After the Close
The major equity averages wandered about for much of the day, but ultimately settled on a mixed note. At the close of trading, the Dow Jones Industrial Average was down six points; the broader S&P 500 Index was up one point; and the NASDAQ was lower by six points. Market breadth showed a divided session, too, as advancers were about even with decliners on the NYSE. The equity sectors were mixed. The utility, consumer, and energy names managed to advance, while the healthcare and basic materials issues retreated.
The employment situation has returned to the spotlight. Specifically, initial jobless claims dipped to 246,000 for the week of January 28th, which was a better reading than had been anticipated. Also, tomorrow the government is slated to release the non-farm payroll numbers for the month of January. This issuance will probably be watched by traders, as they attempt to speculate about the Federal Reserve’s monetary policy, and the likelihood of another interest-rate hike.
Finally, fourth-quarter earnings season continues. Over the past 24 hours, we heard from a number of large names. Specifically, shares of Facebook (FB) traded lower, even though the social media giant posted solid numbers. Shares of Merck (MRK - Free Merck Stock Report) moved up, as investors seemed pleased with the company’s business outlook. Later this afternoon, we will hear from Amazon.com (AMZN) and Visa (V – Free Visa Stock Report).
Technically, stocks have been range bound lately. Traders are looking for clarity in the corporate sector. This is important, given that stocks are trading at elevated price-to-earnings multiples. Further, recently, the political changes and developments taking place in Washington may also be confusing to Wall Street. - 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
U.S. equities began Thursday’s session lower, as concerns about potential tensions from the political arena are sowing doubt on the market. Each of the major indices traded in the red through most of the morning hours. Sentiment brightened gradually, at points, and the bulls regained control late in the morning. Even the Russell 2000, where struggles have weighed on overall market breadth for most of the week, had registered positive movement by the midday hour. Accordingly, advancing stocks outnumbered declining issues by a 1.3-to-1 margin at that point.
The business-friendly promises of President Trump are responsible for the historic rally seen since November. Since taking office, though, the reaction to several of his policies has tempered some of these gains. This is especially apparent in the Dow Jones Industrial Average. Many of the blue chip components would stand to benefit greatly if and when a lower corporate tax rate is enacted and relaxed regulatory environment. But recent overtures on trade accords and longstanding foreign policy paradigms, as well as subsequent disagreements with allied heads of state, have spurred additional volatility within the index. This morning, for instance, Mr. Trump put Iran on notice for a ballistic missile test run by the nation. At its early-morning nadir, the Dow was shedding more-than 65 points from yesterday’s close.
In addition to geopolitical developments, investors are likely waiting for more updated guidance with quarterly earnings reports. So far, though, this has not been the case. Corporations, like traders, seem to be waiting for more concrete details on the new Administration’s tax policy before pricing premiums into valuations. Mr. Trump will host a tax reform meeting today, and a summit with chief executives tomorrow. Both ought to help add much-needed clarity to a fiscal development that could swiftly return many equities to historical levels set in previous weeks.
But, there were plenty of silver linings to start the day’s session, including positive momentum in the consumer (both cyclical and non-cyclical), energy, technology, and utilities sectors. On the business beat, a better-than-expected jobless claims report has offset some of the political discord. The 246,000 level is 14,000 lower than the previous week’s tally. Meanwhile, nonfarm labor productivity rose at an annualized rate of 1.3% in the fourth quarter. This beat consensus forecasts by 0.3%, and underscores the strengthening labor market the Federal Reserve referred to during its Wednesday afternoon statements. Tomorrow morning’s job report from the Labor Department will offer traders more clarity as they determine their positions to end the week.
So, looking out to the rest of the day, the bulls are once again hoping to assert control over trading activity and reduce the wide losses registered on Monday and Tuesday. With a day and half remaining for the week’s trading, though, the Dow and broad-based S&P 500 have their work cut out if they hope to salvage gains for the five-day period. Stay tuned. – Robert Harrington
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before the Bell
Following back-to-back declines in the stock market over the past two trading sessions, in which the Dow Jones Industrial Average fell by a combined 230 points, the stock market began the session yesterday with an impressive early gain. Not only was the Dow higher from the start, with a first half hour increase of just over 100 points, but the NASDAQ was up almost 50 points, or nearly one percentage point. The apparent reason for the early strength was a clear revenue and earnings beat from technology icon Apple Inc. (AAPL - Free Apple Stock Report). Shares of that tech behemoth surged by nearly 6%, to a 52-week high above $128 a share, in the early going.
Of course, there also is the economy. Here, payrolls services giant ADP (ADP) reported that private-sector employment had jumped by a better-than-expected 246,000 in January. That news, issued more than an hour before the stock market opened, gave the equity futures a further lift. Then, 30 minutes into the trading day, the Institute for Supply Management, a trade group, reported that manufacturing had stepped up its pace of growth in January, coming in with a reading of 56.0. That was above the December tally of 54.5, the 12-month average of 52.1, and expectations of 55.0.
Moreover, this key survey result made it five months in a row in which this industrial category had shown improvement. (Note that a reading above 50.0 signals that the manufacturing sector is growing; a survey result below that level is consistent with one that is contracting.) So, armed with these positive issuances, the market rallied early. But nervousness ahead of yesterday afternoon's conclusion of the Federal Reserve's latest FOMC meeting, and some uneasiness ahead of tomorrow's non-farm payroll data survey, helped to pare the market's gains shortly thereafter.
Regarding the Fed, expectations going into the meeting had been that the bank would hold off on any interest rate increases at this time, a forecast that proved to be on the mark, as results from yesterday's confab affirmed. Now, the question is whether or not the lead bank will opt to tighten monetary policy at its March get together. The jury seems out on that decision. Not surprisingly, given the uncertainty about the meeting and some uneasiness about recent Trump Administration policies and executive orders, stocks fell back as the morning concluded, with only the NASDAQ in the black.
Things did not get any better as the next two hours unfolded, and as we neared the 2:00 PM (EST) meeting conclusion, the market was generally lower, with notable weakness in the energy, utility, and telecom names. Also, as we passed the midday hours, losing stocks had surpassed winning issues on the NYSE. The market, as noted, meandered about into the Fed decision. When it came out with a unanimous vote to hold interest rates unchanged, stocks rallied moderately in the first half hour, or so, with the Dow rising to a gain of some 50 points.
The NASDAQ, meantime, continued to hold its own and the S&P 500 Index and the small- and mid-cap sectors perked up a bit. This late strength persisted into the close, with some relief that the Fed did not put on back-to-back rate increases, even as the economy was strengthening. But this may well be a brief respite, as there is the possibility the next FOMC meeting (scheduled for March) or, more likely, the subsequent gathering six weeks after that will lead a 25-basis point rate increase. At this time, we sense that two, or possibly three borrowing cost hikes will be effected this year.
All told, at the close, the Dow managed to hang onto a 26-point gain; the S&P 500 was just nominally higher; and the NASDAQ was up 28 points on the aforementioned strength in technology. Overall, though, the aggregate market had a slightly negative bias to it. Looking out now at the new day, we cast out eyes to Asia, where the major indexes were mostly lower overnight. The bourses, meantime, are generally higher in Europe so far this morning. As to our futures, with the Fed meeting in the rearview mirror and tomorrow's jobs report on tap, the early read is modestly weaker. Also, bond yields are down a bit and oil is pennies a barrel higher. – Harvey S. Katz
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
