After The Close - The stock market started the trading day lower, giving back some of yesterday’s gains. However, positive comments from Federal Reserve Vice Chairman Richard Calida, stating that interest rates are getting “much closer to the vicinity” of neutral, helped the indices turn around to a degree. This statement moved the market by suggesting that rate hikes may slow in 2019. The Dow Jones Industrial Average climbed from a low of 24,416 to 24,748, on this news, while the S&P 500 moved in tandem. In addition, the markets benefited from increased optimism concerning a trade deal with China at the G-20 meeting later this week. Economic advisor Larry Kudlow stated that “a lot of communication with the Chinese government at all levels” is occurring. Still, Dow component United Technologies (UTX – Free United Technologies Stock Report), held back the move, as the price fell on news that the company plans to split into three businesses by 2020. All told, the Dow closed up 0.4% on the day, while the S&P 500 was up 0.3%.
Market breadth was mixed, as decliners marginally outpaced advancers on the day. Healthcare, utilities, and consumer staples companies led on the day, suggesting that a flight to safety was occurring. Meantime, materials stocks were among the weakest performers.
In economic news, consumer confidence recorded the first fall in five months in November, slipping to 135.7 from an October read of 137.9. Still, optimism for the next few months remains high, though it notably has dipped a bit from recent highs. The number is much higher than in the prior-year period, which augurs well for a stronger year-end quarter.
Looking ahead, a large amount of economic data is slated to be released tomorrow. This includes the EIA status report on crude oil inventories, and the second estimate on third-quarter GDP growth. Too, new-home sales were expected to reach around 575,000 in the month of October. Meantime, earnings announcements from Burlington Stores (BURL) and Tiffany & Co. (TIF) may offer some insight on how early Christmas season sales are performing. - John E. Seibert III
At the time of this article’s writing, the author held positions in one or more of the companies mentioned.
Before The Bell - Following a difficult holiday shortened week for the stock market in which even the abbreviated post-Thanksgiving Day session on Friday saw a 178-point slide in the Dow Jones Industrial Average, on an assortment of worries both onshore and offshore, Wall Street began the latest five-day span with a strong gain, In fact, within minutes after the open, the 30-stock blue chip composite was ahead by more than 200 points. And it was off to the races for the balance of the morning, with the Dow's early advance veering towards the 400-point mark.
That morning high in the Dow Industrials of 387 points would prove to be the high-water mark for the session, however, although the ultimate gains would not be very far from that level. Helping the early gains and the strong showing throughout the day, was the fact that the equity market was now deeply oversold after the unrelenting losses of the past several weeks. The Street also was underpinned by the encouraging performance on Cyber Monday, as Internet sales were generally strong.
Elsewhere, there was little of note going on, with investors eagerly awaiting the latest musings tomorrow from the Federal Reserve Chair Jerome Powell. Investors were hopeful that the head of the Fed would strike a dovish tone. We shall see. In the meantime, the stock market kept its momentum up until the noon hour, with the morning concluding with the Dow still up close to the session highs. However, the advance would stall for a brief time as we began the afternoon, with the gains just about cut in half.
As noted, though, the pullback would be sharp, but brief, lasting well under an hour. At the early afternoon lows. The Dow's gain would fall to under 200 points, while the NASDAQ, which had been ahead by more than 100 points, shave some of that gain. But, unlike the Dow, which would peak before the lunch hour, the NASDAQ would turn right around and climb to session highs near the close. All told, after its brief turnabout, the major averages would all push ahead again as the afternoon progressed.
Meanwhile, once the renewed buying commenced, it would largely continue for the duration of the day. This was all very reassuring to the bulls, who had seen about 2,000 points come off of the Dow in the past few weeks. Now, the question is whether this was just a brief respite in an intermediate downtrend or the start of what could wind up being a Santa Claus rally. Much of that will depend not only on what transpires on the trade front, but also how the Federal Reserve proceeds with its monetary policy.
On that last count, the comments from Mr. Powell may shed some light on the situation. For now, though, the guessing is that the bank will raise interest rates when it meets next month. If it goes ahead and tightens further at that time, it would be fourth such increase this year. Whether this strong showing yesterday was a bounce off a bottom, will likely be evident in the coming weeks. For now, though, the bulls were cheered to some degree by the good showing and by expectations for a good post-Thanksgiving sales surge.
All told, the Dow would add 354 points; the S&P 500 Index would climb 41 points; and the NASDAQ would add 143 points. Also of note, the small-cap Russell 2000 would advance by 17 points. It was a thoroughly satisfying day for those long equities. Looking out now to a new day, and after yesterday's fireworks, we see that stocks were mixed in Asia overnight, while in Europe, the principal bourses are lower on trade concerns. Also of note, Treasury yields, up yesterday, now are lower and our equity futures are off in early action after yesterday's big gains. - Harvey S. Katz, CFA