After The Close - The U.S. stock market delivered a mixed performance today, as traders look to the Federal Reserve for guidance. At the close of trading, the Dow Jones Industrial Average was down about 22 points, the broader S&P 500 Index was up just slightly; and the NASDAQ was higher by 14 points. Market breadth was positive, with advancers slightly ahead of decliners on the NYSE. The major equity sectors were divided. There was leadership in the basic materials issues. In addition, the financial names made progress. However, some of the consumer stocks underperformed today.

There were no important economic reports released this morning. However, some traders may still be digesting the February employment report issued last Friday. Tomorrow will be a light day for news, as well. However, the FOMC will be meeting over the next couple of days, and on Wednesday will release an interest-rate decision, accompanied by some prepared remarks. Given that the economy has been quite strong lately, and that the labor markets have firmed up, it is likely that the Federal Reserve will take action. While many on Wall Street acknowledge that this is a real possibility, it remains to be seen how the stock market will react, if rates continue to move higher over an extended period of time.

Meanwhile, few widely-watched corporations posted their financial results this morning. However, some M&A news was announced. Specifically, shares of Mobileye (MBLY) surged in response to reports that the technology company, which specializes in driverless car applications, will likely be purchased by Intel (INTC Free Intel Stock Report) in a deal valued at roughly $15 billion.

Technically, stocks have forged ahead over the past several months. However, with equity valuations a bit elevated, and the Fed ready to act, there is likely little room for disappointments and setbacks. - Adam Rosner

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


12:00 PM EDT - The major U.S. equity indexes are trading in mixed fashion as we pass the midday hour on the East Coast. The major averages are not straying too far away from the neutral line, a case we noted in our pre-market commentary. Our sense is that investors may not be willing to make any major moves ahead of this week’s monetary policy decision from the Federal Reserve on Wednesday afternoon. The prevailing sentiment is that the central bank will tighten interest rates by 25 basis points, but the investment community will likely be most interested in what kind of a stance the Fed takes with regard to future monetary tightening. A more hawkish posture could produce some profit taking in a market that is overbought right now.

At the noon hour, the large-cap Dow Jones Industrial Average and the broader S&P 500 Index are in negative territory, while the tech-heavy NASDAQ is in the black. Overall, though, there is a modestly bullish tone to trading, but we do note that we are seeing weakness in some market fundamentals in the last half hour. On the positive side, the broader small-cap stocks, which typically lead the market in one direction, are providing some leadership; there is a plurality of winning issues on both the Big Board and the NASDAQ, but the spread has recently narrowed some; and most of the 10-major equity groups are in positive territory. Among the top-10 sectors, the leadership is coming from the basic materials group. And there is some modest buying in the technology sector, helped by some M&A news in the industry (see below).

There was no news of note on the economy for investors to digest today. That will change, however, as the week progresses. In addition to the much-anticipated interest-rate decision from the Federal Reserve, we will get a number of important reports from the business beat, including the latest data on producer (wholesale) and consumer prices, retail sales, housing starts and building permits, industrial production and capacity utilization, and consumer sentiment. These reports, especially the FOMC decision and the retail sales figures, have the potential to have a notable impact on the performance of the stock market.

Meantime, we did get some news from corporate world this morning. Of note, we learned that Dow-30 component Intel Corp. (INTC - Free Intel Corp. Stock Report) plans to buy Israel’s Mobileye NV (MBLY) for roughly $15 billion, its second-biggest acquisition and an expensive attempt to surpass rivals such as Qualcomm (QCOM) in technology for self-driving cars. The chip-making giant would pay more than $63 per share in cash for Jerusalem-based Mobileye, a 34% percent premium to Mobileye’s preannouncement closing price. This news also is pulling the shares of industry peer Advanced Micro Devices (AMD) higher.

Looking at the remainder of the session, we don’t anticipate the major averages making any significant moves ahead of Wednesday’s FOMC decision on monetary policy. However, we would not be surprised if the Dow Jones Industrial average and the S&P 500 rallied, given the above mentioned market fundamentals, but our confidence is not as strong as it was just a half hour ago, as we have seen a recent pickup in selling in selective areas. Stay tuned. - William G. Ferguson

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


Before The Bell - The first full trading week of March took investors on a bit of a rollercoaster ride. In the end, the bears came out slightly ahead of the bulls, which has been a rather rare occurrence since the Presidential election on November 8th. For much of the last four months, sentiment that the Trump Administration will implement a number of business-friendly initiatives, a strengthening U.S. economy, and a very cooperative fourth-quarter earnings season has pushed the U.S. market markedly higher. It also has left the stock market susceptible to some profit taking if the news were to disappoint. Last week, stocks were held in check by some concerns about the unveiling of a new healthcare plan to replace the Affordable Care Act, a sharp drop in oil prices on oversupply concerns, and some apprehension leading up to Friday’s report on the labor market. For the five-day stretch, the market gave modest ground, with the Dow Jones Industrial Average, the NASDAQ, and the broader S&P 500 Index falling 0.5%, 0.2%, and 0.4%, respectively.

As for the market on Friday, the major averages put in a mild rally following the much anticipated report on employment and unemployment. Leading up to the release, investors were a bit worried that a good jobs figure may hurt the stock market, as it would bring more calls for the Federal Reserve to tighten the monetary reins, perhaps as early as this week. (Typically interest-rate hikes are not greeted kindly by equity investors.) However, that was clearly not the case on Friday, as all of the major indexes finished in the black, each of the 10 major equity groups were in positive territory, and there was a plurality of winning issues on both the New York Stock Exchange and the NASDAQ. The jobs report, which showed the addition of 235,000 nonfarm payrolls in February, and an accompanying uptick in hourly wages were seen as signs of a strengthening economy and that seemed to outweigh the possibility of an interest-rate hike this Wednesday in the minds of investors. That said …

The Federal Reserve will again be front and center for Wall Street this week, as the central bank begins its two-day monetary meeting tomorrow. Given the strength of Friday’s jobs creation figures and the recent uptick in inflation, the overwhelming consensus is that the FOMC will vote to raise short-term interest rates to 0.75%-1.0%, from 0.50%-0.75%. This may have an impact on the market, but our sense is that investors will be more interested in the wording of the accompanying Fed monetary policy statement. If the central bank were to take a more hawkish tone, it could prompt some profit taking in a market that is clearly overheated. While we will have to wait a few days to see what the Fed announcement will do to the market, we would not be surprised if the market took a breather ahead of this report. Investors may not be willing to make any major moves leading into the monetary policy decision.

Meantime, investors also will be keeping an eye on the oil market, where recent news has not been encouraging. This morning, crude prices dropped to their lowest in three months. The recent retreat comes despite efforts by OPEC efforts to curb crude output. A recent buildup in supply, as U.S.-based drillers kept adding rigs, is pressuring oil prices. The energy commodity appears headed for fifth-consecutive down day, which would mark the biggest losing streak since a six-day slump that ended on November 4th.

Looking at the day at hand, the U.S. futures are presaging a rather flat opening when trades gets underway in less than an hour from now. Initially, we may see some modest buying on these shores, and it should be noted that main indexes in Asia finished higher overnight and the major European bourses are sporting small gains as trading moves into the second half of the session on the Continent. As noted above, we would not be overly surprised if the main averages traded in a tight band around the neutral line over the next few days, as investors await the Federal Reserve’s monetary policy decision on Wednesday afternoon at 2:00 P.M. (EDT). Stay tuned. - William G. Ferguson

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