After the Close
U.S. stocks began the week on a strong foot, until mounting concerns over geopolitical tensions ended the early run-up around lunchtime. But each of the three major indexes turned higher early in the afternoon and, though failing to again reach the mid-morning peaks, managed to finish Monday in positive territory. Market breadth was boosted by the small- and mid-cap equities, which outperformed their large-cap counterparts considerably.
The reaction to the United States’ missile strike on Syria continues to unfold, and developments on the political front are a large reason for today’s up-and-down market movement. Secretary of State Rex Tillerson is set to meet his Russian counterpart in Moscow this week, with an aim at exerting American influence over the foreign power’s relationship with the Syrian government. Traders appear to be increasingly wary that expanded military activity will distract from the Trump Administration’s tax and deregulation goals, two of the primary drivers for the post-election rally.
But one area where the geopolitical events are helping is the energy industry. U.S. crude oil prices ticked upward, by $0.76 per-barrel, as halted drilling activity in Syria and Libya continues to increase demand for domestic fuel. Accordingly, the energy sector was among the better performing business groups today, ringing in the closing bell an aggregate 0.70% higher. Industrials, particularly equities with exposure to military spending, have also traded higher in the wake of recent news items.
The final hour saw the bulls lose steam, as the three main indexes shed most of their daily gains. When all was said and done, the S&P 500, Dow Jones Industrial Average, and the tech-centric NASDAQ ended the day marginally higher. The market sectors exhibited similarly muted positivity, with telecom and healthcare struggling as the afternoon progressed. Advancing stocks maintained a nearly 2-to-1 edge on declining shares despite the late-day selloff.
Looking out, the first-quarter earnings season will begin at the end of the week, with banking stocks kicking things off. The profit performance of Corporate America will help traders to better gauge the economy’s strength, as will an upcoming speech by Federal Reserve Chair Janet Yellen. Last week’s disparate job data will task Ms. Yellen with simultaneously reiterating the central bank’s monetary tightening strategy while also addressing the Labor Department's recently reported jobs growth slowdown. Because her statement did not begin until after today’s market closed, we expect early Tuesday’s trade to largely center around the speech. – Robert Harrington
At the time of this article’s writing, the author did not hold positions in any of the companies mentioned.
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Mid-Day Update - 12:50 PM EDT
The U.S. stock market got off to a decent start this morning. However, as we pass the noon in New York, the major averages are pulling back quite a bit. The Dow Jones Industrial Average is now down four points; the broader S&P 500 Index is up one point; and the NASDAQ is nominally lower. Market breadth is still favorable, with winners ahead of losers on the NYSE. Many of the major market sectors are also still in positive territory. The energy names are displaying leadership, helped by stronger crude oil prices. Notably, the world’s most widely traded commodity is up to almost $53 a barrel in New York, as traders react to recent political events, as well as concerns about supply disruptions in parts of the Middle East. Meanwhile, the high-yielding utilities are lagging the broader market.
There were no major economic reports released this morning. Moreover, tomorrow will be a light day for reports. However, the pace should pick up on Wednesday, as import and export prices for the month of March are slated to be released.
Meanwhile, few leading corporations delivered their financial results earlier today. However, the first-quarter earnings season will soon commence. In fact, a few major banks, including JP Morgan Chase (JPM - Free JP Morgan Chase Stock Report), are scheduled to report later this week. Elsewhere, there was some M&A activity to report in the trucking space. Specifically, shares of Swift Transportation (SWFT) and Knight Transportation (KNX) are up sharply in response to a merger announcement.
Technically, the stock market still seems to be in need of some direction. Perhaps, the first-quarter earnings season will provide some clarity. – Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before the Bell
The most recent five-day stretch of trading on Wall Street went to the bears. The large-cap Dow Jones Industrial Average and the broader S&P 500 Index were each off 0.3% for the week, while the tech-heavy NASDAQ backed off of its all-time high set earlier in the week, falling by 0.6%. In general, investors took a bit of a breather, as they await the start of first-quarter earnings season. The earnings news begins to flow in later this week and will likely play a major role in what path the stock market takes in the coming weeks. The general consensus is that the reports from the corporate world will ultimately prove constructive for the U.S. stock market.
Last week, the stock market was held in check by some news that is not typically good for equities. Of note, the Federal Reserve minutes from its last FOMC meeting showed that the central bank will soon begin to reduce its bloated balance sheet, which was inflated by years of bond-buying. The looming specter that the Federal Reserve will be tightening the monetary reins in the coming months, along with a disappointing jobs report, emboldened the bears late in the week. On Friday, the Labor Department reported that nonfarm payrolls expanded by just 98,000 jobs in March, falling well short of the consensus expectation of 180,000 jobs. The Fed minutes and the jobs data makes for a tricky situation for the central bank moving forward, as it attempts to tighten monetary policy without disrupting the economic progress made by the U.S. economy in recent years. Investors should note that Fed Chair Janet Yellen is scheduled to speak this week on the aforementioned issues. Her commentary may well have an effect on trading.
The forthcoming commentary from Fed leaders is not only news investors will receive on the economy this week. The headline data will be the retail sales report on Friday. We will also get reports on consumer and producer prices. In general, save from Friday’s labor market data, the reports from the business beat have been rather supportive.
The investment community’s attention will turn to Corporate America this week, as first-quarter earnings season commences with reports from a number of the nation’s biggest banks. The holiday-shortened week (the stock market is closed on Friday for Good Friday) will bring the latest quarterly reports from banking giants JPMorgan Chase (JPM - Free JPMorgan Chase Stock Report), Wells Fargo (WFC), and Citigroup (C). As noted above, the expectation is that the upcoming earnings season will prove supportive for the U.S. equity market. The earnings news does not heat up, though, until investors return from the long-holiday weekend next Monday.
Meantime, the news from Washington D.C., which has had a big impact on trading since last November’s Presidential Election, should slow down a bit, as Congress takes a break for the Easter Holiday. Last week, contentious proceedings regarding the confirmation of President Trump’s pick for the Supreme Court, Neil Gorsuch, worries about President Trump’s two-day meeting with China’s President Xi Jinping, and news that President Trump ordered attacks in Syria against the Assad regime weighed on the market. As far as the meeting with China’s leader, the initial take away is that the talks were constructive. During his presidential campaign, President Trump promised to be tough with China on trade policy.
With less than an hour to go before the commencement of trading stateside, the equity futures are presaging a modestly higher opening for the U.S. market. Overnight, the main indexes in Asia put in a mixed session, while the major European bourses are in the red as trading moves into the second half on the Continent. Worries about France’s upcoming Presidential election and the escalating geopolitical tensions in the Middle East are weighing on European stocks today. As far as France’s election, equity investors responded disappointingly to an increasingly crowded field in the race and to polls showing far-left candidate Jean-Luc Melenchon surging in the polls. Still, last week’s U.S. missile strike on Syria and the escalating geopolitical tensions in the Middle East remain the biggest headwinds for European investors today. Will those dour tidings eventually find their way to the U.S. equity market? We shall see. – Harvey S. Katz
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
