After The Close - Each of the major indexes set all-time highs today, though the rally was temporarily halted midway through the afternoon as investors processed news that North Korea had fired a ballistic missile. By the end of the day, however, the Dow, S&P 500, and NASDAQ 100 all weathered the midday selling pressure to advance even higher than the morning run up, ringing in the closing bell at historic highs.
While most of the major market sectors spent the session comfortably in positive territory, it was the financials that led the charge. The industry grouping continued to benefit from yesterday’s support for a December rate hike from Dallas’ Fed Chair, while the outlook for the sector was also bolstered by Fed Chair nominee Jerome Powell’s testimony. The likely successor to current head Janet Yellen ostensibly favors a lax regulatory climate for the banking sector, a prospect that sent Bank of America (BAC) and other financial issues higher. Elsewhere, the basic materials, energy, and consumer groups also helped to drive the averages higher on Tuesday.
Meanwhile, U.S. crude oil prices slipped slightly on the day, with investors largely standing pat as the market awaits OPEC’s output decision. Recent news items have suggested some delegates prefer to only extend the deal to June, rather than the entirety of 2018, which may offer some pause to the bullish traders hoping for a torrid per-barrel rally next year. U.S. crude finished the session one penny under $58.
Overall, despite the brief paring of gains following the surprise update from the Korean peninsula, the session was dominated by the bulls. Underscoring the strength of small-cap equities, market breadth favored advancing issues by a 1.5-to-one ratio.
Looking ahead, a key vote on tax reform is set to take place later in the week and, currently, it appears the market is anticipating the bill will be passed by yearend. As the divisive measure still faces intense scrutiny, we recommend subscribers follow the developments closely. A failure to implement lower corporate taxation rates by the end of the year, or at least guide towards a timely introduction of a lower code, could open up an opportunity for profit takers to reappraise elevated valuation levels as the calendar turns to 2018. – Robert Harrington
At the time of this article’s writing, the author did not have any positions in the companies mentioned.
12:20 PM EST - Equities got off to a slow start this morning, but have since firmed up quite a bit. At roughly noon in New York, the Dow Jones Industrial Average is ahead 135 points; the broader S&P 500 Index is up 14 points; and the NASDAQ is higher by 19 points. Advancers are comfortably ahead of decliners on the NYSE, which is a positive indication. Further, all of the major equity sectors are in positive territory. The energy stocks, which had been weak yesterday, are displaying leadership today. In contrast, the technology names are putting in a somewhat sluggish performance.
Meanwhile, there were a couple of economic reports to digest this morning. Specifically, the Conference Board’s Consumer Confidence Index rose to 129.5 in the month of November. This reading was quite a bit better than had been anticipated, and was also up nicely from the October figure. In fact, the current reading is the highest seen over the past 17 years. Elsewhere, according to the S&P Case-Shiller Home Price Index, housing prices rose 6.2% in the month of September, thanks, in part, to low inventory levels. Tomorrow, we get a look at pending home sales for the month of October, as well as the second estimate for third-quarter GDP.
While few major corporations posted their financial reports over the past 24 hours, we did hear from Thor Industries (THO). Shares of the recreational vehicle manufacturer are trading up sharply in response to a solid profit report. Elsewhere, in M&A news, shares of Buffalo Wild Wings (BWLD) are trading higher on reports that the company will be acquired by Roark Capital Group, the owner of Arby’s, in a deal valued at $2.9 billion.
Technically, the stock market continues to drift higher. Traders appear pleased that consumer sentiment is running high. Furthermore, Wall Street is likely hoping that the Administration’s tax reform measure will gain approval. Finally, we are entering the holiday season, which often spurs on the bulls. – 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 - Wall Street got off on the right foot yesterday morning after the Thanksgiving Day weekend, with the Dow Jones Industrial Average, the Standard and Poor's 500 Index, and the NASDAQ all racing to new all-time highs in the first hour of trading. On point, the Dow jumped by some 80 points at its morning peak, while the NASDAQ was about 10 points to the good. Optimism about holiday sales in the wake of some positive early shopping indications and as a sense that at least some tax reform measure will pass by yearend dominated the early thinking.
However, this initial burst of optimism was short-lived, and as we reached the noon hour in New York, the Dow had given back just about all of its early rise (it had actually turned negative briefly), while the S&P 500 Index and in particular the NASDAQ had gone into the red, as profit taking took hold. Then, after this late-morning selling burst, the market steadied somewhat, with the Dow turning positive once more. However, the comeback was not fully inclusive, as the S&P 500 and the NASDAQ remained in the minus column as we moved into the afternoon.
The mid-session pullback evolved as the early rally in the retail stocks fizzled. The gains had took hold after signs pointed to a solid showing on Black Friday. The early upturn also reflected some optimism ahead of Cyber Monday’s results. Several chains, in fact, led by Dillard's Inc. (DDS), turned nicely higher. On the other hand, stocks of other retailers faltered on the day. Meantime, as noted, investors also were watching for developments surrounding the Republicans tax plan, with the Senate vote scheduled for this week.
Also in the news was Dallas Federal Reserve President Robert Kaplan, who said yesterday that he would support a December interest rate increase. Earlier, he had been on the fence regarding such a policy action. He also warned of possible financial imbalances going forward, noting that the stock market has gone for 12 straight months without even a 3% correction. Overall, stocks wilted as the afternoon proceeded, with the aggregate mood being influenced by this news ahead of further Washington dealings.
Things would change little as the afternoon wound down, so that as we entered the homestretch, the indexes remained range bound, as before, with the Dow clinging onto a small gain, while the other indexes fell back modestly. All told, as the final bell sounded, the Dow was able to hold on to a 23-point advance, while losses of one and 11 points, respectively, were tallied by the S&P 500 Index and the NASDAQ. The small-cap Russell 2000 also softened, while nearly all of the ten leading equity groups closed lower.
Looking out to a new day now, we find that stocks were trading with modest losses in Asia overnight, while in Europe, the leading bourses were moving higher thus far this morning. Elsewhere, we see that oil prices, which moved lower yesterday and took some oil issues with them, have now started trading with additional early losses. Also, interest rates now are up a bit, while U.S. equity futures are showing some early gains. In sum, the day is likely to be influenced by the latest news on taxes, the economy, and the Fed. Stay tuned. - Harvey S. Katz, CFA