, profit taking just thereafter, and a half-hearted second run to higher prices in the latter part of the morning. And all of that was before traders headed out to lunch. Overall, buyers were continuing in the belief that a yearend rally was securely in place and that any inclination to sell was very muted--at most. As to the market, it has been driven higher in recent weeks by the expectation that a limited trade understanding with China will soon be signed and that the Federal Reserve will be in no hurry to raise interest rates.
In fact, the leaders of both the United States and China are indicating that such an agreement, albeit a limited phase one accord, will be signed by early in January. We shall see. For now, though, this seems to be the consensus, and investors are acting on that belief and continuing to press ahead with their stock buying plans. In such a backdrop, there seems to be little room for selling. So, stocks have continued to move higher. Another widespread belief, which holds that the Fed will be on hold with respect to raising interest rates throughout 2020, is also meeting with investor approval. Thus, the buyers continue to press their case.
The modestly positive action then would continue as the afternoon got under way and between noon and 3:00 PM (EST), the market largely moved sideways. Investors, it seemed, were apparently too tired to push equities dramatically higher, but not yet ready to cash in their chips. Either way, the yearend rally seemed resilient, and with just two trading days left to the old year, the bulls remain comfortably in the saddle. All told, the Dow is up on the edge of 23% so far this year, the S&P 500 Index is 29% better; and the NASDAQ is up about 36%. It has been that kind of year.
The early afternoon, as noted, would bring few changes, with the market in a virtual standoff with the Dow and the S&P staying in the green, while the NASDAQ struggled a little. There would be little change as the final hour got under way. However, there would be some backtracking as we neared the close. True, the selling was rather modest, but enough to push the Dow into the red briefly as the closing bell neared, before some buying enabled the index to end matters modestly in the green. The S&P 500, meantime, was flat, while the NASDAQ, with the latter seeing some weakness in recent high-profile winners, was off by 16 points.
Now, a new week begins and following another record-setting week, the U.S. equity futures seem poised to begin things with little change of note. As to the week ahead, the major issuances in the coming days will be the Conference Board's Consumer Confidence Index tomorrow morning and the ISM's manufacturing activity survey. These reports could have some influence on trading activity. On balance, though, the main impact on the market figures to be the latest doings on the trade front with China. Stay tuned.
– Harvey S. Katz, CFA
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
