After the Close
Equities moved nicely higher earlier today, but softened quite a bit in the late afternoon. At the close of trading, the Dow Jones Industrial Average was ahead 15 points; the broader S&P 500 Index was up five points; and the NASDAQ was higher by 14 points. There was some underlying strength to today’s session, as advancers easily outnumbered decliners on the NYSE. The energy and industrial issues assumed leadership, while the telecommunications stocks weighed down the market.
Traders likely have been concentrating on the nation’s employment situation. Yesterday, Automatic Data Processing (ADP) released its report, showing that 263,000 private sector jobs were added to the economy in the month of March. Today, according to the Labor Department, initial jobless claims retreated to 234,000 for the week of April 1st. Analysts had been looking for a less favorable showing. Finally, tomorrow morning the Government will release the employment figures for the month of March. This issuance will be closely watched by traders, as they speculate about the Federal Reserve’s monetary policy, and the timing of another possible interest-rate hike.
In the corporate arena, we recently heard from a few widely-held names. Shares of Bed Bath & Beyond Inc. (BBBY) advanced after the retailer put out a decent report. Shares of Constellation Brands (STZ) also gained ground in response to a favorable release.
Technically, the stock market has been holding up reasonably well, so far this year. The next big catalyst for equities will likely be the first-quarter earnings season, which will be commencing shortly. Hopefully for the bulls, companies will deliver solid results, especially given the market’s current extended valuations. – 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 - 12:05 PM EDT
The major U.S. indexes began Thursday with an up-and-down pattern before eventually settling above the breakeven line. Conflicting tone regarding the central bank’s monetary outlook, political developments in Washington, and new data on the jobs market are all playing a role in today’s growing positive sentiment. On the latter, the averages climbed on reduced jobless claims last week in what was the largest drop in nearly two years. Strength in the energy, industrial, and cyclical consumer goods industries are offsetting pockets of softness elsewhere, and advancing stocks lead declining issues by a more-than 2-to-1 margin.
One development investors are keeping an eye on is the meeting between President Trump and China’s President Xi Jinping. The relationship between the two nations is a matter of great importance for the U.S. economy, especially as it relates to trade, global military presence, and foreign exchange. As a candidate, President Trump accused the eastern power of manipulating its currency, so we expect the tone and outcome of this two-day summit will be widely dissected. Mr. Trump's recent action on H-1B1 visas has sowed considerable uncertainty in the telecom and technology industries, where companies rely heavily on these programs to attain key talent. Accordingly, the former sector is the biggest laggard today among the major industry groups.
Meanwhile, lingering concerns stemming from yesterday’s release of the minutes from last month’s Federal Open Market Committee continue to influence trading sentiment. The transcript showed members thought the stock market was overvalued and expressing a desire to pare its $4.5 billion balance sheet, furthering bolstering the likelihood of rate hikes in the near future. The 2:00 PM publication spurred a sudden turn in the market, ending what had until then been a broad-based and much-needed run up. Another afternoon item that contributed to the early-day instability was House Speaker Paul Ryan’s suggestion that tax reform, a central facet in the post-election rally, would not occur in the immediate future.
So, as we pass through the noon hour in New York, we see each of the three indexes holding on to gains so far in the day. We expect developments from the Trump/Xi meeting to cause some minor waves today, as investors wait for tomorrow morning’s jobs report from the U.S. Labor Department. The private sector payroll update from Automatic Data Processing (ADP) drove early yesterday’s short-lived uptick, so the bulls are hoping for a similar, but longer lasting, rally. – Robert Harrington
At the time of this article’s writing, the author did not hold positions in any of the companies mentioned.
Before the Bell
After two pedestrian sessions to start the second week of April, the stock market took off yesterday, and appeared set to score a wire-to-wire win for the bulls. On point, equities surged at the outset of trading, as investors were buoyed by solid employment data ahead of the release (yesterday afternoon) of the Federal Reserve's minutes from its last FOMC meeting and tomorrow's report on employment from the Labor Department. In all, the upbeat jobs report was provided by Automatic Data Processing (ADP) and it featured a private-sector payroll jump of 263,000 last month.
Armed with this strong report, the Dow Jones Industrial Average jumped to a gain well north of 100 points, with a session-best rise of just under 200 points. Solid increases also were tallied by the S&P 500 Index and the NASDAQ. But the big winner was the Dow, which, interestingly, has been a weak link so far this year, with an opening-period rise of less than 5%, or about half of the gain of the NASDAQ. The small- and mid-cap indexes, meanwhile, were behind the curve, as well, yesterday morning, with gains of less than half a percentage point.
In all, the ADP figures were well north of the 185,000 increase forecast for March. Although there is not always a good correlation between that report and tomorrow's government issuance, there is often at least some relationship between the two. In fact, the ADP release served to contradict some of the fears on hiring, stemming from recent inclement weather in parts of the country. As for the Labor Department report, expectations had been that Washington would report a jobs gain of 180,000. Now, there are some expectations that this estimate will be raised to a much higher figure.
Also, the upbeat ADP report ran counter to a weaker issuance from the Institute for Supply Management. That trade group, which two days earlier had issued a decent release on manufacturing, put out an unprepossessing survey on non-manufacturing activity, in which its index registered a reading of 55.2. That was a strongly positive tally, to be sure, but it was less than the forecast result of 57.0. However, that report had much less of an impact than the ADP release. So, stocks continued to rally through the morning, before giving some ground as we approached the noon hour.
The afternoon then began with the Dow still up by some 135 points, or about two-thirds of its earlier advance, while proportionately smaller increases were logged by the other averages. As for the Dow, 29 of its 30 components were leading the way higher at the time, while nearly twice as many stocks were gaining on the day as falling on the NYSE. The rally gained further traction as the early afternoon proceeded, with the S&P 500 and the NASDAQ almost catching up to the Dow in terms of the percentage increases. It was still a formidable rally until the final 90 minutes, when stocks reversed course.
The upturn faltered badly, in part, we sense, because the Fed minutes (issued in mid-afternoon) showed that Fed officials wanted to start unwinding the bank's massive $4.5 trillion balance sheet later this year. Treasury yields rose on this news and stocks started to backtrack. In fact, as we headed into the home stretch, all of the indexes had turned lower, including the Dow. Also, whereas early on, all 10 of the sectors were higher, the reverse was nearly true at the close, while losing stocks took a wide lead on gaining issues on the Big Board. All told, the market ended the session holding some notable losses, especially in the secondary names.
So after the failed rally yesterday that ended hopes for a wire-to-wire win, or any gain for the bulls, for that matter, stocks fell in Asia overnight, while in Europe, the major bourses are now lower. As to our futures, yesterday's close is not having a carry-over effect, as our futures are now up modestly. Elsewhere, oil is a touch higher and Treasury bond yields are mixed, as Wall Street awaits the jobs report tomorrow morning from the U.S. Labor Department. – Harvey S. Katz
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
