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After The Close - The equity markets opened lower this morning, but managed to firm up in the afternoon. At the end of the session, the major averages remained in positive territory. The Dow Jones Industrial Average was ahead roughly 17 points; the broader S&P 500 Index was up three points; and the NASDAQ was higher by seven points. Market breadth was slightly negative, with decliners modestly ahead of advancers on the NYSE. Nonetheless, many equity sectors still managed to make some progress, with respectable gains in the utility and consumer issues. In contrast, the energy and telecom names declined sharply today.

There were no major economic news items released this morning, and that may help explain the session’s lackluster tone. Tomorrow should be somewhat busier, as the Producer Price Index (PPI) for the month of October will be released. The Consumer Price index (CPI) will follow on Wednesday, along with many other reports. These issuances will likely be watched by traders looking to see if any inflationary pressures are emerging in the broader economy.

Elsewhere, the third-quarter earnings season has largely concluded at this point. However, a few companies did manage to make headlines. Specifically, shares of General Electric (GE Free GE Stock Report) retreated today. The conglomerate announced a dividend cut, as it looks to turn around the business. In the consumer area, shares of toymakers Mattel (MAT) and Hasbro (HAS) rallied on reports that the two companies may merge. Elsewhere, shares of Qualcomm (QCOM) moved higher, as the technology giant rejected Broadcom’s (AVGO) acquisition offer. Investors are likely anticipating that a higher bid will materialize.

Technically, stocks remain resilient. Of note, the market has not pulled back for quite some time. Further, the bulls seem ready to move in to support equity prices whenever they weaken. - Adam Rosner

At the time of this article’s writing, the author had a position in Mattel (MAT).


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12:10 PM EST - After ringing in the opening bell in negative territory, the major large-cap indexes recovered early and spent the rest of Monday morning around their respective breakeven lines.  So while the bulls were quick to counter a spate of profit selling that characterized initial trading, the market looks to be in something of a holding pattern as investors monitor earnings, the economy, and political developments at home and abroad. In fact, overall breadth remains in favor of declining shares, which outnumber advancing issues by a roughly two-to-one ratio.

Looking at the Dow, we see that strong gains from Boeing (BAFree Boeing Stock Report) are being offset somewhat by a selloff of General Electric (GEFree General Electric Stock Report) shares. The former is benefiting from a large order in the Middle East, while the latter conglomerate has suffered on the heels of a reduced guidance announcement. The broad-based S&P 500 and tech-heavy NASDAQ 100 is exhibiting similarly mixed tone. Of the market sectors, only consumer goods (both cyclical and noncyclical) and the utility sectors were able to post an aggregate gain through the opening hours.

The listless movement of the major indexes (besides the Russell 2000, which remained in the red) can be attributed to the increasingly murky outlook for tax reform. One of the primary catalysts for the post-Election rally that drove composites and equities to all-time highs, recent updates on the front suggest the policy may not be implemented by the end of the year. Even if a measure is approved by January 1st, there is still concern that corporate tax cuts, the cornerstone feature of this proposed policy, will be delayed until 2019.

As earnings season winds down, we expect speculation over the Federal Reserve’s monetary outlook will begin influence trading. The central bank’s December meeting will be the last under the watch of Janet Yellen, and investors have largely factored in a rate increase. Thereafter, President Trump’s nominated successor Jerome Powell will likely take the reins. Though only time will tell how the Fed’s direction changes under Mr. Powell’s leadership, the expectation is that he will be accommodating to Corporate America.

Meanwhile, U.S. crude oil rose to two-year per-barrel highs early on Monday before turning sharply negative as the midday approached. Rising domestic production was the cause for the downturn, though investors remain bullish for international supply trends. We believe recently elevated valuations have played a role in the selling, as traders look to collect on profits. Looking forward, historic demand trends forecasted for 2018 will likely remain a positive tailwind for the commodity trade.

As the noon hour neared in New York, the large-cap indexes were all hovering slightly above their breakeven level. We suspect the aforementioned concerns over tax reform will cap gains today, as the market grows anxious for some positive developments on that front. - 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 - The most recent five-day stretch of trading, which started with the major averages at or near record highs, went to the bears by a thin margin. For the week, the Dow Jones Industrial Average, the NASDAQ, and the broader S&P 500 Index fell 0.5%, 0.2%, and 0.2%, respectively. It snapped an eight-week winning streaks for both the Dow 30 and the S&P 500 Index. Behind the mild profit taking were concerns that the Republican-led tax cut plans proposed in the House of Representatives and Senate would have a hard time garnering enough support in their current forms to be implemented. Since the election of President Trump a little over a year ago, the U.S. equity market has surged on hopes that some business-friendly policies would be put in place, most notably a reduction in U.S. corporate and individual tax rates, with the former going from 35% to 20%.

Meantime, there was not enough positive news from Corporate America to keep the traders from taking some profits. The earnings season, which, for the most part, has proven constructive for stocks, did not enthuse investors much last week. In fact, the investment community was disappointed with some more difficult reports from the retailers, including the latest data from Macy’s (M) and Kohl’s (KSS) on Thursday. And on Friday, shares of The Finish Line (FINL) fell sharply after the struggling retailer did not provide much hope with its latest results and guidance. Likewise, a quiet week on the business beat did not provide a catalyst for stocks. If anything, the market was disappointed with the uptick in initial jobless claims in the most recent week.

On Friday, the trading was mixed, with the Dow 30 and S&P 500 Index finishing modestly lower, while the NASDAQ used a late-day rally to finish the session nominally higher. Overall, declining issues led advancers on the Big Board, while there were more winning than losing stocks on the NASDAQ. From a sector perspective, the consumer staples and discretionary sectors fared the best, while energy, basic materials, financial, and utilities groups were out of favor.

Turning to the week at hand, the earnings season will continue to wind down, but not before we get the latest results from a number of prominent retailers, including Dow-30 components The Home Depot (HD - Free Home Depot Stock Report) and Wal-Mart Stores (WMT - Free Wal-Mart Stock Report). We will also get quarterly data from Best Buy (BBY), The Gap (GPS), and The TJX Companies (TJX). Meanwhile, the news will pick up on the business beat, with reports due on producer (wholesale) and consumer prices, retail sales, industrial production, and housing starts. The pricing and retail sales data will be closely examined for clues to how the consumer is feeling ahead of the all-important holiday shopping season, which officially kicks off a week from this Friday with Black Friday. All in all, the economic data of late has been mostly positive. That trend is going to need to continue to provide the market with some support at a time when traders are worried that the tax cuts will have a hard time gathering enough support on Capitol Hill. This week, we also will hear from a number of Fed Presidents on monetary policy. The investment community will continue to look for clues as to how the central bank may proceed next year under new leadership. Earlier this month, President nominated Jerome Powell for next Federal Reserve Chair, replacing current leader Janet Yellen. Mr. Powell’s voting record at the Federal Reserve has been more dovish than hawkish.

With less than an hour to go before the commencement of the new trading week stateside, the equity futures are presaging some profit taking in the U.S. equity market. So far today, the trading was mixed overnight in Asia, while the major bourses in Europe are in the red this morning, with Germany’s DAX and France’s CAC-40 indexes trading notably lower. Will the bearish feelings from overseas spill over to the U.S. market? At first blush, the answer appears to be yes. 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.