After the Close
Thursday’s market breadth was roughly even, with widespread selling amongst mid- and small-cap equities offsetting an afternoon rally principally by the Dow Jones Industrial Average. After solid openings, and subsequent pullbacks into the red, the Dow and, to a lesser degree, the S&P 500 strengthened as the day wore on. The former added 35 points on its way to setting yet another all-time closing high, while the latter salvaged a modest gain by the closing bell. The NASDAQ, meanwhile, was unable to turn its fortunes around, and saw the end of its fifteen-day streak of gains.
Some of the mid-morning selling can be attributed to comments on tax reform from Treasury Secretary Mnuchin. He said that the Administration aims to have its tax plan approved before Congress’s August recess. While on the one hand, the prospect of tax reform has been one of the factors driving the market higher since the election, investors are looking for more clarity to pair with these assurances. Still, the bulls had regained control of the narrative by lunchtime.
Much of the rally was driven by the energy sector. The price of U.S. crude per-barrel rose 1.6% today, following the release of positive data. Yesterday’s report from the American Petroleum Institute that U.S. crude stockpiles declined by 884,000 barrels last week provided some hope. Continued optimism from OPEC that its drilling limit has been largely successful so far is another positive tailwind. Chevron (CVX – Free Chevron Stock Report) and Exxon Mobil (XOM – Free Exxon Stock Report) were accordingly two of the best-performing members of the Dow today.
Elsewhere, the other sectors exhibited mixed results. Basic materials stocks struggled mightily today, shedding roughly 1.6% aggregate market value. Industrials slipped as much as 1%, while technology lagged despite a positive reaction to HP Inc.'s (HPQ) quarterly earnings. Utilities traded higher, likely benefiting from the aforementioned uptick in oil prices. Pfizer (PFE – Free Pfizer Stock Report) led the healthcare group to a strong finish.
Looking out to the rest of the week, analysts are waiting for the last wave of earnings to come in. Retail and healthcare will be the primary industries in focus. On the business beat, new home sales and consumer sentiment updates will likely move the needle, one way or the other, on Friday. The bulls will look to cap off another weekly advance when the markets open tomorrow. – Robert Harrington
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Mid-Day Update - 12:05 PM EST
The U.S. equity markets started the morning uniformly with slight gains. However, as the session wore on, the major indexes all slipped into the red.
Most of the early advance was fueled by the energy stocks. Namely, crude oil made a sizeable move of more than two percentage points, boosting the shares of Chevron (CVX - Free Chevron Stock Report) and Exxon Mobil (XOM - Free Exxon Mobil Stock Report), two Dow components. After the market’s close yesterday, the American Petroleum Institute reported that U.S. crude supplies were down by 884,000 barrels last week, whereas expectations were calling for an increase of several million barrels. Additionally, it reported declines in stockpiles of gasoline and distillates.
Now, as we cross the noon hour in New York, stocks are trading in mixed fashion. The Dow Industrials have showed renewed strength, bouncing off their morning lows to move about 20 points into positive territory.
Notably, should the Dow maintain its footing, it would mark a 10Th consecutive record close for the blue chip index. Meanwhile, the broader S&P 500 appeared to be leveling out, but was still down three points, while the tech-laden NASDAQ was faring the worst of the lot, down 37 points, or a little over half a percent.
Taking a quick look at the European bourses, we see that the picture is decidedly more downbeat. Germany’s DAX and London’s FTSE both shed about half a percentage point. Meanwhile, France’s CAC-40 fared only slightly better, losing about a quarter percent on the session. – 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 stock market, which got out of the gate quickly on Tuesday to start the holiday shortened week, limped out yesterday, as profit taking and concerns over the pending issuance of the minutes from the last Federal Reserve Open Market Committee meeting in late January held the buyers in check. True, the Dow Jones Industrial Average did jump out to another all-time intraday record high in the first hour, or so, of trading, but the rest of the market stayed under pressure. As for the Dow, it went in and out of the black for most of the morning. The other indexes were more uniformly in the red throughout the morning.
As for key influences on early trading, the big one remained the Fed release, as central bank officials have been more hawkish of late, while the economic data also have been pointing to a stronger business advance. The next FOMC meeting is scheduled for the middle of next month, where there is a chance, albeit not a really good one, for an interest rate hike. Be that as it may, another influence on trading yesterday was the release, at 10:00 AM (EDT) of the monthly report on sales of existing homes. That issuance was constructive as it showed another gain for the sector in January.
Regarding the housing report, the latest data showed that sales surpassed a recent cyclical high with the 3.3% gain for last month, reaching its fastest pace in almost a decade according to the National Association of Realtors. The last time sales were this high was February of 2007. Meanwhile, housing inventories rose slightly in January from December, but remained well below the year-earlier level. In all, inventories have fallen on a year-to-year basis for 20 straight months. The new home sales report, which is a far more volatile series, will be out tomorrow.
Back to the stock market, it remained lower through the morning, but not aggressively so, with the Dow staying at the breakeven mark at noon in New York, but with the S&P 500 Index, the NASDAQ, the S&P Mid-Cap 400, and the small-cap Russell 2000 all in the red at that time, while losing stocks held sway on the NYSE, with about a nine-to-five lead at that point, while most of the 10 leading groups were lower, led down the losing path by the basic materials and energy categories on weaker oil prices. So, as we entered the first part of the afternoon, the market had a modestly weaker bias to it.
The approach of the 2:00 PM (EDT) issuance of the Fed minutes from its last meeting saw the market still in negative territory, with the small-and mid-cap indexes notably weaker than their large-cap peers. As to the market, in the aggregate, losers still led gainers on the NYSE, although the Dow had moved steadily higher within a narrow range. However, the other key averages remained in the minus column before and soon after the minutes came out, attesting to the fact that there was little new in the issuance, although, as noted, the Fed did imply that interest rates could rise soon. Still, we think a rate hike at next month's meeting is unlikely.
Little then changed over the balance of the afternoon, with the Dow holding a modest, but hardly overwhelming, gain of some 25 to 35 points, for the most part, while the other large- and smaller-cap indexes were all incrementally lower in an uninspiring session, as investors moved to the sidelines. At the close, the Dow was up 33 points, with the S&P Mid-Cap and the small-cap Russell 2000 composites both off in the area of nearly half a percentage point. As earlier, losing stocks held an advantage on the NYSE, while among the 10 leading sectors, the basic materials and energy groups were the clear laggards.
Looking ahead to a new day now, we see that the leading indexes were lower in Asia overnight, while on the Continent the major bourses are now mixed in early dealings. Stateside, meanwhile, the futures point to a higher open, if just slightly so, while gold and silver are up, as well, and oil is higher on lesser inventories. Finally, Treasuries are firmer and bond yields are easing somewhat. So, following yesterday's softer performance, the bulls could be back in business this morning. Stay tuned. – Harvey S. Katz
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
