After The Close
After shedding most of their early-morning gains through the midday hour, the major U.S. indexes each rallied on Wednesday afternoon. The tech-laden NASDAQ was the strongest performer, adding 73 points, while the S&P exhibited a parabolic movement, eventually settling at an all-time high. The Dow Jones Industrial Average broke its four-day streak of losses, benefiting from the strength of its banking components, which helped to offset an earnings-related selloff of NIKE (NKE – Free NIKE Stock Report) stock. The day’s positive undertone was not restricted to the large-cap composites by any means, as the Russell 2000 expanded roughly 2% for the day.
The White House’s tax plan, though light on the nitty-gritty details, was viewed as a step in the right direction for a market that has been growing anxious for more clarity on the lynchpin economic reform. The policy boasts the expected 20% corporate tax rate, as well as a simplified structure for personal obligations, which sent banking shares considerably higher. Still a ways away from being voted into law, we nonetheless view today’s release as a positive for bullish investors.
Looking at the market sectors, the financial and aforementioned technology sectors led the advancing stocks today. In addition to the taxation policy update, the former benefited from yesterday’s statements by Janet Yellen. The Federal Reserve chair indicated that too-accommodating a monetary policy may have an adverse effect on economic stability, stoking the growing consensus that the central bank will increase interest rates during its December meeting. As for the declining sectors, utilities and consumer non-cyclicals were the biggest laggards.
As for tomorrow, we suspect the reaction to today’s developments on tax reform will play a big role early, as investors look for more risk. Also, the business beat ought to also hold influence throughout the day. Investors will be offered updated third-quarter GDP estimates, as well as the weekly initial jobless claims.
– 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 - 12:05 PM EDT
The stock market opened higher this morning, but has been struggling to maintain these gains, save for the NASDAQ. At just past noon in New York, the Dow Jones Industrial Average is ahead 10 points; the broader S&P 500 Index is up three points; and the aforementioned NASDAQ is higher by 37 points. Meanwhile, market breadth is mixed, with winners about even with losers on the NYSE. From a sector perspective, the technology issues are pressing ahead, while the utility and energy stocks are weighing on the market.
Meanwhile, traders received a handful of economic releases this morning. Durable goods orders increased 1.7% during the month of August, surpassing analyst estimates. Meanwhile, pending home sales declined 2.6% in August, slipping a bit more than had been anticipated. In the energy patch, according to the EIA, crude oil inventories declined by 1.8 million barrels in the latest reported week. Tomorrow will be a busier day for economic news. Specifically, the final estimate for third-quarter GDP is due to be released, along with the weekly initial jobless claims figures.
Also a number of widely-held corporations issued their financial results over the past 24 hours. Shares of NIKE (NKE – Free NIKE Stock Report) are off on concerns about the sneaker giant’s outlook. However, Micron (MU) stock is trading higher in response to an upbeat release.
Technically, the stock market has been holding up reasonably well lately. Moving forward, much will depend on the third-quarter earnings season, which will commence in the weeks ahead.
— Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before The Bell
Following an unprepossessing start to the new trading week on Monday, in which the NASDAQ, in particular, took an early drubbing on a further pullback in technology, the stock market began yesterday's session to the upside, and in rather convincing fashion. On point, within minutes of the open, the Dow Jones Industrial Average had fashioned an advance of almost 75 points. The NASDAQ, which had been down more than 1% for a time on Monday, rebounded, as well, gaining 35 points. A recovery in the technology group led the charge, while the S&P 500 stayed just above 2,500 at its mid-morning peak.
However, concerns about North Korea, and that regime's nuclear threats and accompanying rhetoric combined to bring caution back into play as the morning wound down. So, as the noon hour approached, the three large-cap indexes had all but given back their gains. As to individual sectors, information technology was the day's leader for a time, with a nice comeback being fashioned by some high-profile issues. Also doing well at the outset were the small-cap stocks, as the Russell 2000, a record setter on Monday, climbed somewhat further during the morning and then throughout the day.
As to other areas, health care was lower, as were about half of the 10 major equity groups, while gaining stocks held a modest lead over declining issues on the Big Board and the NASDAQ. Also, of note, the economy was playing a role yesterday, but not to the extent of being a game changer. To wit, data were released some 30 minutes into the trading day showing a surprise, but modest, dip in new home sales in August, with that metric totaling 560,000 dwellings on an annualized basis, off from a downwardly revised 580,000 homes in July. Some impact from the hurricane striking Texas likely was seen.
Also of note, the Conference Board reported that its Consumer Confidence Survey stood at a reassuring 119.8 in September, down just slightly from August's 120.4. Meanwhile, the Expectations component rose this month, going from 101.7 to 102.2. Here, too, it should be noted, according to a spokesperson for the group, that confidence in Texas and Florida was hard hit by the hurricanes striking those two states. Overall, though, sentiment remains quite favorable, and that should help to boost the economy in the months to come.
Then, after its late-morning hiccup, stocks steadied themselves and started to rebound as the afternoon progressed, so that as we moved inside of the final two hours of trading, the three large-cap indexes all had moved securely into the plus column, led by the NASDAQ, which could boast a mid-afternoon advance of some 30 points. As before, our thinking was that sector rotation was again at work. This upbeat move continued into the latter part of the afternoon hours. As for North Korea, it remains a problem, but the largely reassuring economic data and hopes for a good earnings reporting season are somewhat offsetting at this time.
The market then drifted back and forth as the afternoon continued, with the NASDAQ's earlier formidable gain withering notably. In all, that composite retained just 10 points of that earlier advance. The S&P 500 closed just about unchanged, while the Russell 2000 held onto a five-point gain, but the Dow shed 12 points. Thus, a once promising session ended on a clearly mixed note.
Looking out at a new day, and to the ups and downs of the global stock markets ahead of a succession of key economic reports over the balance of the week, including data on revised second-quarter U.S. GDP, weekly jobless claims, consumer sentiment, personal income, and consumer spending, we see that stocks in Asia were mixed in overnight dealings. In Europe, meantime, the principal bourses are tracking higher, at this hour. Also, bond yields, up yesterday, are ahead notably this morning on hawkish talk last night by Federal Reserve Chair Janet Yellen; oil is down slightly; and gold is down. Finally, the U.S. equity futures are up nominally in early morning trading.
— Harvey S. Katz, CFA
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
