After The Close - The stock market opened higher this morning, maintained its gains through much of the afternoon, before easing in the final hour of the session, as talks to reopen the government broke down. Earlier today, traders were likely feeling optimistic that constructive developments might emerge from the latest round of trade talks between the U.S. and China. Furthermore, news that the Federal Reserve might adopt a more accommodative interest-rate policy was likely applauded by investors. By the end of trading, the major averages all showed some progress. Specifically, the Dow Jones Industrial Average was ahead 92 points; the broader S&P 500 Index was up 11 points; and the technology-heavy NASDAQ was higher by 60 points.
Market breadth showed broad based participation, as advancers were nicely ahead of decliners on the NYSE. From a sector perspective, the technology and energy stocks displayed leadership today. In contrast, the defensive utility issues fell out of favor with investors, who were likely busy deploying their capital into more exciting names.
In economic news, there were few reports issued today. However, the FOMC did release the minutes from its December meeting. Tomorrow, we will get a look at the latest weekly initial jobless claims report. On Friday, the Consumer Price Index (CPI) for the month of December will be released.
In the corporate arena, a few notable names posted quarterly profits today. Specifically, shares of Constellation Brands (STZ) sank after the beverage maker provided a weaker-than-anticipated outlook. The news was a bit brighter for Lennar (LEN). Shares of the home builder surged, as investors seemed pleased with that company’s latest report. Looking ahead, the fourth-quarter earnings season will soon be commencing. Perhaps, some respectable numbers, and positive guidance for 2019, will help sustain the improved sentiment on Wall Street.
Technically, the stock market has firmed up considerably over the past several sessions. The next challenge for the bulls will be to push the S&P 500 Index above its 50-day moving average, located near the 2,640 level. But, given the strength displayed lately, this feat may take a while longer to materialize. - 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 - After another agonizing selloff last Thursday and a welcome recovery on Friday, stocks began the new trading week with a solid, if unspectacular, gain on Monday. They then started the daily festivities yesterday with a more dramatic rise. Revised expectations that the Federal Reserve may not lift interest rates at all this year and some optimism that trade talks with China might produce a workable compromise combined to give stocks another solid early lift. In all, the Dow Jones Industrial Average jumped out to a gain north of 300 points in the first few minutes of trading. The other indexes gained ground as well.
The main impetus for the early session strength clearly was the cautious optimism that Washington and Beijing could move forward on a trade deal. Shares of some high-profile tech giants led the way higher early on, as a trade pact would give a strong boost to these companies. This advance by the tech stocks continued the recovery that commenced just after Christmas Day. As the talks between the two largest economies could bring about some compromises, although little was certain at this time. The stock market, meanwhile, also was preoccupied with the lingering government shutdown, where an end date still was up in the air.
The early rally would fade somewhat as we hit the 90-minute mark of trading, with the Dow still clinging to a nice gain, but with the S&P 500 Index seeing most of its increase eaten away, while the NASDAQ actually would go negative for a time. However, that buying pause would soon give way to some further increases, so as we entered the afternoon in New York, the Dow was back up by some 160 points--it had briefly pulled back to a gain of fewer than 100 points--while the S&P 500 and NASDAQ had both firmed up their resolve to go higher.
The bulls then stiffened their resolve as we moved further into the afternoon, apparently convinced that something constructive would come out of the trade talks noted above. On point, the Dow, which never gave up its gains fully, came roaring back, climbing to an advance of more than 250 points as we moved inside the session's final two hours. The uptick was broad to that point and fully inclusive. The market's improvement also may have reflected some optimism that the President's scheduled talk last night may have held some good news on the government closure front.
The market's gains would then persist into the late afternoon, with some large high-profile tech names leading the way higher. Among the big gainers were Amazon (AMZN) and Facebook (FB). Both issues have been gaining ground of late after plunging in price this past fall. The optimism on trade was fueled, in part, by constructive comments from the U.S. Commerce Secretary. The President also tweeted yesterday that trade talks were "going very well." Holding back gains, of course, have been concerns about how long the government shutdown impasse would last.
Not all of the stocks did well, as there was some softness in the chip stocks and some banking issues. In general, though, there is a sense of cautious optimism both on trade and on the Fed's indicated flexibility on interest rates. This flexibility likely reflects some concerns about easing economic improvement, with recent data on manufacturing activity and non-manufacturing showing decelerating growth patterns. The latter report, released on Monday, indicated that the services sector registered a reading of 57.6 in December, which was below expectations (58.4) and the November tally of 60.7.
The market then would close near session highs, with the Dow advancing by 256 points; the S&P 500 climbing 25 points; and the NASDAQ adding 74 points. Both the Dow's gain and that of the NASDAQ easily eclipsed the S&P 500 uptick. Even better increases were logged by the smaller-cap indexes, including the S&P 400 and the Russell 2000, while advancing issues held a formidable lead on declining stocks. It was, save for some early choppiness, a wire-to-wire win for the recently emboldened bulls. The market, with yesterday's gains, posted a win for the first five days of January, which is often a bullish sign.
Looking out to a new day now, we see that yesterday's late gains are now carrying over to Asia, where the major indexes were higher overnight. In Europe, the primary bourses are climbing thus far today on optimism that the United States and China have made progress on trade issues. Also, bond yields, up yesterday, as investors sought out more risky assets are rising anew and oil prices are up about 2%. Finally, U.S. equity futures are suggesting a higher opening when live trading resumes this morning. - Harvey S. Katz, CFA