After The Close
U.S. stocks ended a modestly positive third quarter in generally upbeat fashion. Investors responded favorably to a slew of solid updates from the business beat, as well as optimism that the Trump Administration can eventually succeed in delivering corporate tax reform. Both the S&P 500 and tech-heavy NASDAQ 100 set record highs during the session, underscoring the still-bullish tone characterizing the equity market as the fourth quarter looms. Market breadth was in favor of the bulls, as advancing shares outnumbered declining issues by a 1.4-to-1.0 ratio, with the technology and healthcare sectors doing the lion’s share of the legwork. Although utility stocks turned negative in the final hour, each of the market sectors spent most of the session in positive territory.
Meanwhile, U.S. crude oil finished the quarter on a high note. The per-barrel price rose 12% in the third quarter, a change in sentiment stoked by a bullish outlook for demand trends in 2018. The three-month period saw traders digest a number of developments, ranging from a streak of hurricanes at home to OPEC’s attempts at extending its drilling accord. Turmoil in Libya and Iraqi Kurdistan did little to derail the upbeat outlook for the gradually tightening market, which has been hamstrung by oversupply concerns for some time now. Ultimately, the positives far outweighed the negatives. U.S. crude oil wrapped up the day at $51.67 per-barrel.
At the close, the S&P 500 and NASDAQ boasted decent daily gains. The Dow Jones Industrial Average was markedly more mixed, although some last-minute buying placed the blue chip composite in positive territory for the day. The final hour revealed President Trump’s intention to decide on the next head of the Federal Reserve in two to three weeks. This news item bore little importance to the indexes, however, which remained in their afternoon ranges despite the uncertain impact said appointment would have on the central bank’s recently hawkish monetary policy.
Looking out to the new quarter, investors are expecting a decent showing from Corporate America as earnings season approaches. Elevated multiples and a growing widespread desire for more progress on lynchpin tax reform will likely give opportunistic traders the wherewithal to collect on some profits, though we remain confident that the bulls can reaffirm their tenuous hold on the market barring any setbacks on the corporate front. Stay tuned.
– 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 - 12:00 PM EDT
The stock market is putting in a directionless session so far today. At just past noon in New York, the Dow Jones Industrial Average is down 15 points; while the broader S&P 500 Index is up five points; and the NASDAQ is higher by 36 points. There is an upward bias to the session, as winners are ahead of losers on the NYSE. Leadership can be found in the technology stocks. Also, some consumer issue are making strides. Meanwhile, the utility issues are trading slightly lower.
Elsewhere, traders received a few economic news items this morning. Specifically, personal incomes rose 0.2% (while spending increased 0.1%) during the month of August. These figures were in line with the consensus view. Elsewhere, the Chicago PMI delivered a reading of 65.2 in the month of September, which was nicely ahead of expectations. Finally, the University of Michigan’s Consumer Sentiment Survey was finalized at 95.1 for September, which was still a solid reading.
Finally, we heard from just a few corporations over the past 24 hours. However, it is likely worth noting that shares of KB Home (KBH) are rising sharply today, in response to a solid release. Shares of the homebuilders as a group are moving higher in reaction to the news.
Technically, the stock market continues its advance. However, with price-to-earnings multiples somewhat elevated, traders will likely be looking for an impressive third-quarter earnings season, and possibly some progress in Washington, especially on the tax reform front.
— 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
A mostly positive, but hardly compelling, third quarter for the stock market will be coming to an end today. Before that, however, Wall Street began the penultimate session of September in unconvincing fashion, with the leading equity averages all pressing lower at the outset. Of course, there still were some inducements to buy. On point, oil prices continued to increase, although the reason for the jump in crude, the intensifying tensions between Iraq and the autonomous Kurdistan region of the north of that country, is not a long-term plus for the equity market.
Overall, though, the rationale for the early setback was uncertainty about the outlook for taxes following the Wednesday release of the Republican's attempt at tax reform. To be sure, while the post-election run-up in the stock market was in large measure a result of hopes for lower taxes, the brief history of the Trump Administration's attempt to get legislative things done has not been a good one, as repeated attempts to replace the Affordable Care Act have failed. As such, there are uncertainties involved on the tax front, the general popularity of this issue notwithstanding.
As for the equity market, the early setback was mild, and really did not last all that long. In fact, as we passed the one-hour mark of trading, the Dow Jones Industrial, once off just over 50 points, had turned narrowly positive, while the earlier losses in the S&P 500 Index and the NASDAQ had been pared. In other influences, aside from oil and taxes, the government noted that its latest revision of second-quarter GDP showed an advance of 3.1%. That was up from the initial revision of 3.0%, but matched expectations. The GDP revision's impact was, therefore, negligible. Mostly, the market was consumed by expectations for tax reform.
The stock market then stiffened its resolve as the session progressed, with the Dow's advance increasing into the afternoon. To wit, shortly after lunch, the composite's gain increased to more than 50 points, bringing it to the doorstep of another all-time high. The S&P 500 Index, meanwhile, which had posted a record on Wednesday approached once again for a time, while the NASDAQ, after a move into the black at midday, edged below the neutral line by late afternoon. However, the small-cap Russell 2000, which soared on Wednesday, moved up more modestly during the day yesterday, but sufficiently so to set another all-time high.
Meanwhile, the rally cooled down some as the session drew to a close, especially as far as the NASDAQ was concerned. Among individual issues of note, shares of Dow component McDonalds (MCD - Free McDonalds Stock Report) did well on a brokerage house ratings upgrade amid hopes for a better sales performance going forward. On the other hand, year-long laggard General Electric (GE - Free GE Stock Report) shares were among the Dow's weaker performers. All told, the session closed with slight buying during the final minutes of trading, which enabled the Dow to end matters ahead by 40 points and the S&P 500 up by three. The NASDAQ ended at breakeven.
Now, the month and quarter conclude, and as they do so, we see that stocks in Asia were trading higher in the overnight hours, while in Europe, the leading bourses are up, as well. Also, Treasury yields, which ended flat yesterday, after an early uptick faded, are now range-bound again; oil, a modest casualty yesterday, is now stabilizing; and gold is thus far up slightly. As to the futures, the final day of the month is likely to start on a mixed note, if current trends there persist.
— Harvey S. Katz, CFA
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
