After the Close
The stock market made some progress today, as we embarked on a new trading week. At the close of the session, the Dow Jones Industrial Average was ahead 90 points; the S&P 500 Index was up 12 points; and the NASDAQ was higher by 50 points. Market breadth showed broad based participation, with advancers well ahead of decliners on the NYSE. Almost all of the major equity sectors forged ahead today. There was considerable leadership in the technology and consumer non-cyclical names. Further, it should be noted that many aerospace and defense issues moved higher today, possibly in response to a recently announced arms deal with Saudi Arabia. Meanwhile, the energy stocks lagged the market today, even as crude oil prices edged ahead.
Traders received no major economic reports this morning. Tomorrow, we get a look at new home sales for the month of April. The existing home sales issuance will follow on Wednesday. These reports will likely be watched closely, given that a strong housing market has contributed to the nation’s economic recovery.
Meanwhile, it was a quiet day for corporate earnings reports. However, some M&A news was announced. Specifically, Huntsman Corp. (HUN) has agreed to merge with Switzerland-based Clariant. Shares of Huntsman were off slightly today. In general, M&A activity is usually helpful for the stock market. Corporations which might face intense competition alone can often join forces and realize various business and cost synergies.
Technically, the stock market has been somewhat volatile lately, due to mounting political uncertainty. However, some traders on Wall Street may be optimistic that President Trump’s trip to the Middle East will be successful, and that may be aiding sentiment. – 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 - 11:40 AM EDT
The major U.S. equity indexes started the session to the upside—with the Dow Jones Industrial Average up nearly triple digits within the first 30 minutes—and has held most of those gains as we approach the midday hour on the East Coast. The latest stock market rally, which started last Thursday on the heels of a nearly 400-point drop in the Dow Jones Industrials on Trump Administration concerns, is continuing. Perhaps, the President’s trip to the Middle East and away from the politically charged environment in Washington D.C., is helping, at least for the moment, to ease some of the tensions between the political parties, which is welcomed by Wall Street. Hence, the rally we are seeing the last two-plus sessions.
Looking closely at today’s performance, it is clearly going in the way of the bulls. All of the major equity groups, save the utilities, are comfortably in positive territory. The leadership is coming from the consumer staples sector, which is up more than 2% this morning, on the strength of the personal services stocks. Also in favor today are the technology, healthcare, and basic materials issues. Among the gainers, the energy stocks are holding the smallest advantage. Likewise, market breadth is clearly favoring the bulls, with advancers leading decliners by a wide margin on both the New York Stock Exchange and the NASDAQ, to the tune of nearly three to one on the former. There is also a plurality of issues hitting 52-week highs than lows this morning.
Meantime, it should be noted that the small- and mid-cap sectors are sporting even bigger percentage increases than their large-cap brethren, which may speak to the likelihood of the bulls seeing this uptick to the closing bell. Our sense is that we are seeing a “trading vacuum on Wall Street”, with little new earnings or economic news to stall the rally that began last Thursday. Stocks may also be getting a boost from some “Merger Monday” news, as we learned that Huntsman (HUN) is merging with Swiss rival Clariant in a stock swap deal that values the combined companies at $20 billion. The company will be called HuntsmanClariant, with headquarters in Switzerland, but its primary operations in Texas.
The U.S. investment community also is easily shaking off some political jitters from the pond this morning. The major European bourses are under modest pressure as they approach the closing bell on the Continent. Of note, critics of Mariano Rajoy's ruling party and Spain's austerity policies returned to lead the opposition Socialists party; polls showed Britain's election race tightening and its chief Brexit negotiator threatening again to walk away from European Union exit talks unless the bloc eases its demands; and euro zone finance ministers and the International Monetary Fund will meet to try negotiating a deal on Greek’s debt relief.
Looking ahead to the second half of today’s U.S. session, market fundamentals are clearly suggesting that the bulls will make it three-consecutive winning sessions on Wall Street. The lack of any major earnings, economic, or domestic political news is not giving investors any reason to alter the course that began last Thursday. – 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 investment community was taken on a rollercoaster ride last week, with both the bulls and the bears heard from during the five-day stretch of trading. The biggest move came last Wednesday when investors were unnerved by concerns about turmoil in the Trump Administration that Wall Street pundits fear may pose a big threat to the President’s attempt to get a pro-business agenda through Congress in the coming months. The stock market rose sharply in the months following the election on hopes of some business-friendly legislation (most notably tax reform) and looser regulations being a boon for U.S. corporations. However, the recent turmoil has raised questions about how many reforms will pass this year, and prompted the big setback on the middle trading day of last week. That selling made it a winning week for the bears, but the size of victory was pared significantly by a good day for stocks on Friday.
During the final two days of the week, investors were able to put the concerns about the Trump Administration on the backburner, at least for the moment, and concentrate on some good news from both the earnings and economic fronts. The encouraging news from the business beat included data showing that weekly initial unemployment claims fell to a nearly 30-year low in the most recent week. Meantime, strong quarterly reports from Dow-30 companies Home Depot (HD - Free Home Depot Stock Report) and Wal-Mart Stores (WMT - Free Wal-Mart Stock Report) was a breath of fresh air for the struggling retailing sector. The data from industry behemoth helped pull the consumer discretionary stocks higher over the final few trading days of last week.
On Friday, the Dow Jones Industrial, the tech-heavy NASDAQ, and the broader S&P 500 Index rebounded 142, 29, and 16 points, respectively, helping to pare some of the early week losses. From a sector perspective, the basic materials, energy, and telecommunications groups led the charge higher in a day when all of the top-10 equity groups finished comfortably in positive territory. The buying was broadbased, with both the small- and mid-cap sectors in the black. There was a plurality of winning issues on both the New York Stock Exchange and the NASDAQ, with the spread more than three to one on the Big Board.
Looking out at the week at hand, the earnings news will be rather light, with the books nearly closed on the first-quarter earnings season, which was a very productive one. Meantime, the business beat will bring data on new and existing home sales, durable goods orders, and the revision to the first-quarter GDP estimate. The economic schedule will be quiet today and tomorrow, which, along with the lack of headline stories from Corporate America, may push the investment community’s attention back to Washington D.C. and the international community. As noted above, the former has not been a good thing for stocks in recent weeks, as Wall Street is concerned that many of President Trump’s business-friendly policies may not get through Congress as quickly as some had initially expected.
With less than an hour to go before the commencement of the new trading week stateside, the equity futures are presaging a rather flat start for the U.S. stock market. So far, the trading has been mixed overseas, with the main indexes in Asia finishing higher overnight, while some selling is taking place in Europe. Trading on the Continent is being hurt by some political concerns, with rumblings out of Spain, Britain, and Brussels. Of note, outspoken critics of Mariano Rajoy's ruling party and Spain's austerity policies returned to front the opposition Socialists party; polls showed Britain's election race tightening and its chief Brexit negotiator threatening again to walk away from European Union exit talks unless the bloc eases its demands; and euro zone finance ministers and the International Monetary Fund will meet later today to try negotiate a deal on Greek’s debt relief. It will be interesting to see with the dearth of economic and earnings news stateside if the European political worries spill over to the U.S. equity market. Right now it is too early to tell, but we shall see. 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.
