After The Close
Equities got off to a weak start this morning, but managed to selectively recover ground as the session progressed. At the conclusion of trading, the Dow Jones Industrial Average was ahead 40 points; the broader S&P 500 Index was up three points; while the NASDAQ broke even. All told, market breadth was somewhat positive today, as advancing issues slightly outpaced decliners on the NYSE. The major market sectors were divided, with strength in the utility and basic materials issues offsetting weakness in the telecom and consumer cyclical names.
Elsewhere, today’s economic news likely offered some support for the market. Specifically, according to the final estimate, gross domestic product (GDP) increased at an annualized rate of 3.1% during the third quarter. This figure was in line with expectations. Elsewhere, the labor market remains in good shape. Here, initial jobless claims came in at 272,000 during the week of September 23rd. Although this was somewhat higher than the prior week’s figure, the current reading was in line with the consensus view. Tomorrow, personal incomes and spending for the month of August will be reported, along with the Chicago PMI for September.
Finally, a few corporations posted their financial results over the past 24 hours. Specifically, shares of BlackBerry (BBRY) rose in price after the mobile device maker delivered better-than-anticipated figures. In contrast, shares of Rite Aid (RAD) sank after the struggling drug store operator posted disappointing quarterly numbers.
Technically, the stock market continues to show some resilience. Looking ahead, investors will be largely influenced by the numerous third-quarter corporate reports soon to be released and the future of proposed tax reform efforts.
— 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 - 12:00 PM EDT
The major U.S. equity indexes started the session lower today, with the small- and mid-cap stocks leading the move to the downside. There are a few factors weighing on the market, including sentiment that President Trump’s tax plan may have trouble getting through Congress without some tinkering to the parameters, reports that the impact of Hurricanes Harvey and Irma slowed the pace of third-quarter GDP growth, and growing sentiment that the Federal Reserve will raise the federal funds rate by 25 basis points in December. However after the slow start, we have seen some selective buying, which is helping a few of the large-cap averages.
Thus, as we move closer to the midday hour on the East Coast, the large-cap dominated Dow Jones Industrial Average has retraced its earlier losses and then some and is now in positive territory. Likewise, the S&P 500 Index has made a comeback and is now bouncing around the neutral line in a tight band. However, we are still seeing some selling in the broader small- and mid-cap sectors, after the Russell 2000 hit an all-time higher earlier this week on hopes of forthcoming tax reform. In general, there is a bearish undertone to trading, with declining issues leading advancers on the Big Board and the NASDAQ, and most of the top-10 equity groups showing down arrows.
As noted above, we received some news on the economy this morning. At 8:30 A.M. (EDT), the Commerce Department reported its final revision to second-quarter GDP, which showed a nominal increase from 3.0% to 3.1%. Meantime, initial weekly jobless claims jumped by 12,000 in the latest week. With regard to the GDP release, what investors keyed on was the warning that growth in the soon-to-be-completed third quarter will be negatively impacted by the recent hurricanes that hit the United States –and the market sold off a bit at the start of trading on the release.
From a sector perspective, most of the groups are in the red, though none of the setbacks is notable. The positive trend for the U.S. dollar in recent days is continuing to hurt some of the commodities groups, including the basic materials area, while the recent spike in bond yields is weighing on the higher-yielding equities. Conversely, the financial stocks, most notably those of the banks, are being helped a bit by the recent rise in fixed-income borrowing costs. We also are seeing some buying in the healthcare sector, with a strong showing from the pharmaceutical stocks leading the move higher for the group.
Looking ahead to the second half of the session, the bears are holding a slight upper hand, but their grip on trading is rather loose. Too, the sentiment about President Trump’s tax plan, which was announced yesterday, is fluid and could change on the dime and push the market in either direction, making it difficult to get a sense of which way stocks are going to finish today. 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
After back-to-back undistinguished sessions to start the new trading week on Wall Street, the stock market came out of the gate in a clearly bullish way yesterday morning. Indeed, within minutes of the open, the Dow Jones Industrial Average, an incremental loser over the first two trading sessions of the week, had moved out to a gain of some 85 points. Then, as if on cue, the equity market gave back much of its early forward thrust, and as the noon hour neared on the East Coast, that 30-stock composite had dipped a bit into the red. But the NASDAQ, a clear third-quarter leader, would stand tall and not surrender its early gains.
But the Dow's sojourn into the minus column would be just momentary, and as the afternoon began, all of the leading indexes had moved back into the plus column, albeit just gingerly, save for the NASDAQ and the small-cap Russell 2000, which roared ahead in uninterrupted fashion. In part, the day's comeback was stoked by a rise in bond yields, which occurred following hawkish comments from Federal Reserve Chair Janet Yellen. In her remarks, she basically cautioned that the Fed would seek to normalize interest rates even before the bank's hoped-for 2% inflation target was again met.
In response, yields on the 10-year Treasury note, which had come close to the 2.00% level a fortnight, or so, ago, rose to above 2.30%, finally closing at 2.31%. Uncharacteristically, the market appears to like higher yields these days, perhaps as a sign that the economy is doing well. More to the point, however, the market's rebound, which gathered momentum after lunch, was underpinned by the release of details on the oft-mentioned tax reform package. Central to the package is a proposed reduction in the corporate tax rate from 35% to 20%. Expectations are that companies would keep a lot more money if this proposal becomes law.
So, stocks pressed ahead, with the Dow Industrials regaining just about all of the morning's ground, climbing back to a gain of more than 80 points as we moved inside the final 90 minutes of trading. Meanwhile, the NASDAQ, benefiting from a surge in tech stocks, soared to a session-best advance of some 90 points. Several high-profile casualties earlier in the week in the tech space, such as Facebook (FB), were among the sector's best performers. Not all the news was good, however, as apparel and footwear giant and Dow component NIKE (NKE - Free Nike Stock Report) was hit rather hard following the issuance of less-than-compelling guidance.
The market's afternoon joyride then continued into the latter stages of the day, with the technology-driven rally continuing in strong form, as indicated by the further surge in both the NASDAQ and the Russell 2000. At the other end of the spectrum, there was a rush out of the perceived safety of the utility stocks, as greater risk was again seen as a plus for the investor, while a third-quarter laggard, General Electric (GE - Free GE Stock Report) again gave ground, falling more than 2% on the day. Overall, however, it was a positive session, and again demonstrates the extreme pull of lower tax rates, even if such a shift is far from being adopted at this time.
All told, at the close, the Dow, led by the financial stocks, ended matters ahead by 56 points, thereby retaining about two-thirds of its best gain on the day; the S&P 500 added 10 points, rising to a record during the session; and the NASDAQ climbed a 73 points, to past 6,450. Finally, the Russell 2000 gained 28 points, or almost 2%. Also, seven of the 10 leading equity groups recorded gains, while advancing issues held a four-to-three lead on declining stocks on the Big Board. All told, it was a strong comeback session for the market, with the Dow breaking a four-day losing streak.
Now, a new day starts, and following the tax-reform-driven fireworks of yesterday, we see that stocks saw mixed results in Asia in trading in the overnight hours. At the same time, equities are higher in European dealings so far this morning. Also, gold prices are now off slightly; Treasury yields, which, as noted, pushed above 2.30% during the day yesterday, are now up again; and oil is climbing, too. Also, U.S. equity futures are posting early losses, suggesting that the day ahead could see some sluggishness in the market at least at the outset. Stay tuned.
— Harvey S. Katz, CFA
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
