After the Close
The U.S. equity market got off to a slow start this morning, but managed to make progress later in the day. At the end of trading, the Dow Jones Industrial Average was ahead 37 points; the S&P 500 Index was up eight points; and the NASDAQ was higher by 24 points. Market breadth was quite favorable, as advancers outnumbered decliners by a healthy margin on the NYSE. The financial and energy names displayed leadership, while the utility and basic materials issues underperformed the broader market.
There were a few economic reports released today. Specifically, according to the revised reading, productivity increased 3.1% for the third quarter, unchanged from the previous estimate. The nation’s trade deficit widened to $42.6 billion for the month of October, which was quite a bit more than had been reported in September. On a brighter note, factory orders increased 2.7% in October, which was in line with analyst expectations. Tomorrow will be a light day for economic news. However for those traders watching the energy markets, the EIA is set to release the latest weekly crude oil inventory figures.
Elsewhere, a couple of widely-watched corporations posted their financial results over the past 24 hours. Specifically, shares of AutoZone (AZO) rose slightly, after the retailer delivered a better-than- expected report. In addition, shares of Toll Brothers (TOL) advanced after the home builder provided an upbeat outlook.
Technically, the market continues to move gradually higher. Today’s session puts the S&P 500 Index near the 2,210 mark. Keeping the broad index above the 2,200 level, and possibly making some additional gains, will be the key challenge for the bulls in the days ahead. – Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Mid-Day Update - 12:00 PM EST
The major U.S. equity indexes opened slightly to the upside today, and haven’t strayed very far since then.
Economic news has been on the light side. The trade deficit was reported as widening to $42.6 billion in October. Meanwhile productivity was up 3.1% in the September quarter, and factory orders were up 2.7% for October, with the latter marking their fourth consecutive gain in as many months.
Elsewhere, oil prices have taken a step back, as rising global output has dampened hopes after last week’s welcome announcement about OPEC’s plans to cut back production. Light sweet crude futures for January delivery were trading at about $50.70 a barrel, down 2.1%.
For the most part, next week’s Federal Reserve rate-setting meeting remains the main thing on investors’ minds. While a 25-basis-point increase appears to be a given, market participants will be more keenly interested in hearing what the lead bank plans to do next, or at least as much as can be divined from official comments.
At the noon hour of trading in New York, the key indices were still hovering around breakeven. By the numbers, the Dow Jones Industrials were down 12 points, the S&P 500 was ahead by one, and the NASDAQ was off by two notches--all moves of less than one-tenth of a percentage point.
Reflecting the generally listless movement this morning, advancing issues held only a slight edge over declining and unchanged stocks on the NYSE. In terms of sector performance, telecommunications issues are ahead by half a percentage point, while basic materials are down by a similar amount.
Taking a look at the European bourses, trading action across the Atlantic has been decidedly more inspired today, likely reflecting expectations that the European Central Bank will continue buying bonds to keep interest rates down. France’s CAC-40 and Germany’s DAX led the charge to the upside, each rising about one percent on the session. However, London’s FTSE wasn’t far behind, holding onto a gain of about half a percentage point. – Mario Ferro
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before the Bell
The major U.S. equity indexes started out the first full trading week of December on a merry note. Early on, the market was able to overcome news from the Continent that Italy’s Prime Minister Matteo Renzi was resigning after he lost a constitutional referendum, signaling a win for the nation’s far-right political party. The Italy news brought concerns about the struggling country’s massive sovereign debt problems, which are crippling that nation’s banking system. Similar type fears about Greece, which has a much smaller economy, in recent years have roiled the world’s financial markets. That said, it was clearly not the case yesterday, both here and on the Continent, as the major European bourses, which included a gain of more than 1.5% for Germany’s DAX, and the main U.S. equity indexes—the Dow Jones Industrial Average, the NASDAQ, and the S&P 500 Index rose 0.2%, 1.0%, and 0.6%, respectively—finished in the win column. Still, the Italy situation remains fluid and we would not be surprised if it caused some volatility in the world financial markets in the coming weeks and months.
Helping equities stateside was another encouraging report on the U.S. economy. After solid data last week on third-quarter GDP, consumer confidence, manufacturing activity, and employment and unemployment, the Institute for Supply management (at 10:00 A.M. EST) issued an encouraging report on nonmanufacturing activity for the month of November. Specifically, the ISM Nonmanufacturing Activity Index grew for the 82nd consecutive month, coming in at 57.2%, versus 54.8% in October. The gains in the services sector were led by improvements in the business activity and employment subsectors. And although the new orders figure fell a bit short of the October figure, it still came in at a very healthy level. The services data gave a boost to the consumer cyclical stocks yesterday.
Speaking of the 10 major equity groups, it was a clean sweep for the bulls. Not surprisingly, those groups most closely tied to the economy performed the best, with the leadership coming from basic materials, technology, and financial sectors, as well as the aforementioned consumer discretionary stocks. However, the advances were only modest for the higher-yielding (i.e., utilities, telecom, and consumer staples) categories. The likelihood of a rate hike by the Federal Reserve next week weighed some on the higher-yielding equities. A rate increase would make the fixed-income securities a bit more attractive to income-oriented investors, maybe to the detriment of the dividend-paying equities.
And that brings us to the next topic on the minds of investors right now, which is the Fed’s final two-day monetary policy meeting of 2016, commencing a week from today. The prevailing thought is that the central bank will raise short-term interest rates by 25 basis points next Wednesday. Our sense is that the market may have already priced a good deal of that in already, and therefore will be much more interested to see what might be the monetary course the lead bank takes in 2017. A hawkish outlook would probably lead to some selling, while a more dovish stance (only gradual and measured hikes in 2017) would probably help produce one of those typical year-end “Santa Claus” rallies for the market.
With less than a half hour to go before the start of trading on the homeland, the futures are relatively flat, but hinting at some modest buying in the U.S equity market. Will the post-election rally morph into a Santa Claus rally on Wall Street? Our sense is that next week’s Federal Reserve decision and, maybe more so, accompanying monetary policy statement, will hold the answer to that question. 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.
