After The Close - Equities moved nicely higher this morning, pulled back around noon, but managed to firm up selectively late in the session. At the end of trading, the Dow Jones Industrial Average was up 71 points; the broader S&P 500 Index was ahead eight points; and the NASDAQ was higher by 36 points. Market breadth was supportive, as advancers outpaced decliners on the NYSE. Most of the major equity sectors managed to make progress today, helped by sizable gains in the technology and industrial stocks. In contrast, the noncyclical consumer and utility issues underperformed the broader market.
In economic news, the nation’s employment situation has returned to the spotlight. Today it was reported that initial jobless claims moved down to 236,000 for the week of December 2nd. This figure was slightly better than analysts had expected, and shows that the broader economy remains in good shape. Tomorrow morning, the government will release the nonfarm payroll report for the month of November. The consensus forecast currently calls for the addition of about roughly 190,000 jobs, with the unemployment rate holding steady at 4.1%, for the month.
Meanwhile, a few corporations posted financial reports over the past 24 hours. Of note, shares of Broadcom (AVGO) were unchanged today, even though the technology giant delivered respectable results. Meanwhile, lululemon Athletica (LULU) fared somewhat better, as shares of the apparel company rose in response to an encouraging report. Technically, stocks continue to perform well, as the year draws to a close. However, in the coming weeks, portfolio managers will likely be rebalancing their portfolios and be making tax-related decisions, which will likely play out in the market. – Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
11:45 AM EST - The major U.S. equity indexes after a sluggish performance yesterday are rallying this morning. The march higher is being led by the broader small-cap sector, which may suggest that the bulls will continue to be heard from through the second half of the session and into the closing. However, although the S&P 500 Volatility Index (or VIX) sits at a level that suggests there is little volatility in the market, we still have seen some notable intra-day swings in the last week that would have one thinking not to completely write off the bears today.
In general, the recent market fluctuations are being caused by the dealings on Capitol Hill and, in particular, sentiment about whether the Republican-led Senate and House of Representatives will find common ground on the differences in their tax bills to craft a unified version for President Trump to sign into law before year’s end. That said, today’s move higher is being led by the technology and consumer discretionary sectors, with stocks of many of the technology giants, which have been somewhat lackluster in recent sessions, trading in positive territory.
On a day that has been quiet on both the earnings and economic fronts, we think that today’s move is more a case of a bit of bargain hunting after some recent selective weakness—although that is not an easy task in this overextended market. Overall, the large majority of the 10 major equity groups are in the black. The only laggards as we move toward the midday hour on the East Coast are the more-defensive consumer staples and utilities categories. Meantime, the spread between advancing and declining issues, which was razor thin at the onset of trading, is widening on both the Big Board and the NASDAQ. The aforementioned strength of the technology group has the ratio at more than two to one in favor of winning stocks on the NASDAQ.
As far as the business beat goes, the investment community is awaiting the latest reading on employment and unemployment from the Labor Department at 8:30 A.M. (EST) tomorrow. That report will be looked at by the Federal Reserve when making its final monetary policy decision of 2017 and under the leadership of Chair Janet Yellen next week. However, unlike recent years, when the jobs data would drive significant moves in the equity indexes, we think tomorrow’s report will have a more muted impact on trading, as the market seems to have already baked into its valuation a 25-basis-point interest-rate increase by the central bank. Too, the employment data will most likely take a backseat this month to the ongoing tax-reform meetings on Capitol Hill. This appears to be the case today, as unlike in year’s past when the trading sessions prior to the employment release tended to be more contained, we are seeing some notable moves, including the aforementioned nearly 1% gain for the small-cap stocks.
And on that note, it is looking like the bulls will be tough to beat in the week’s penultimate trading session. But as noted above things can change in a hurry these days based on the tidings emanating from Washington D.C. Stay tuned. – William G. Ferguson
At the time of this article’s writing, the author did not have any positions in the companies mentioned.
Before The Bell - Following some broad and rather steep declines during the early morning hours in Asia and across Europe yesterday, U.S. equities began the latest session with mild declines. However, once traders got into gear, the pattern quickly became somewhat mixed, with seesaw action especially among all of the major averages. The alternating gains and losses would then continue through the middle of the morning. But the mixed action in the key averages was not fully reflected in the overall market, where in the late morning, seven of the ten leading equity sectors were lower, while losing stocks held a comfortable lead on gaining issues on the Big Board.
Looking at the aggregate market, energy was a notable laggard on lower oil quotations. Typical end-of-year jitters and some profit taking are factors here, as well. Uncertainty in Washington likewise is playing a role in the recently choppy trading, as the House and Senate strive to resolve their differences on tax reform so a unified package can be sent to the President for his signature. In other market-moving news yesterday, the government reported that worker productivity had increased by 3.0% in the third quarter, or double the gain of the second three months and more or less in line with expectations.
Meanwhile, as the morning progressed, the bulls' resolve stiffened somewhat, as the three major large-cap indexes tilted over into the plus column, but did so rather gingerly, while the smaller indexes stayed a touch below the breakeven line. This inconclusive pattern would then continue into the noon hour on the East Coast. We are in sort of quiet period at the moment, as a final tax reform package could still be a couple of weeks away and it will be a four to six weeks before we are into fourth-quarter earnings reporting season. So, movements on Wall Street are being somewhat contained.
Of course, this could all change tomorrow when the government reports on November non-farm payrolls. An increase in jobs on the order of 190,000 is expected to be reported at that time, the same figure, incidentally, that Automatic Data Processing (ADP) had reported yesterday morning on its survey of private-sector job creation. Still, that benign report, which was more than the 175,000 gain forecast, and the good productivity number could not awaken the bulls, who continue to wait for some signal from Washington that a corporate tax bill to their liking is enacted into law.
Things didn't really change in the early to mid-afternoon, as stocks continued to show nominal firmness in the larger-cap categories, but labor somewhat in the riskier smaller issues. As to individual groups, what modest strength there was generally remained in the recovering tech sector, whereas energy continued to lag. Individually, among the Dow components, Merck & Co. (MRK - Free Merck Stock Report) continued to struggle, with that stock lower by some 3% late in the day. That issue, trading near a 52-week low, has been under pressure for some time. Also among the Dow stocks, Boeing (BA - Free Boeing Stock Report) continued its rush to higher ground.
Little would change as we headed into the close, with the Dow and the S&P 500 moving in and out of the red, while the NASDAQ, on the aforementioned strength in tech, staying well ahead of the breakeven line. Losses, meantime, were sustained by the S&P Mid-Cap 400 and the small-cap Russell 2000. As before, losing stocks held a modest lead over gaining issues on the Big Board, but a more formidable advantage on the NASDAQ. Also, six of the top ten market categories would end up in the red. At the close, the Dow would be 40 points; the S&P was essentially at breakeven; and the NASDAQ remained positive to the tune of 14 points.
Looking out on a new day now and following the generally softer close stateside yesterday for the U.S. markets, we see that stocks were generally higher across Asia overnight, while in Europe the early read is also positive. In other markets, oil, a big loser yesterday on some apparent softening in demand, is up modestly in early dealings this morning, while interest rates, off somewhat yesterday, are trending a bit higher today. Finally, U.S. equity futures are now showing a mixed pattern after earlier gains. In all, we would expect some watching and waiting today ahead of tomorrow's jobs release. - Harvey S. Katz, CFA