After the Close
Equities moved higher this morning, pulled back briefly around midday, before advancing again in the afternoon. At the close of the session, the Dow Jones Industrial Average was up 69 points; the broader S&P 500 Index was ahead seven points; and the NASDAQ was higher by nearly 17 points. Market breadth was constructive, with advancers ahead of decliners on the NYSE. From a sector perspective, the financial issues displayed leadership, while the utilities put downward pressure on the market.
Todays’ economic news likely spurred on the bulls. Specifically, the final estimate for fourth-quarter GDP showed the economy expanding at an annual rate of 2.1%, which was a bit better than the previous estimate. However, initial jobless claims for the week of March 25th came in at 258,000, which was a higher number than had been anticipated but lower than the prior week. Tomorrow a number of reports are due out. Specifically, we will get a look at the latest monthly personal income and spending numbers, the Chicago PMI for the month of March, as well as a report on consumer sentiment from the University of Michigan.
Meanwhile, in corporate news, few large names weighed in with their numbers over the past 24 hours. However, shares of lululemonathlectica (LULU) sank, after the upscale yoga apparel maker’s outlook disappointed investors. The pace will surely pick up, as the first quarter for 2017 is now closing, and the earnings season will commence in the weeks ahead.
Technically, stocks continue to find support. Today’s buying puts the S&P 500 Index further above its 50-day moving average, located near the 2,335 mark. It remains to be seen, if the bulls can regain control over the market and push stocks higher from here. – 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 - 11:50 AM EDT
The major U.S. equity indexes started the session running in place, with none of them straying too far from the neutral line. Initially, it was looking like investors were unwilling to make any major moves with so much uncertainty regarding what will be the next big news story from Washington D.C. The major averages recently weakened after the White House’s proposal for healthcare reform hit a roadblock on Capitol Hill, but then rebounded on some favorable economic data, including a strong reading on consumer confidence on Tuesday and today’s release of the final revision to the fourth-quarter GDP estimate. Those economic reports, which further signified a strengthening of the U.S. economy, and rumors that Speaker of the House Paul Ryan plans to resubmit the healthcare bill, possibly as early as next week, appear to be giving a boost to stocks, with the buying picking up as the morning hours unfolded. Speaker Ryan is addressing the media right now.
As we approach the midday hour on the East Coast, the U.S. equity market is putting forth a constructive session after a directionless start. The large-cap Dow Jones Industrial Average and the broader S&P 500 Index after moving in and out of positive territory in a tight band over the first 30 minutes have since broken out to the upside, joining the NASDAQ, which has been strong since the start. The NASDAQ has been the standout performer among the major averages during the first quarter on the strength of technology and that trend is continuing today. The NASDAQ is eying its fifth-consecutive winning session. In general, there is a bullish tone to trading, with advancers comfortably ahead of decliners on both the Big Board and the NASDAQ.
We are seeing some sector rotation among the 10 major equity groups today. The inflation-driven sectors are doing well, with today’s leadership coming from the financial, basic materials, and energy groups. The latter commodities area is also being helped by a rise in crude oil prices in both New York dealings and on the Continent. WTI crude is now trading just shy of the $50-a-barrel mark. Conversely, we are seeing some weakness in the higher-yielding equity groups (i.e., consumer staples, telecommunications, and utilities), with the rise in fixed-income yields pressuring those sectors. The yield on the 10-year Treasury note is trading higher today, which makes bonds more attractive to income-oriented investors, often to the detriment of higher-yielding equities.
As noted above, the big news from the business beat came in the form of the final reading on fourth-quarter 2016 GDP. The Commerce Department report showed an upward revision in the fourth-quarter GDP estimate from 1.9% to 2.1%. This marked the second-consecutive increase, with the upside driven by a bigger-than-expected jump in personal consumption expenditures. Personal consumption accounts for roughly two-thirds of nation’s output, so the uptick in that category is a good sign for the economy going forward, especially with the continued improvement in consumer confidence during the first quarter of this year. The strong economic data, as noted, are giving a boost to equities this morning.
Meantime, the news from Corporate America is mixed. On the positive side, shares of Conoco Phillips (COP) rallied this morning on news that the energy giant announced a $13.3 billion deal to sell its oil sands and natural gas holdings in Canada to Cenovus Energy (CVE.TO). The funds from the transaction will be used to clean up Conoco’s balance sheet. That appeared to please investors. The investment community, though, does not like the deal for Cenovus. Conversely shares of retailer lululemon athletica (LULU) tumbled as the investment community was very disappointed with the company’s outlook and same-store sales guidance. The lululemon news is capping what has been a very difficult quarter for the retailing sector.
Looking ahead to the second half of today’s session, the bulls look to be holding the upper hand. Market fundamentals, which includes more winning than losing issues on the NYSE and NASDAQ on high trading volume, suggests that the market may be able to hold the gains into the closing bell. 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 Tuesday's spirited rally in the stock market, a continuation of that upturn might have been expected at the open yesterday. However, no better than mixed-to-slightly higher showings in Asia overnight and in Europe earlier in the morning took the measure of the bulls on our shores at the start of trading. So whereas Tuesday had been helped by an uplifting monthly survey on consumer confidence, which surged to better-than-a 16-year high, there was no such positive news yesterday to offset an uncertain backdrop. So, stocks wilted at the open.
There was no wholesale selling, to be sure, but the roughly 50-point early loss in the Dow Jones Industrial Average was at least a modest reversal from the supportive performance the day before. As the morning continued into its latter stages, the S&P 500 Index managed to edge back toward breakeven, while the S&P Mid-Cap 400, the small-cap Russell 2000, and the NASDAQ moved more solidly into the black. But the Dow, held back by a moderate loss in shares of health insurer UnitedHealth Group Inc. (UNH - Free UnitedHealth Group Stock Report), was still decidedly in the loss column.
Among the influences yesterday morning were comments from Boston Federal Reserve President Eric Rosengren, who intoned that the Fed may be more aggressive this year in raising interest rates than is generally perceived. On point, he mused that four, rather than three, rate hikes would be appropriate in 2017, especially if the economy heats up. So, stocks could not fully find their bearings over the course of the morning. In all, by noon in New York, the Dow's loss had increased to some 60 points, while the S&P 500 had dipped back into the red. Still, gaining issues held an edge on the NYSE, making the early outcome a truly mixed affair.
Stocks then moved into a somewhat stronger position as the afternoon unfolded, with the Dow's deficit, more than 75 points at the session's nadir, being pared by about two-thirds as we moved inside the final 90 minutes of trading. Meanwhile, the other indexes expanded their heretofore very modest improvement. Among the major groups, seven of the 10 leading sectors held gains at that point, led by more than a 1% increase in energy on higher oil quotations, while gaining stocks now held a nine-to-five advantage on declining issues, which represented a clear widening of their earlier small edge.
Meantime, in addition to some hawkish commentary from the Fed, there also was the start of Brexit efforts. Although that is neither a positive nor a negative development at this time, there is some logical nervousness attached to such an effort. Then, there is the uncertainty engendered by last Friday's decision to halt efforts to repeal and replace the Affordable Care Act. The concern is that the savings that were to be generated from such a replacement had been intended to assist in tax reform. Now, such sums will be missing unless a second effort is launched and succeeds.
Such concerns aside, a resilient bull continued to hang in there yesterday, and as the afternoon wound down, further selective buying took hold, except in the Dow, which continued to struggle into the close. In all, that composite ended with a loss of 42 points, while gains of three and 22 points were logged, respectively by the S&P 500 and the NASDAQ, with individual issues showing many more advances than declines. Among the principal sectors, higher oil quotations led the energy groups to a hefty gain, which also helped drag along the basic materials.
Now, a new day gets under way, and ahead of action on our shores, we look out at the markets across Asia, which were mostly lower in overnight dealings, while in Europe, stocks have opened on a mixed to lower note. Elsewhere, oil is off a few pennies a barrel; interest rates on Treasury issues are a bit lower; and the futures on these shores are pointing to some slippage ahead of the opening bell in New York. – Harvey S. Katz
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
