After The Close - The stock market moved sharply higher today, as investor concerns about international trade tensions eased. Moreover, in contrast to yesterday’s stock market performance, which ended with some late-day selling, today equities managed to advance through the late afternoon, which is a likely bullish indication.
At the close of trading, the Dow Jones Industrial Average was ahead 429 points; the broader S&P 500 Index was up 44 points; and the NASDAQ was higher by 144 points. Market breadth was quite favorable, as winners were overwhelmingly ahead of losers on the NYSE. Almost all of the major market sectors participated in today’s rally. Specifically, the energy and basic materials issues showed clear leadership. In contrast, the utilities, often held for dividend income, fell out of favor with traders, who were likely moving capital into the more exciting names.
There were a few economic news items released this morning. Specifically, the Producer Price Index rose 0.3% in the month of March, which was slightly more than had been anticipated. The core reading was up a similar amount, as well. These readings may hint at some inflationary pressures, but this did not appear to be a concern today. Meanwhile, wholesale inventories rose just 1.0% in the month of February, where a somewhat better number had been expected. Tomorrow, the monthly Consumer Price Index will be released. Also, the FOMC will deliver the minutes from its latest meeting in the afternoon.
In the corporate sector, few major companies released reports today. However, as the first-quarter earnings season will soon commence, we will certainly be receiving plenty of news. For example, Dow component and financial leader, JPMorgan Chase (JPM – Free JPMorgan Stock Report) is slated to weigh in with its numbers later this week. Hopefully for the bulls, corporate results, which should be aided by tax savings, will impress traders. This may help offset fears about rising interest rates and possible tariffs.
Technically, today’s rally was encouraging. However, with the daily swings that we have been seeing in the market lately, it is unclear if a sustained move higher will actually unfold over the next few days. Of note, the S&P 500 Index is still sitting below its 50-day moving average, located around 2,700, and pushing stocks past this technical area will likely be the next big challenge for the bulls. - 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 seeming lessening in trade tensions with China and a solid rally in technology combined to take the stock market broadly and sharply higher at the start of trading yesterday, This comeback, which gathered momentum as the morning pressed on, followed a major setback this past Friday, in which increasing trade concerns had pushed the Dow Jones Industrial Average down some 575 points at the close, with an earlier session descent of almost 765 points. But that was Friday and yesterday was yesterday--at least for much of the day.
On point, in the latest session, the market rose from the opening bell and would not look back until near the close, eventually fashioning a narrow wire-to-wire win, led by technology and health care. As for trade, White House spokespersons, such as Larry Kudlow, the President's chief economic advisor, were noting that the Administration was open to negotiations with China, and that the President was at heart a free trader. The tech stocks, in the meantime, which had been under pressure, answered the bell and were out front for the bulls.
All of this took place at the start of a week that will feature the commencement of earnings reporting season, in which a number of high profile financial names will issue their reports for the opening three months of 2018 this week. Leading the way will be banking giant JPMorgan Chase (JPM – Free JPMorgan Chase Stock Report). In all, the market is banking on a strong outcome for the quarter across nearly all economic and market sectors. In fact, given the still high level of equities, such a strong showing may well be needed to keep prices at least at recent levels.
As to the market, the Dow's surge continue to build, with the blue-chip composite climbing to a mid-session gain of 440 points. The powerful rally attests to the impact that trade news, can have on the market, with the apparent softening in our stance with regard to China giving investors a big lift. Meanwhile, Wall Street was waiting to see what China's President, Xi Jinping would have to say when he responded early today. So, most stocks continued to gain until late in the day, attesting to the volatility in a market that has been up and down with regularity.
Then, after the market remained strongly higher into the start of the final hour of trading, the bottom fell out of the rally, with the earlier 400-point gain in the Dow being pared to a closing increase of just 46 points. The other key indexes also fell back to small upticks. The reason was a major political development. Indeed, just as the seeming easing off in trade tensions had helped bring on the early rally, now it was news that the FBI had entered the offices of the President's lawyer, Michael Cohen.
The market saw this as a major development and stocks fell back dramatically, with the Dow, as noted, losing 90% of its value. At the same time, the S&P 500 Index, once up 50 points, ended ahead by fewer than nine points, while the NASDAQ, a mid-session winner to the tune of 160 points, closed out the day up by only 35 points. Also, there were more stocks down that up on the Big Board at the close, while the NASDAQ saw just a few more gaining than losing stocks on the day.
Looking out on the market as the second trading day of the business week gets under way, we see that stocks were higher in Asia over night after China's President Xi said he would be amenable to opening up China's markets with lower tariffs. In Europe, meantime, the principal bourses are trending upward as well on the China news. In other moves, oil is up on the relaxation in trade and interest rates, which closed slightly higher on the 10-year Treasury note, which are now gaining nominally once again in early dealings this morning. Finally, after the big turnaround yesterday, the latest moves in the U.S. futures suggest a higher open this morning. It seems that for now, at least, President Xi is riding to Wall Street's rescue. Stay tuned. – Harvey S. Katz, CFA