After the Close
It was harder to find buyers on Wall Street today as stocks broadly fell, although the Dow Jones Industrial Average was an exception, turning in a modest 33-point gain. Elsewhere, though, the tone was tilted to the downside, with the NASDAQ easing five points and the broader S&P 500 pulling back a few points. The market’s tone was perhaps most evident in the poor advance-decline lines apparent on both the New York Stock Exchange and the NASDAQ, where losers topped winners by respective 4-to-3 and 3-to-2 margins.
Investors couldn’t get excited today despite an encouraging report by the National Association of Realtors on existing home sales. There is no shortage of buyers in the housing market, but the thinking is that higher interest rates could soon dampen home sales to a degree.
On the interest rate front, Wall Street took a cautious stance ahead of this afternoon’ s release of the minutes of the Federal Reserve’s last meeting. That report indicated the central bank was inclined to raise interest rates “fairly soon” which, while vague, suggested the Fed could well raise rates as early as March. If not, the timetable would next shift to June, depending on how progress shapes up in the labor market, with respect to inflation, and possibly how President Trump’s policies are affecting the economy.
Lower oil prices were another drag on sentiment. Crude oil quotations fell about $0.75 a barrel in New York, to around $53.50. The oil market had been enjoying the support of lower production on the part of producers outside the United States through an agreement set to remain in force until the spring. But the recent occurrence of very warm temperatures in key regions that normally consume large amounts of heating oil reduced the excitement somewhat. Among the stock market’s major sectors, energy stocks were the day’s laggards.
Overall, investors were largely playing defense in the latest session. The consumer staples, utilities, and telecom sectors performed the best today. With earnings season now winding down, the focus may shift to a greater degree to the economy, interest rates, and how quickly expected new tax policies may be implemented. - Robert Mitkowski
At the time of this writing, the author did not have positions in any of the companies mentioned.
-
Mid-Day Update - 11:45 AM EST
The major U.S. equity indexes, which ended yesterday’s session at all-time highs, were lower to begin today, with some profit taking the likely cause. The initial move down was led by the commodities stocks, with lower oil prices weighing on the energy issues. However, since the weak start to the trading the day, the averages have recovered some, with the Dow Jones Industrial Average turning positive just over a half-hour into the session and moving in and out of the black since then. The market got a boost from a very encouraging report on the housing market, which is yet another sign that the U.S. economy is strengthening.
Thus, as we approach the midday hour on the East Coast, the major averages are showing some resiliency, with the index of 30 bellwether companies, as noted, in positive territory and the losses pared on the NASDAQ and the broader S&P 500 Index. Likewise, market breadth, which was favoring the bears early, to the tune of nearly two-to-one margin on the NYSE, has narrowed on the pickup in buying following today’s housing figures.
The day’s big news is coming from the business beat, with the housing sector taking center stage. At 10:00 A.M. (EST), the National Association of Realtors (NAR) reported that existing home sales expanded 3.3%, to a seasonally adjusted annualized rate of 5.69 million, last month. It marked the fastest pace in almost a decade—and was another positive sign for the U.S. economy and an indication that the American consumer is feeling better these days. The NAR Chief Economist Lawrence Yun said: “The January sales gain signals resilience among consumers even in a rising interest-rate environment. Much of the country saw strong sales activity last month, as strong hiring and improved consumer confidence at the end of the year appear to have sparked considerable interest in buying a home.” Overall, three of the four housing regions saw gains last month, led higher by the Northeast (+5.3%) and West (+6.6%) markets.
Speaking of interest rates, investors will be focused on such later today, as we will receive the minutes from the latest FOMC meeting at 2:00 P.M. (EST). The investment community will be looking at the release for some more clues as to when the Federal Reserve might tighten the monetary reins again. Although the consensus is that the central bank will hold rates steady at next month’s monetary policy meeting, recent data suggest that the economy may be on solid enough footing to withstand some monetary policy tightening over the balance of 2017. Our sense is that the minutes may play a role in which way the market moves during the final two hours of trading today.
From a sector perspective, the majority of the 10 major equity groups are in the red this morning, but the declines have been well contained so far. And we have seen a recovery in some of the groups, with the consumer staples, technology, and utilities issues getting some mild buying interest. Meantime, the commodities groups are the biggest laggards so far today.
Looking ahead to the second half of the session, it is shaping up to be a bit of a tug-of-war between the bulls and the bears. As noted, we think the latest musings from the Federal Reserve in FOMC minutes will play a part in who wins the game today. Based on recent market action, it is hard to bet against the bulls, but we shall see. Stay tuned. – Willam G. Ferguson
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 jumped out of the starting gate quickly yesterday, following a big week for the bulls over the preceding five-day span. The latest uptick continued during the morning and into the afternoon. Indeed, even though the market remains overbought on the heels of a 13% gain in the Dow Jones Industrial Average since the election last November, stocks keep climbing. Behind the market advance in recent months is ongoing optimism about the pending economic policies of President Trump. The latest day's upturn, meantime, was an extension of the recent gains on Wall Street plus encouragement from recent earnings data.
Specifically, the latest session saw the release of generally positive earnings from a pair of Dow heavyweights, The Home Depot (HD - Free Home Depot Stock Report) and Wal-Mart Stores (WMT - Free Wal-Mart Stock Report). In addition, the former announced a $15 billion share buyback program. Thus, the home improvement retail behemoth saw its shares climb to an all-time high. As for Wal-Mart, that retail giant did even better yesterday, rising more than 3% during the latest session on upbeat tidings. Overall, retail earnings have been well received, even though some stores have posted mixed results.
So, armed with the solid earnings and further buoyed by the naming of a popular choice to fill the high-profile vacancy on the National Security Council, following the forced resignation of erstwhile NSC head, Michael Flynn, the market rallied. In all, the Dow, fresh off a win each day last week, surged by close to 135 points in mid-morning. That early ascent proved to be the high-water mark for the session. All told, as lunch time arrived, the market had retreated notably, paring about 60% of its one-time gain. But it remains hard to keep this bull down, so as the afternoon arrived, so did the bulls for a return visit.
According to some pundits, the naming of General H.R. McMaster to head the NSC, albeit a well-received choice, was not the prime reason for yesterday's strong showing. Rather, it was the further flow of generally favorable corporate results, headlined by the earnings cited above. Also helping was another rise in Boeing stock. That Dow component has been rising steadily and aggressively in recent weeks, and is now at an all-time high, having crossed the $175-a-share mark yesterday. But the big story remains the retailers, where the generally decent results speak well of upcoming consumer spending trends.
The market then continued on its merry way into the latter stages of the afternoon, with the Dow's gain again moving north of 100 points, while gaining stocks continued to hold a sizable advantage over losing issues on the Big Board of some two-to-one. The differential was narrow on the NASDAQ, however, with gainers holding just a 15-to-13 advantage late in the day. As before, all 10 of the leading equity groups were higher, led by energy, on higher oil prices, and basic materials. This constructive pattern then persisted into the close.
By the final bell, the market had made up most of its mid-session gains, with the Dow ending higher by 119 points. The S&P 500 Index (up 14 points) and the NASDAQ (ahead by 27 points) also did well, as did the small and mid-cap composites. Additionally, all 10 of the leading sectors gained on the day, with three of the groups, the utilities, the basic materials, and the energy category all showing gains of better than 1% at the conclusion of trading. It was a wire-to-wire win for the emboldened bulls. The challenge will now be to secure further all-time highs in the days to come.
As to that effort, the principal indexes were generally higher across Asia in overnight dealings, while they also are marching forward in Europe so far this morning. The picture is a bit less welcoming in our country this morning, where the equity futures are taking a step back at this time, presaging some possible mild profit taking at the outset of trading. But as we have seen thus far this year, the bears have been unable to gather any momentum for a selloff, and there is no indication as of yet that this is about to change. – Harvey S. Katz
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
