After The Close - The stock market opened nicely higher this morning, and managed to advance strongly through the afternoon. Wall Street seemed relatively pleased with the results of the mid-term elections, which largely unfolded as expected. The stock market generally does not like uncertainty, and today’s rally would seem to suggest that traders are feeling more confident about the political landscape. At the close of the session, the Dow Jones Industrial Average was ahead close to 550 points; the broader S&P 500 Index was up 58 points; and the technology-heavy NASDAQ was higher by 195 points. Market breadth showed widespread buying, as winners were well ahead of losers on the NYSE. All of the major stock market sectors forged ahead, with leadership in the healthcare and technology names.
Traders received few notable economic reports today. However, tomorrow the pace should pick up. Specifically, the latest weekly initial jobless claims numbers are due out. In addition, the FOMC is slated to weigh in with an interest-rate decision and commentary in the early afternoon.
In the corporate arena, some companies are still reporting their results. Over the past 24 hours, we heard from a number of names. Specifically, shares of Twilio (TWLO) and Etsy (ETSY) surged today in response to positive earnings reports. In contrast, shares of Dean Foods (DF) and Zillow (Z) failed to impress investors.
In general, the stock market seems to be in the process of recovering after losing ground in October. Today’s advance puts the S&P 500 Index back above its 200-day moving average, which is a level closely watched by technicians. Meanwhile, it is too early to tell, but some on Wall Street may be starting to wonder if the market will deliver a holiday rally as the year winds down. – 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 - Another Election Day has come and gone and the voters have made their decisions following a tense and divisive campaign season. Now, it is back to the Federal Reserve being the news of the day, especially tomorrow when the lead bank will announce its latest interest-rate decision and give some sense as to what will be upcoming when it meets again next month. As to the stock market, it started the session yesterday to modestly the upside, gaining from the outset, notwithstanding the tensions that were generated by the voting and the implications for the upcoming policy agenda of what now looms as a divided Congress.
Regarding the equity market, the technology stocks raced out to solid gains in the early going, taking heart from initial strength in the shares of International Business Machines (IBM – Free IBM Stock Report), the old-line tech giant and a component of the Dow Jones Industrial Average. That issue had fallen prey to aggressive selling last week on disenchantment with its latest quarterly revenue and profit report, as well as its outlook. But yesterday, the issue was rallying once more, for a second day in succession. As to the rest of the market, it was heading higher, as well, but in more tempered fashion, at least early in the day.
That uptrend would carry into the latter stages of the morning, so that as we reached the noon hour on the East Coast, the major averages were near their highs for the morning. There seemed to be some optimism about that the outlook for divided government would be bullish for stocks. We shall see if that is the case going forward. In any event, the Street's focus now will be on the U.S. economy, earnings season (which is winding down), and the Federal Reserve. There, the expectations are that the bank will leave interest rates unchanged, but that it will keep open the possibility of a rate hike at next month's FOMC meeting.
In other matters, there was no economic news yesterday, nor will there be today, save for the start of the two-day FOMC meeting. There, no news will be made until tomorrow. This mid-week break follows the release of key data on non-manufacturing activity on Monday, where the Institute for Supply Management reported that the services sector had cooled so slightly in October. On point, that group's index came in at a still strong reading of 60.3 last month, which was well in expansion territory (i.e., above 50.0), but a bit below the September tally of 61.6, which was the highest reading on record.
Then, after the market had firmed into and through the lunch hour, trepidation about the outcome of yesterday's election seemingly came into play, so that after the Dow had surged to an early afternoon gain of more than 150 points, the sellers entered the fray and about two-thirds of that gain was whittled away as we had moved inside the final 90 minutes of trading. The other indexes responded in kind, with the NASDAQ really being buffeted as it briefly gave back a 70-point advance. However, as we approached the final hour of trading, a partial rebound would take hold, with the major indexes again pressing forward.
The market then stayed range-bound during much of the final hour, with the Dow sustaining a low-triple-digit point gain, with IBM and Caterpillar (CAT – Free Caterpillar Stock Report) leading the way higher. The other indexes trailed the blue chips, but also were higher on the day. However, in the final few minutes of trading, there was one last buying squall by the bulls, which carried the key indexes to their session highs. In all, the Dow ended matters up 173 points; the S&P 500 was better by 17 points; and the NASDAQ climbed 36 points. Meantime, gaining stocks held a three-to-two lead on the NYSE, while all 10 of the leading equity sectors saw advances on the day.
Now, one more election is in the history books and we are, as expected, in divided government. As to how the world sees things this morning, stocks in Asia were somewhat weaker overnight, while in Europe, the key bourses are gaining ground following the U.S. elections. Also, oil prices, under pressure of late are up a bit and Treasury note yields, which closed at 3.21% on the day yesterday, are now at 3.19%. Finally, after the big lead up to Election Day, our equity market is suggesting a strongly higher opening when trading resumes later this morning, with the Democrats about to retake the House, while the Republicans hold onto the Senate. Stay tuned. - Harvey S. Katz, CFA