After the Close
Stocks rose nicely on Thursday against the backdrop of a major winter snow storm in the Northeast. For the day, the Dow Jones Industrial Average, the NASDAQ, and the S&P 500 all closed at record highs, posting respective 118, 33, and 13 point gains. The broader market affirmed the bullish sentiment. Advancers topped decliners by wide margins on both the New York Stock Exchange and the NASDAQ.
Wall Street was encouraged by word from the White House that an announcement on tax policy would be forthcoming in a few weeks. Investors have been enthused by hopes for lower taxes since the Presidential election in November.
This morning’s economic news was also encouraging, with the Labor Department reporting that initial weekly unemployment claims fell to their lowest level in 43 years.
Indications of business strength drove bond yields higher. The yield on the benchmark 10-year Treasury note rose from 2.35% to 2.39% on the day.
Among interest-rate sensitive sectors, higher yields hurt shares of utilities, owing to the perception of rising competition from bonds, but helped bank stocks. Banks have suffered in recent years from very narrow interest-rate spreads, but are now seen as benefiting from a reversal of that trend. The banking group was the best performing sector of the session.
Energy shares also rose as oil prices climbed by $0.68 a barrel in New York trading, to $53.02. A surprise draw in gasoline stockpiles supported the move higher.
Airline stocks moved higher, too, as industry leaders met with President Trump to discuss ways to improve conditions. There is a possibility that government infrastructure spending on airports could clear the way for more flights to be handled.
In corporate news, earnings reports were still in focus. Shares of Dow-30 component Coca-Cola (KO - Free Coca-Cola Stock Report) fell moderately on lackluster results. Elsewhere, shares of Twitter (TWTR) declined sharply on weak revenue growth and a poor outlook for its social media service.
On the upside, media company Viacom (VIAB) and restaurant operator Yum! Brands (YUM) performed better than analysts’ expectations, and their stocks rose in response.
Overall, it was a very good day for investors. But there may be some ups and downs along the way before the President’s upcoming tax plan is finally worked out with Congress. – Robert Mitkowski
At the time of this writing, the author did not have a position in any of the companies mentioned.
Mid-Day Update - 11:45 AM EST
The major U.S. equity indexes started the trading day to the upside, and have extended those gains notably as we near the midday hour on the East Coast. The primary catalyst was a statement by President Trump in a conference with airline leaders that an announcement of a sizable tax-cut plan will be coming within the next three weeks. The market averages, which were up modestly to start the session, jumped in the minutes directly following his statement. A reduction in the corporate tax structure is viewed as a boon for U.S. companies, and Wall Street reacted in kind. A batch of mostly positive earnings reports from Corporate America (more below) and higher oil prices also are giving support to equities today.
Thus, as we approach the noon hour, the Dow Jones Industrial Average, the NASDAQ, and the S&P 500 Index are all up nicely off of their already lofty levels. Investors also should note that all three indexes hit all-time intra-day highs this morning, and the broader small-cap Russell 2000 and S&P Mid-Cap 400 Index are holding the biggest percentages gains, on high trading volume. This, along with data showing advancing issues holding a sizable lead on decliners on both the New York Stock Exchange and the NASDAQ, augur very well for the bulls over the remainder of today’s session.
From a sector perspective, nearly all of the 10 major equity groups are trading in positive territory, with the leadership coming from the most economically sensitive categories, including the energy, industrial, and financial stocks. Shares of the airliners also are higher after their CEOs met with President Trump, who promised a roll back in regulations in the industry. Conversely, we are seeing some modest selling in the basic materials and utilities. The higher U.S. dollar and rising bond yields, which move inversely to price, are weighing on those two respective sectors. There is clearly a desire for some risk among investors, which is helping push equities higher again today.
As we noted above, it was mostly good news from Corporate America this morning. On the positive side, Kellogg (K), Viacom (VIAB), Yum Brands (YUM), and Equifax (EFX) all posted solid gains and their stocks are responding positively. That said, all is not cheery, as the stock of Twitter (TWTR) is down sharply after the social media company reported that revenue fell short of expectations in the latest quarter and issued a weak forecast.
Looking ahead to the second half of the trading day, the bulls, emboldened by the aforementioned tax commentary from President Trump and some encouraging earnings news, will be hard to beat. Trading on Wall Street is pointing to record closes for the Dow 30, the NASDAQ, and the S&P 500 Index. 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.
Before the Bell
Following a strong opening to the stock market on Tuesday, but an uninspiring close in which most of the early gains were whittled away, U.S. equities started the session yesterday to the downside, as lower oil prices stoked concerns about domestic supplies. The latest pullback in oil, which, in truth, has been modest, comes on the heels of many months of rising prices. A resurgence in U.S. shale, coupled with some recently higher inventory levels, has hurt oil prices to a degree. However, with oil still above $51 a barrel in New York, crude is hardly a negative for the economy.
This lower start came on a day in which economic reports were again sparse, following a busy stretch last week. On the other hand, earnings continue to come out, although here, as well, the tide of issuances continues to lessen. One major company that did report (after the market closed on Tuesday), was entertainment giant and Dow Jones Industrial Average component Walt Disney (DIS - Free Disney Stock Report). It released mixed numbers, beating consensus on the profit line, while falling short on revenues. But after falling back in after-market trading on Tuesday, that stock rallied moderately yesterday morning, helping to offset the Dow's losses to a degree. By day's end, however, the shares were back unchanged.
The weak backdrop persisted through the morning, so as we reached the noon hour in New York, stocks were still off, particularly the Dow, with financial services behemoth Goldman Sachs (GS - Free Goldman Sachs Stock Report) leading the way lower. In addition the blue chip composite (then off about 55 points), the S&P Mid-Cap 400 and the small-cap Russell 2000 also were down notably, while minimal change was seen by the S&P 500 Index and the NASDAQ. A midday look at the overall market, meantime, showed that losing issues were just edging out winners on the NYSE, but were twice as numerous on the NASDAQ.
The market then attempted to firm up in the afternoon, and did so with some success. To wit, the Dow loss eased, while the S&P 500 Index and the NASDAQ moved back into the black. Importantly, there was improvement in the small and mid-cap sectors, as the advance-decline line strengthened to a degree on the NYSE, with gaining stocks moving into the lead, and on the NASDAQ, where the edge being held by losing stocks lessened notably. Also, most of the 10 leading sectors moved into the plus column, led by the heretofore struggling telecom and utility groups.
At the close, the market's selective comeback continued, with the Dow erasing all but 36 points of its mid-session losses, while the S&P 500 Index and the NASDAQ closed marginally higher. Even the small-cap Russell 2000 regained all but two points of a once-formidable 13-point deficit. Finally, gaining stocks managed to overtake losing issues on the NYSE. Bond yields also eased, and this retracement from over 2.50% to 2.35% is also helping to limit the equity damage.
Looking out to a new day we see that stocks were mixed in Asia overnight, while the bourses are now up nicely in Europe. At the same time our futures are pressing moderately higher in the pre-market, buoyed to an extent by a rebound in oil prices this morning. – Harvey S. Katz
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
