After the Close
The stock market opened sharply higher this morning and managed to maintain much of these gains through the afternoon. Much of the strength in the United States likely originated overseas. Specifically, equities in Europe rallied sharply in response to political developments in France, and this set the stage for a solid opening on our shores. Further, Wall Street may be hoping that the Trump Administration will be able to advance a new tax plan, which would give the economy an additional boost. At the close of the session, the Dow Jones Industrial Average was ahead roughly 216 points; the S&P 500 index was up 25 points; and the NASDAQ was higher by 73 points. Market breadth was quite favorable, with advancers well ahead of losers on the NYSE. All of the major equity sectors made progress, with sizable gains in the financials and in the consumer issues.
Meanwhile, traders received no notable economic reports today. Tomorrow, we will get a look at the latest monthly new home sales figures, as well as a report on consumer confidence. For some perspective, one of the most important releases slated for this week will be the advanced estimate for first-quarter GDP, which is due out Friday morning.
In the corporate arena, a few highly visible companies posted their results this morning. Specifically, shares of Kimberly-Clark (KMB) moved slightly lower, but closed up, even though the consumer products giant delivered a somewhat mixed report. Shares of Hasbro (HAS) jumped, as the toymaker put out an encouraging release. In M&A news, shares of C.R. Bard (BCR) surged on reports that the medical device company will likely be acquired by Becton, Dickinson & Co. (BDX).
Technically, stocks have firmed up over the past few sessions, and today’s rally certainly helps matters. However, the S&P 500 Index is still below the 2,400 area that was briefly hit in early March, just before the market pulled back. It remains to be seen if the bulls can push stocks back to this level in the coming weeks. – 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 - 11:55 AM EDT
The new trading week is starting off with a bang, as the major U.S. equity averages were up notably to start the session and are holding those gains as we approach the midday hour on the East Coast. The main impetus behind the buying was the results of this week’s Presidential election in France, which will result in a runoff between two candidates on May 7th. In a nutshell, the initial voting was taken as an indication that centrist candidate Emmanuel Macron will be the favorite to win, which augurs well for France’s commitment to the European Union.
As we near the noon hour, the Dow Jones Industrial Average, the NASDAQ, and the broader S&P 500 Index are sporting gains of 201, 65, and 22 points, respectively. The buying is broadbased, with the small- and mid-cap sectors all doing very well this morning. Market breadth clearly favors the bulls, with a plurality of winning issues on both the Big Board and the NASDAQ. From a sector perspective, the trading is a complete reversals from Friday’s performance, as all but the utilities stocks are in positive territory.
The leadership among the top-10 sectors is coming from the financial group. The financial stocks are being helped by a rise in bond yields today and the growing sentiment that France’s place in the European Union may not be threatened by a referendum following the May 7th Presidential election. Far-right candidate Marine Le Pen has promised to put the European Union membership up for a vote if she wins the presidency. Overall, most of the economically sensitive sectors are more than 1% higher today on the news from France.
Meantime, we are in the heart of first-quarter earnings season, but the earnings data do not seem to be having much of an impact on trading today. It may be the calm before the storm, as the week will bring reports from 12 Dow-30 companies over the next four days, including data from five blue chips tomorrow. This morning, we got quarterly results from Hasbro (HAS), Kimberly Clark (KMB), and Halliburton (HAL).
As noted, the big market-moving news came from France today. Results in France’s election yesterday saw centrist Emmanuel Macron and far-right nationalist Marine Le Pen emerge as the top two candidates for a run-off on May 7th. What investors are most encouraged by was early polling showing that Mr. Macron is expected to win by a wide margin. That would avoid a Brexit type outcome, which would likely roil the world equity markets, may be even more so than what is taking place in the U.K., as Britain has its own currency and central bank. Investors, not surprisingly, are responding in kind to the news.
Looking ahead to the remainder of the session, it would take a Herculean effort for the bears to turn the tide of trading. And given that it is a relatively quiet day on the earnings front, we think that the U.S. market will close notably higher. It was a banner day on the Continent for stocks and we expect the gains to be notable here as well at 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
The most recent five-day stretch of trading went to the bulls, but it was a small victory and not without some moments for the bears. The primary catalyst behind the modest buying on Wall Street was the start of the first-quarter earnings season, which, save for some high-profile misses, was mostly supportive to stocks. Among the Dow-30 components, the news has been mixed and that was the case on Friday, as Visa’s (V) latest quarterly results impressed investors, while the report from General Electric (GE) left investors wanting more. For the week, the Dow Jones Industrial Average, the tech-heavy NASDAQ, and the broader S&P 500 Index were up 0.5%, 1.8%, and 0.9%, respectively.
But on Friday, there was some profit taking after Thursday’s sharp increases. The Dow Jones Industrials, the NASDAQ, and the S&P 500 Index gave back 31, six, and seven points, respectively. In general, the market was weak, with more declining than advancing issues on both the Big Board and the NASDAQ, and nearly all of the 10 major equity groups finished in the red, save for some interest in the high-yielding and more-defensive utilities issues. The recent drop in bond yields has made the higher-yielding equities more attractive to income-oriented investors over the last fortnight.
Meantime, in the midst of all the talk about earnings, the investment community received some important data on the U.S. economy. Early last week, the reports were encouraging for both industrial production and residential construction. Then on Friday, we got a very strong report on existing home sales. Specifically, the National Association of Realtors reported completed transactions that include single-family homes, townhomes, condominiums and co-ops, ascended 4.4%, to a seasonally adjusted annual rate of 5.71 million units, in March from a downwardly revised 5.47 million in February. March's sales pace was 5.9% above a year ago and surpassed January as the strongest month of sales since February 2007. This week, the economic schedule includes reports on new home sales, consumer confidence, durable goods orders, and the first reading on the first-quarter GDP.
The earnings news, though, will continue to receive the lion’s share of Wall Street’s attention. As noted above, the earnings data so far have proved constructive for stocks. On the docket this week are 12 Dow-30 companies, with five of them, including Caterpillar (CAT) and McDonald’s (MCD), reporting results tomorrow morning. The continuing consensus is that the S&P 500 companies will deliver double-digit earnings growth for the first quarter.
There will also be some focus on the international front this week, where geopolitical tensions between the United States and Russia, Syria, and North Korea remain elevated. Investors will also be keeping close tabs on the political news from France and that country’s upcoming Presidential election. Over the weekend, we learned that centrist candidate Emmanuel Macron and far-right Marine Le Pen received enough votes to make the second and final round on May 7th. The upcoming France election may prove to be a barometer of French voters’ desire to maintain its European Union membership. National Front party leader Le Pen has vowed to hold a referendum on France’s EU membership, if she wins the presidency. Macron, on the other hand, has pledged to firm France’s ties with the European Union. The outcome has the potential to move the market just the way the results of the Brexit vote did last June. Right now investors seem to be encouraged that Mr. Macron will win the upcoming election by the outcome of this weekend voting and are jumping back into stocks in a big way today.
With less than an hour to go before the start of the new trading week stateside, the equity futures are presaging a markedly higher opening for the U.S. market. Overnight, the main indexes in Asia finished in positive territory, while the major European bourses are significantly higher as trading moves into the half of the session on the Continent. The outcome of the aforementioned voting over the weekend in France has investors feeling bullish today. 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.
