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After The Close - The bulls bounced back on Thursday and in a big way, offsetting midweek softness and pushing the major market indexes to historic highs. The gains occurred gradually from the opening bell until mid-afternoon, when each stabilized near their final level. The tech-laden NASDAQ led the way for the large caps, though the S&P 500 and Dow Jones Industrial Average also posted respectable advances.

To wit, the bounce back was not restricted to the large-cap composites. In fact, the Russell 2000 outpaced all other indexes, underscoring the particular strength seen from small-cap equity trading. Overall, advancing shares outpaced declining shares by a more-than three-to-one ratio. This suggests to us that tax-related optimism remains the market’s driving force, despite some select softness in recent sessions.

As for the market groups, only the utilities and noncyclical consumer goods sectors failed to finish the day in positive territory. Energy, industrial, and basic materials stocks were among the strongest performers. Overall, advancing shares outpaced declining issues by a more-than three-to-one ratio.

As for the economy, a pair of updates from the business beat figured into trading today. While the U.S. Producer Price Index reading fell for the first time since mid-2016, the previous two months saw increases of 0.4 percent. Elsewhere, investors also shook off another rise in weekly unemployment claims.

Meanwhile, domestic oil edged higher. Strong global demand trends and geopolitical tensions in Iran and elsewhere have helped to embolden the bulls, with OPEC’s production accord also adding optimism. But with the per-barrel valuation rising to three-year highs during the recent rally, traders will likely begin to look for more auspicious data releases before pushing the price higher.

Looking to tomorrow, we expect the morning’s retail sales data to be an early influence on trading. With quarterly earnings season coming up, investors will be given the opportunity to digest updated, tax reform-augmented guidance from Corporate America. – Robert Harrington

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

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Before The Bell - After moving higher one session after another thus far in 2018, Wall Street finally opted to take a breather yesterday morning. On point, rising bond yields and some concerns China would stop buying our debt combined to take the measure of the bulls early on. Still, the selling was not widespread, with most losses modest. That said, eight of the top ten equity sectors were in the red after the first 90 minutes of trading, while the Big Board had more than twice as many losing issues as gaining stocks. The losses were steepest in the consumer non-cyclical group, where the food stocks were among the few categories to see material retrenchment.  

As to China's disaffection with U.S. debt, officials there now sense that U.S. bonds are becoming less attractive compared to other assets. In part, this push away from U.S. borrowings is also being driven by trade tensions between the two countries. All told, as the morning wound down, the Dow Jones Industrial Average, which has been setting record after record, was off by 30 points, after having been lower by about 130 points at its morning nadir. Losses also were observed in the NASDAQ, the S&P 500 Index, the S&P Mid-Cap 400, and the small-cap Russell 2000.

Also worrisome for Wall Street, in addition to the concerns out of China, is the rise in bond yields in recent days. In all, the return on the 10-year Treasury has jumped to 2.59%, or just shy of the 12-month high, to this point, on those inflation fears. However, when yields started to back off into the 2.55% range, stocks firmed somewhat further, with the Dow actually going slightly positive in the early part of the afternoon. The Russell 2000 joined the Dow, meantime, but the other large and mid-cap indexes failed to go along, and the rally soon petered out to a degree.

Another impetus for the mid-session comeback was setbacks by telecom and the utilities sectors.  Behind this weaker tone by these latter groups were higher yields, although, as noted, the 10-year Treasury did recoup some of its early losses to end matters with a yield of 2.55%. At the day's worst levels, the note was yielding 2.60%.

Now, a new day dawns, and looking out to Asia, the overnight story had some further losses. In Europe, meanwhile, the key bourses are down, as well. Meantime, oil, up yesterday, is largely flat now, while Treasury yields, ahead yesterday, are now lower thus far today. Finally, the U.S. equity futures are now indicating a slightly higher start to the new trading day. - Harvey S. Katz, CFA 

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