After The Close - The market started the day lower, as a lack of details concerning the possibility of an eventual trade deal with China spooked the markets. Follow through occurred early in trading, as several retailers put out preliminary results concerning the Christmas selling season, which underwhelmed the Street. The Dow Jones Industrial Average fell as many as 176 points, while the S&P 500 was lower by 23 points during the first part of the trading session. However, the markets turned around quickly, as focus turned to U.S. Federal Reserve Chairman Powell’s speech at the Economic Club of Washington D.C. In that meeting, he stated that the Fed would be “patient” and would see how the economic backdrop unfolds when determining policy. Still, he claimed that the Fed balance sheet will be “substantially smaller” in the future. The indices trended higher, trading around breakeven levels for a while near midday, before a final push at the end of the day. This move resulted in daily highs by the close. All told, the Dow ended higher by 123 points, the S&P 500 was up 12 points, and the NASDAQ gained 29 points.

Additionally, market breadth was somewhat narrow, as advancers only outpaced decliners by a 1.5-to-1.0 ratio. REITs and Industrial stocks were among the strongest performers on the day, while consumer discretionary equities were among the weakest. The latter was held back by poor performances from the aforementioned retail stocks.

In commodity news, crude oil prices eked out a gain on the day, as the commodity continued to rebound from its late-December low. Meantime, U.S. bond yields were moderately higher on the day, as a move from save haven assets occurred. Too, the VIX Volatility Index was lower, as demand for option protection fell.

Looking forward, the Consumer Price Index for December is slated for release tomorrow. This data will likely factor into the Fed’s interest-rate decision in January. However, we anticipate the central bank will probably hold rates steady. The earnings front will be rather quiet, as the fourth-quarter earnings season begins in earnest next week.   - John E. Seibert III

At the time of this article's writing, the author did not have positions in any of the companies mentioned.


Before The Bell - Another day, another uptick for the stock market. That saying, which had been rare of late for this recently encumbered market, has been a better fit these days, with Wall Street coming into yesterday's session with a trio of daily wins in place. And the market started out as if a fourth straight win would be easy, as the Dow Jones Industrial Average quickly moved out to a gain of just under 200 points. That advance, which came on continuing optimism that a trade deal with China was on the way, continued into the late morning. In fact, despite some easing at times, the Dow remained strongly in the plus column as noon arrived in New York.

To be sure, there was some profit taking in some issues, such as the banking group and some telecom issues. Overall, though, there was a strong bias to the morning, as sentiment around U.S.-China trade negotiations seems to have improved after the conclusion of the country's two-day meeting on trade. The market then strengthened further as we moved into the first part of the afternoon. Meanwhile, comments following the conclusion of the two-day meeting with China were generally upbeat, with one of the key negotiators saying he thought the talks went fine.

Given this encouraging sentiment, it was not surprising that industrial giant and Dow-30 component, Caterpillar (CATFree Caterpillar Stock Report) saw its shares rise nicely as the morning concluded. Expectations are that China will agree to some concessions so that its economy, already reeling, could move onto a smoother course going forward. Should that be the case, the market, already up nicely this month, could rise further in the days to come. In any event, the market looked as though it was working on a fourth straight win as we headed further into the afternoon.

Meanwhile, as the day progressed, we saw a key development unfold. On point, the Federal Reserve released the minutes from its mid-December FOMC meeting. In that report, the central bank reiterated its position, enunciated last week by its Chair Jerome Powell, that it would be patient regarding interest-rate policy. That release helped the Dow climb to a session-best advance of 198 points. The minutes cited low inflation as a justification for its patience. The release also opined that some Fed officials now think a limited number of rate increases may be forthcoming. That muted observation supported the Street's rising optimism.

So, stocks entered the final hour of trading still sporting good gains on the day in a broad advance that included a rise in bond yields, with the 30-year Treasury climbing past 3.00%, while oil prices, another volatile commodity, likewise held strong. In looking at the aggregate market performance, we saw that oil climbed to a new bull market. The energy group, not surprisingly, was the best individual performer. Other big winners late in the day included the technology sector, the basic materials group, and the industrial stocks. Also, gaining stocks led losing issues by a two-and-a-half-to-one ratio on the NYSE.

The market's strong advance, however, would fade a little into the close following the breakup of a meeting at the White House in which the President indicated that there was no deal afoot to re-open the government. The sticking point remained the wall on the nation's southern border and how and whether it would be funded. Up until this time, the issue had taken little of the Street's focus. Now, given the latest breakup, investors seemed to be noticing, at least for now. So, the advance eased some, but remained largely intact, with the Dow ending higher by 92 points and the NASDAQ climbing 60 points.

Looking out to a new day, we see that shares in Asia were mostly lower in overnight dealings, while in Europe, the principal bourses are trending downward, as well. Also, oil prices, up notably yesterday, are now off about 1% and Treasury yields, which rose to 2.73% on the 10-year note, are down to 2.70% this morning. Finally, the U.S. equity futures are suggesting a weaker opening when live trading resumes this morning, as investors await the results of the U.S.-China trade talks. – Harvey S. Katz, CFA

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.