After the Close
The major stock averages turned in a constructive session today ahead of the upcoming long Memorial Day weekend. At the close, the Dow Jones Industrial Average was up 75 points; the NASDAQ was ahead 24 points; and the S&P 500 was six points higher. Market breadth was modestly positive, but it wasn’t until late in the day that the tide turned.
Investors spent a good part of the day waiting for the minutes of the Federal Reserve’s last policy meeting to be made public at 2:00 PM EDT, and got about what they expected, give or take. Providing some clarity regarding plans to shrink its balance sheet, the Fed gave notice that it expects to allow a certain amount of maturing securities to roll off. That strategy will serve to reduce monetary stimulus in a controlled fashion. The key theme seems to be the gradual nature of the central bank’s moves, so as not to rattle the financial markets. In like fashion, the Fed plans to continue hiking interest rates only slowly.
Earlier in the day, economic data showed that April existing-home sales fell somewhat more than expected, compared to the prior month. This appears to be a case of limited inventories and higher prices putting a cap on sales, since housing demand remains high. Supporting market conditions are the combination of high levels of employment and historically low interest rates. Rates for a 30-year mortgage recently averaged around 4.0%.
Elsewhere, oil prices fell modestly ahead of an expected announcement from OPEC tomorrow that output cuts enacted near the beginning of the year will be extended for nine months. The market seemed to have already priced in that news, and there may have been hope that deeper production cuts would be put in place. The energy sector was the session’s weakest performer among the stock market’s major groups.
Leading the way in what turned out to be relatively calm trading were the consumer staples and utilities sectors. Shares of utilities have fared well of late as interest rates have backed off of their recent highs.
Overall, Wall Street today seemed to like the steady-as-she-goes approach indicated by the Fed minutes, with stocks moving higher after their release. – Robert Mitkowski
At the time of this 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 fresh off of a four-day rally on Wall Street, started the session today modestly to the upside, but are, nevertheless, none too far removed from the neutral line. The lack of any major headlines from Corporate America and maybe some hesitation ahead of this afternoon’s release of the minutes from the last FOMC meeting are giving investors some pause. Too, President Trump’s trip overseas and away from the contentious Washington D.C. dealings is helping to reduce the volatility in the market, at least for the time being.
From a sector perspective, there are several more up than down arrows among the 10 major groups. The leadership is coming from consumer staples, utilities, industrial, and basic materials sectors. Likewise, the red-hot technology stocks, which have played a huge role in the recent success of the NASDAQ, are again collectively trading in positive territory. Conversely, we are seeing some modest selling in the consumer discretionary and utilities sectors.
Meantime, market breadth is once again favoring the bulls, even though the moves by the major averages, as noted, have been pretty well contained. Advancing issues hold a comfortable lead over decliners on both the Big Board and the NASDAQ as we approach the noon hour on the East Coast. It also should be noted that the percentage gains for the small- and mid-cap indexes are a bit bigger than their large-cap brethren, which may be an indication that the bulls are going to be engaged again to the closing bell.
As noted, the minutes from this month’s FOMC meeting will be released at 2:00 P.M. (EDT). Our sense is that the details from the confab will further solidify the likelihood that the central bank plans to tighten the monetary reins at next month’s meeting. Normally, the more hawkish tone would probably prompt some profit taking on Wall Street, but we think that the market may have already priced in the expectation of some near-term interest-rate hikes.
We did get some news from the business beat this morning. Specifically, the National Association of Realtors reported that existing home sales, which include sales of single-family homes, townhomes, condominiums and co-ops, dipped 2.3%, to a seasonally adjusted annual rate of 5.57 million units, in April from a downwardly revised 5.70 million units in March. Despite last month's decline, sales are still 1.6% above the prior-year level and at the fourth-highest pace over the past year. It also should be noted that the sequential dip was primarily the result of low supply levels than a deterioration in demand. Given this backdrop, we expect housing sales to remain solid over the next six to 12 months and, along with housing-related services and products, contribute to a pickup in the nation’s output in the second half of 2017. – 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
After Wall Street started the week in stellar fashion, the bulls took the ball and ran with it again yesterday morning as the leading Indexes climbed at the outset of the trading session. Early on, in fact, the Dow Jones Industrial Average, up 90 points on Monday, was ahead another 45 points early yesterday. Gains of a handful of points also were tabulated by the S&P 500 Index. Further, the tech-laden NASDAQ, the big winner on Monday, with a 50-point gain, rose an additional 17 points in the first minutes of trading. But that initial spurt did not continue, and as we reached the 90-minute mark of the session, the market had a mixed look to it.
The early gains, meantime, were a result, it would seem, of additional buying from expectations that the President's trip abroad would somehow work to defuse the tensions at home. But the injurious news about the Administration continues to come in, and the market is staring to react, albeit modestly, save for last Wednesday, when the Dow tumbled nearly 400 points. In other news, the government reported that new home sales had fallen by 11.4% in April, following March's surge to nearly a decade high. Still, the number of homes sold, at 590,000, was a decent level and this sector remains resilient, on the whole.
Meanwhile, traders were keeping an eye on the President's trip overseas, while looking at the White House's 2018 budget. The market also was drawing support from the strength in the European bourses following the tragic terrorist attack in Manchester, England on Monday evening. Stocks in the United Kingdom and on the Continent were managing to hold gains during the session in spite of the tragic events the night before. Elsewhere, aside from several Federal Reserve speakers during the day, it was a light news session. Later today, meantime, we will get data on sales of existing homes.
As to the market, a somewhat higher tone continued to prevail as we reached the noon hour in New York, with the Dow up some 45 points, again, regaining its morning momentum in the process, while the S&P 500 held moderately in the black. The NASDAQ, which earlier had lagged, but not by all that much, strengthened as well, climbing modestly back into the black. This fairly upbeat tone then persisted into the early afternoon, thus helping to ensure that we would not have one of those Monday-Tuesday reversals, which have, at times, characterized the first two trading sessions of the week.
Stocks, as they had done on Monday afternoon, continued to hold higher, with a brief spurt later on in the afternoon, especially by the Dow, which momentarily climbed to an increase of better than 65 points. As before, the NASDAQ was a laggard, although it held in positive territory for much of the final few hours. The market then settled in at levels a little below its late-afternoon peak, and as we neared the final minutes of trading, stocks were higher, but somewhat off of their best levels. Gaining stocks, though, continued to hold better than a three-to-two lead on declining issues.
At the closing bell, the market held onto their moderate gains, with the Dow up by 43 points, or about two-thirds of its best level of the session, while the S&P 500 and the NASDAQ retained increases of a handful of points. The big casualty on this mostly higher day were the retailers once again, with auto parts retailer AutoZone (AZO) tumbling by almost 12% on dour results, as its quarterly metrics fell short of expectations. It was the second quarter in a row that AutoZone posted challenging results. Elsewhere, though, most groups did well.
Now, a new day dawns, and at this hour we see that stocks were generally higher in Asia in the overnight hours, while in Europe, the bourses are pressing a little lower. In other markets, metals prices are down; oil is flat in New York postings; and Treasury yields are off a tad. As to our equity markets, the futures are showing little change at this early hour and ahead of live trading at 9:30 AM (EDT). The next item of note, meantime, will be the issuance later on today of the minutes from the last Federal Reserve FOMC meeting. – Harvey S. Katz
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
