After the Close
Traders looked to close the month of August on a high note Thursday, and succeeded in doing so, with each of the large-cap equity indexes boasting stable gains for most of the day. As has been the case all week, the NASDAQ remained the best performer today, with the S&P 500 and Dow Jones Industrial Average also reporting strong growth. Market breadth favored advancing stocks by a sturdy 2.5-to-1.0 ratio, buoyed by strength in small- and mid-cap trading.
Once again, the business beat contributed to today’s positive sentiment. Following yesterday’s solid private-sector update from Automatic Data Processing (ADP), a slight uptick in jobless claims did little to dissuade the cautious optimism ahead of tomorrow’s jobs report from the Labor Department. Also helping to brighten the economic outlook were yesterday’s encouraging GDP revision (to 3.0%), which was supported by strength in consumer spending. The market sectors reveal a similarly bright picture, as healthcare, basic materials, and energy stocks led the way. All ten industry groups reported aggregate gains.
Elsewhere, the political sphere helped to stoke today’s bullish momentum. Yesterday’s speech by President Trump reiterated the Administration’s resolve on getting the tax reform ball rolling next week. The prospect of lower corporate taxes was the primary catalyst for the post-election rally, which has shown signs of fatigue in recent weeks. The eventual implementation of this policy would be a boon for the averages, especially against a relatively quiet geopolitical backdrop as it relates to North Korea.
Meanwhile, U.S. crude bounced back in a big way today. The per-barrel price rose nearly 2.5% today, a welcome reprieve after several days of selling in the wake of Hurricane Harvey’s impact on the Gulf Coast. It remains unclear when several major refineries will reopen, so demand is expected to climb in the near term.
Still, despite the bullish tilt to most of the past week’s market, and another uptick in the final hour, the S&P 500 and Dow lost negligibly on a monthly basis. Friday morning’s nonfarm payroll update will likely determine where the week ends up, before traders wrap up the summer session with a three day weekend. – Robert Harrington
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Mid-Day Update - 11:45 AM EDT
The major U.S. equity indexes are all pushing higher this morning, extending the buying from into yesterday’s close. There are a number of factors giving stocks a boost this morning, most notably encouraging data on the economy and a speech yesterday by President Trump on the need for tax reform. The buying stateside comes on the heels of a good session on the Continent. Thus, as we approach the midday hour on the East Coast, the Dow Jones Industrial Average, the NASDAQ, and the broader S&P 500 Index are all trading comfortably higher.
The aforementioned buying is broadbased, with the small and mid-cap sectors holding even bigger intra-day percentage gains than their large-cap brethren. There is a sea of up arrows among the 10 major equity groups, and advancing issues are leading decliners by a wide margin on both the Big Board and the NASDAQ. Among the top-10 sectors, the leadership is coming from the healthcare, basic materials, and energy groups. Too, the red-hot technology stocks are again moving higher again, and those gains now have the NASDAQ Composite within a stone’s throw of its all-time high.
As noted above, the market is taking its cue from other places than Corporate America, where the earnings news is quiet right now. The economy is giving a lift to stocks, with some encouraging data out this week. Of note, an upward revision to second-quarter GDP growth (from 2.6% to 3.0%) was well received by investors, especially after the consensus opinion showed that the improved GDP data were unlikely to change the Federal Reserve’s thinking on monetary policy all that much for the remainder of this year . The central bank appears unwilling to tighten the monetary reins aggressively in the current low inflationary environment. Meantime, investors also received solid reports on private-sector payrolls from AutomaticData Processing (ADP) and personal income and spending in recent days. The former is an encouraging sign ahead of tomorrow’s highly anticipated report on nonfarm payrolls from the Labor Department.
Likewise, a speech by President Trump on the need for tax reform in Missouri yesterday is giving the equity market a boost. The broader market has been on a historic run since last November on hopes that Washington will pass business-friendly legislation. Unlike healthcare, there is a sense among Wall Street pundits that something will get done on tax policies in the coming months. That and the debt ceiling talks are expected to be closely monitored by Wall Street when Congress returns from its August recess.
Looking ahead to the remainder of the session, the market fundamentals cited above clearly suggest that the bulls will be tough to beat today. Our sense is that we may not see any more major moves today, as traders look to tomorrow’s report on the labor market. That data, along with the latest readings on inflation, will likely be scrutinized by the Federal Reserve when it meets on September 19th and 20th. 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
Following a seesaw day on Tuesday, in which the Dow Jones Industrial Average tumbled 130 points early on, on heightened nuclear fears out of North Korea, only to recoup all of that loss and then some later in the day, the stock market started out initially to the downside again yesterday. But this time there was no conviction to the early selling, and after a half hour, or so, the S&P 500 Index and the NASDAQ, along with the S&P Mid-Cap 400 and the small-cap Russell 2000, were all comfortably in the black. Also, gaining issues were ahead of declining stocks on both the Big Board and the NASDAQ. Only the Dow was holding near breakeven.
Behind the early push forward yesterday was the tech-heavy NASDAQ, which would wind up rallying for the third day in succession, led forward by gains in some high-profile names domiciled on that composite. Helping the market, meantime, were encouraging reports on the economic front. Specifically, before the stock market opened, we saw the Automatic Data Processing (ADP) National Employment report, which affirmed that private-sector jobs increased by a solid 237,000 in August, which was well above the 185,000 forecast. That may be a gauge of tomorrow's more critical jobs data from the Labor Department (discussed below).
More important, the government intoned with revised second-quarter GDP figures yesterday morning, and here, there was a solid upward shift in growth, from the earlier issued 2.6% gain to a better-than-expected 3.0% pace, buoyed by strength in consumer spending and the completion of the earlier drawdown (in the first quarter) of inventories. That report clearly was encouraging, although there were some concerns evolving that the Federal Reserve might yet use that metric to support raising interest rates one more time this year. Our sense, for now, remains that the bank will hold off on another increase until early 2018.
In all, expectations for a December rate hike, which had been at 34%, rose to a still-minority view of 41% after the revised GDP data were issued. Meantime, the market entered the afternoon hours holding moderate gains, with a clear outperformance from the NASDAQ. The gains then accelerated somewhat, with the NASDAQ soaring to an advance of just over 70 points, while the Dow pushed ahead solidly, if less aggressively, as well. In fact, save for weakness in selective groups, the stock market pushed ahead nicely, led by the financials, health, and technology stocks.
The equity market's strength then persisted into the concluding hour of trading, with a speech given by the President on tax reform legislation in Missouri helping to keep the buyers in a solid frame of mind. As before, the NASDAQ led the way higher with a gain in late afternoon of 1.1%; by comparison, the Dow was ahead just 0.1% at that point. Going forward into the session's final minutes of trading, there was brief selling, which actually put the Dow in the red momentarily, before it came back to close with a 27-point gain, while the NASDAQ held onto a formidable 66-point advance.
The good news yesterday persisted even as oil fell to a six-week low, losing about a percentage point on the day, on the damage sustained by refineries in the path of Hurricane Harvey. As to other news, investors will be looking out toward tomorrow's pivotal posting on job creation. Expectations are that the nation added 175,000 positions in August, down from 209,000 in July. Still, the bullish ADP report could be a harbinger of better tidings on the government survey. Tomorrow will also see the issuance of the August tally on manufacturing activity, where another stolid reading is the forecast.
As to the day ahead, early signs are generally positive, as stocks were mixed in Asia overnight, while on the Continent, Europe's key bourses are now tracking higher. In other markets, oil, following the further decline in dealings in New York yesterday, is little changed this morning so far, while gold is moving a bit lower, as the Street focuses on U.S. data releases today. At the same time, Treasury note yields, up slightly yesterday, are off nominally in action thus far this morning. Finally, U.S. equity futures are showing some early strength, suggesting that the day ahead could see some further advances. Stay tuned.
Finally, in data issued just moments ago, the government released figures showing a slight uptick, from 235,000 to 236,000 in the latest weekly jobless claims, while personal income and spending rose by 0.4% in July, up from an unchanged reading in June. Consumer spending, meantime, advanced by 0.3%; in June the increase was just 0.2%. – Harvey S. Katz
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
