After The Close - After taking a breather for most of the morning hours, the major U.S. equity indexes rebounded somewhat in the second part of the day. The afternoon upturn can be attributed to the market’s reaction to Federal Reserve Chair Janet Yellen’s Congressional testimony, as well as some positive contributions from the earnings front.  Each of the three major indexes set new all-time highs around 2:00 PM EST in New York, but mixed trading amongst the small- and mid-cap equities kept market breadth roughly even for most of the day. Then, as the closing bell neared, the Dow climbed to a record level. Strength from its banking components and Apple (AAPL Free Apple Stock Report) were the primary drivers.

Having already guided towards multiple rate increases this year, Chair Yellen’s comments reiterating a three-hike plan did little to change investors’ economic outlook. Both the job market and inflation are trending toward the Fed’s target rate. We believe the testimony reassured traders that a tightening of monetary policy during the Federal Open Market Committee’s March meeting remains unlikely.

Still, as was the case earlier in the day, some market sectors were subjected to rotational trading and profit taking. Basic materials and utilities remained securely in negative territory at the end of the day. Telecommunications and industrials also slipped, while gains from financials and healthcare issues helped to somewhat offset such weakness.

Of course, looming over all of this is the expected issuance of President Trump’s tax plan. The promised reform is one of the central tenets of his Administration’s economic platform and is due sometime in the next three weeks. His intention to overhaul the regulatory environment has also had a positive effect on trading in recent weeks.

Meanwhile, though earnings season is winding down, a slate of releases tomorrow figures to influence the market. A majority of companies have delivered better-than-expected profits during the December period, so investors are hoping for similarly encouraging results from PepsiCo (PEP), Cisco Systems (CSCO Free Cisco Stock Report), and Kraft Heinz (KHC) when they report. Updates from the business beat, on retail sales, industrial production, and homebuilding, among others, should also move the needle intermittently throughout the day. 

So, with two decisive wins for the bulls, we expect more sector rotation and profit taking to occur. But, if economic, earnings, and political updates continue to indicate a strengthening economy, bullish investors are likely to remain animated. Stay tuned. - Robert Harrington

 At the time of this writing, the author did not have a position in any of the companies mentioned.


11:50 AM EST - The major U.S. equity indexes are taking a bit of a breather today after a whirlwind three sessions of trading on Wall Street, which saw the major averages set daily records. The primary catalyst has been the investment community’s positive reaction to commentary last week from President Trump that a comprehensive tax-reform will be unveiled by his Administration within the next three weeks. A supportive fourth-quarter earnings season, which is winding down, and mostly encouraging news from the business beat is also helping equities.

Today we are seeing some selective modest profit taking after the aforementioned move higher by the major averages. However, the selling has been very contained, with none of the major indexes straying too far from the neutral line. The Dow Jones Industrial Average has actually bounced in and out of positive territory, in what has so far been a directionless day of trading on Wall Street. Still, there is a negative undertone to trading, with market breadth favoring the recently battered bears. Declining issues hold a sizable lead on advancers on the New York Stock Exchange, while the spread is thinner on the NASDAQ, but still in favor of the sellers.

From a sector perspective, it is mostly down arrows among the 10 major equity groups. The biggest laggards are the commodities (i.e., basic materials and energy) groups, while there also is some notable selling in the higher-yielding categories, including the utilities sector. The commodities stocks and the utilities issues are down as Fed Chair Janet Yellen testifies before Congress this morning. Her commentary seems to be pushing both the dollar and bond yields higher, which is hurting the aforementioned sectors.   Conversely, we are seeing some mild interest in the consumer discretionary and financial sectors, with the latter category being helped by rising bond yields and talk of future rate hikes. The retailing stocks are higher as well, as industry leaders meet with Congressional leaders about tax reform policies, with many warning of the potential negative impact of a border tax on their companies.

As noted above, the big news is coming from Capitol Hill today, where Fed Chair Janet Yellen in prepared remarks to Congress said that the economy is strengthening, with the job market improving and inflation moving closer to the Fed’s target of 2%. The commentary appears to be setting the stage for some interest-rate hikes over the course of 2017. The possibility of higher rates this year is not having too much of an impact on trading today, as the prevailing consensus is that central bank will still hold rates steady at its March Federal Open Market Committee meeting. However, her commentary is fueling some selective sector rotation in the market, as noted above.

Looking ahead to the second half of the trading session, market data would suggest that the bears hold the upper hand. But given the muted reaction to some hawkish Federal Reserve commentary today and the fluid situation in Washington D.C., where daily headlines are being made, we would not rule out the now very emboldened bulls eventually turning the tide. Within the last half hour, the bulls have rallied, with the Dow 30 in positive territory and the losses being pared on the NASDAQ and broader S&P 500 Index. Stay tuned. - William G. Ferguson

At the time of this writing, the author did not have a position in any of the companies mentioned.


Before The Bell - The stock market started this Valentine's Day week with gifts for the bulls, as equities roared out to fresh record highs at the outset of trading. To wit, within minutes of the open, the Dow Jones Industrial Average was ahead by just over 100 points, to a bit under 20,400. At the same time, the S&P 500 Index had moved further above 2,300; and the NASDAQ, a near 30-point winner, was above 5,750, likewise a record. Behind this continuing advance is optimism about the pending release of President Trump's widely advertised tax reduction plan. 

Such changes in the tax code are due out over the next two to three weeks according to the President. Also lifting sentiment among the investment crowd are moves toward reduced regulations and increases in infrastructure spending. Meanwhile, holding back the early gain was uneasiness ahead of testimony beginning later today by Federal Reserve Chair Janet Yellen. It is expected by some that Ms. Yellen will use this occasion to take a somewhat more hawkish stance on interest rates, although the prevailing thought is that a March interest rate increase is unlikely.

Meanwhile, stocks moved solidly ahead through the morning, led by the financials and the basic materials stocks, with fertilizer manufacturer Mosaic (MOS) being a big part of the bullish early story. Conversely, the high-yielding telecom stocks were again lagging. This bullish start came on the heels of strong showings earlier in the day in Asia and Europe. Breaking the morning's advance down, gaining stocks, also boosted by the technology and industrial sectors, were ahead of decliners by almost two-to-one on the NYSE and by more than that on the NASDAQ.   

The latest bullish run then continued into the afternoon, with the Dow reaching a session-best gain of just over 170 points a little after lunch, while the NASDAQ pushed up by some 37 points in mid-afternoon. Most sectors strengthened further as the afternoon got going, although there was some minor backtracking as trading drew near its final stages. But there was enough underlying strength to carry the market to a strong closing gain and to keep the post-election equity rally alive and well as we headed into Valentine's Day.

As we look toward a new day and to Janet Yellen's testimony, we see that stocks were off in Asia overnight, albeit save for a sharp setback in Japan, the changes were minimal. As to European trading, the early indications are mixed ahead of Janet Yellen, while in our country, the futures are now little changed with a little less than an hour to go before the start of the new trading day. Finally, the new day will begin with shares of Apple (AAPL - Free Apple Stock Report) poised to perhaps make an all-time high. That issue, a sharp gainer yesterday, is the Dow's best performer thus far this year on climbing iPhone sales.   - Harvey S. Katz 

At the time of this article’s writing, the author held positions in one or more of the companies mentioned.