After the Close
Stocks opened lower this morning, and retreated further during the afternoon and into the close. At the end of the session, the major averages had settled at their session lows, with the Dow Jones Industrial Average down nearly 113 points, the broader S&P 500 Index off 14 points, and the NASDAQ lower by 43 points. The selling was fairly widespread today, as losers easily outnumbered winners on the NYSE. There was notable weakness in the financial and basic materials issues. However, the defensive high-yielding utility names managed to press ahead.
It was a relatively light day for economic news. However, the latest weekly initial jobless claims were released, confirming that the nation’ employment situation remains healthy. Specifically, claims dropped to 223,000 for the week of February 25th, which was a better reading than had been anticipated. Tomorrow will be a relatively quiet day. The only notable item due to be released will be the ISM non-manufacturing report for the month of February.
Meanwhile, a few widely watched corporations posted their results over the past 24 hours. Specifically, we heard from Monster Beverage (MNST). That stock advanced in response to an encouraging release. Further, shares of Burlington Stores (BURL) moved up, after the apparel retailer delivered a solid report, accompanied by an upbeat outlook.
Technically, stocks have been making strong progress lately. The S&P 500 Index is now at roughly 2,380, and pushing this key average above the 2,400 mark on a sustained basis will likely be the next key accomplishment for the bulls. However, with the fourth-quarter reporting season now largely over, it is not clear what will serve as the catalyst needed to encourage buying, especially given that many equities are trading at elevated valuations, in our view. – 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 - 12:15 PM EST
U.S. stocks took a breather this morning, following a roaring run-up by the bulls on Wednesday. The gains were a continuation of economic optimism, mostly related to President Trump’s announced promises to deregulate markets, decrease tax rates, and stoke infrastructure and defense spending. The S&P 500, NASDAQ, and Dow each set all-time highs yesterday in the afternoon. But, on a day ripe for profit taking, a broad-based correction is apparently in effect. The major indexes were holding on to slight losses until 11:00 AM (EST), when each of them fell more deeply into the red.
Another factor likely pulling prices lower is the Federal Reserve’s stance on monetary policy. The release of its Beige Book economic summation perpetuated the optimistic tone seen over the past several months. Though there were some caveats, to be sure, particularly as it relates to new legislation, the overall growth picture remains intact. So, with multiple interest-rate hikes likely for the year, it has become probable that the central bank will apply an increase at its March summit in two weeks. In fact, the likelihood has climbed above 60% since yesterday’s anecdotal compilation was published.
Meanwhile, the business beat saw weekly jobless claims come in 20,000 below the expected 243,000, falling to its lowest level in over four decades. The ongoing tightening of the labor market strengthens the case for a near-term rate hike. Elsewhere, the IPO of social media player Snap Inc. (SNAP) got off to a roaring start, opening more-than 40% higher than the offering price.
Looking at the sectors, we see that rotational trading was at play. Yesterday’s leading grouping, basic materials, was shedding well over 1% as of noontime in New York, while financials and industrials also returned some of the value earned during yesterday’s bullish spree. On the other hand, utility stocks climbed higher, the only sector to do so during the morning hours.
So, with declining issues widening their 2.9-to-1 edge over advancing issues as the midday passed, the bulls have their work cut out if they hope to bounce back in the afternoon. - Robert Harrington
As of this article’s writing, the author did not hold positions in any of the companies mentioned.
Before the Bell
The stock market, which posted a strong February, albeit with a ho-hum close on Tuesday, started the new month with a roar in trading yesterday. In fact, is seemed as though March was coming in like the proverbial lion, with the Dow Jones Industrial Average soaring past 21,000 early in the session. That composite, which pushed forward by more than 200 points in the first half hour of trading, was supported, along with the rest of the stock market, by President Trump's reassuring speech to Congress on Tuesday night, that some observers were calling his best address since he had began his quest for the Presidency two years ago.
Buoyed by his talk and his optimistic tone on tax cuts and infrastructure spending, stocks rose sharply from the outset of trading, with the key averages surging to all-time highs. Not only did the Dow ascend to 21,000 early on, but the S&P 500 Index pushed past 2,400, while the NASDAQ moved to the doorstep of 6,000. The small- and mid-cap composites, which had lagged the other indexes in recent days, also advanced strongly. Expectations are that the President's proposals would be good for stocks and the economy. Now, the challenge will be to get Congress to go along once the actual plans that are proposed.
Meanwhile, in other news propelling stocks higher yesterday morning, the Institute for Supply Management (ISM) posted a strong report on the nation's manufacturing sector during February. In all, the latest data from that Arizona-based trade group indicated that its survey had risen to 57.7 last month, moderately ahead of the 56.0 scored in January, and the consensus expectations for a like reading this past month. Healthy gains also were scored by several key components in the survey, notably new orders, which jumped to 65.1 (a reading of 50.0 is considered neutral), production, and backlogs.
Armed with the President's speech and the solid ISM result, stocks continued to push ahead, with most groups participating. To wit, nine of the 10 major sectors of the market were in the green early on in the session, led by basic materials (a likely beneficiary of increased infrastructure outlays), the financials, and the industrials. The lone group losing ground was the utility sector, as higher interest rates (and Treasury yields were up measurably on the President's remarks) would likely detract from the generous yielding Treasuries. Also, gaining stocks were doubling up losing issues in late-morning trading on the NYSE.
The market then persisted on its merry way into the lunch hour and beyond, with the release of the Federal Reserve's Beige Book summation of economic activity across the country looming at 2:00 PM (EST) and representing the next potential hurdle. Going into that issuance, the market was continuing its strong advance, with the Dow up some 300 points. After that release, which continued to suggest that modest-to-moderate economic growth was in place across the country, the market strengthened a bit further, with the Dow Industrials climbing to a gain of more than 350 points.
Equities then continued their powerful advance as the afternoon wound down. It would seem that even if the Federal Reserve was to raise interest rates in mid-March--and there would seem to be better than a 50-50 chance of that happening--the stock market would just look past that event to pending economic and corporate profit news, which figures to be upbeat for the most part. The market's ongoing strength clearly is a function of such expectations. However, the plans advanced on Tuesday night were short on specifics and that could be an offsetting concern should that not change.
The advance, as noted, persisted, so that by the close of action, the Dow had retained 303 points of its one-time 357-point rise, while the S&P 500 Index ended up by 32 points, at just below 2,400. The NASDAQ's gain was 79 points, or also well over 1%. The Russell 2000 uptick, meantime, was 28 points, or about 2%. As before, only the utilities, among the 10 leading groups, fell on the day, while just over twice as many stocks rose in price on the Big Board as fell. So, it was an impressive wire-to-wire win for the emboldened bulls.
Now, a new day commences, and we look across the sea to Asia, where the market was mixed overnight. As for Europe, the early read on the Continent's bourses is non-descript, as well. As to other news, following yesterday's busy session, the day shapes up as fairly light. However, tomorrow the Institute for Supply Management will issue its report on non-manufacturing activity. Expectations are for another strong reading from the services sector to complement the survey issued yesterday by the ISM on manufacturing. Finally, our futures are suggesting a narrowly lower opening when trading resumes shortly. – Harvey S. Katz
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
