Loading...

After the Close - It was a good day to be long equities. The major U.S. indexes were up sharply at the get go and never looked back, as optimism is growing that a deal on Capitol Hill to avoid the dreaded “fiscal cliff” from taking place on January 2, 2013 can be worked out. This, along with some supportive news from the recovering housing market prompted aggressive buying on Wall Street. At the closing bell, the Dow Jones Industrial Average, the NASDAQ Composite, and the broader S&P 500 Index were 1.7%, 2.2%, and 2.0% higher, respectively. Advancing issues notably outpaced decliners on both the Big Board and the NASDAQ in a big win for the bulls today.

The buying was all encompassing, as each of the 10 major sectors finished the session in the black. Leadership came from those sectors most closely tied to the performance of the global economy (i.e., consumer noncyclical, energy, basic materials, and industrials). The gains were more modest for the defensive-oriented sectors, as investors showed a greater appetite for risk today than they have for much of the last fortnight. The yield on the benchmark 10-year Treasury note, which moves in the opposite direction to the price, moved higher in a clear sign there was less demand for safe-haven fixed-income securities. On an individual basis, shares of technology behemoths Apple (AAPL) and Google (GOOG) advanced notably, leading the way in the tech-heavy NASDAQ’s outsized gain.

As noted, the primary catalyst behind today’s buying spree was growing confidence among investors that a deal to avoid automatic tax increases and spending cuts from taking place can be ironed out between the political parties in the nation’s Capitol. The two sides, which included the likes of President Obama and Speaker of the House John Boehner, held what can be termed “constructive” talks late last week at the White House.

We also received some constructive news on the U.S. economy a half hour into today’s session. At 10:00 A.M. (EST), the National Association of Realtors reported that existing home sales unexpectedly rose in October. Sales of existing residences increased a modest 2.1% last month, to an annualized rate of 4.79 million homes. This, along with news that the National Association of Home Builders’ sentiment index rose to its highest level since May 2006, is another indication that the housing sector, which is a major cog in the nation’s output, is strengthening. Tomorrow morning will bring the latest data on housing starts and building permits. Not surprisingly, the major homebuilding stocks, on a roll since the middle of 2011, pushed higher once again today.

Meanwhile, the good times were not just confined to these shores. Both Asia’s leading indexes and the major European Bourses finished notably higher, like the U.S. indexes, on optimism that the U.S. will avoid going over the “fiscal cliff” in January. The U.S. news overshadowed some disquieting comments from the Continent. Specifically, the European Central Bank’s Executive Board member Joerg Asmussen feels that Greece will be unable to return to the markets in 2015-2016, and the struggling nation will require additional aid to keep from defaulting on its debt obligations.

As we noted here last Friday, we expect the lion’s share of the investment community’s near-term focus to be on the “fiscal cliff” drama, especially with the earnings and economic news light during this abbreviated trading week. Investors, though, should note that the last Dow-30 component to report third-quarter earnings comes after the close of trading tomorrow when struggling computer giant Hewlett-Packard (HPQ Free HP Stock Report) releases its latest quarterly results. Today, shares of meat processor Tyson Foods (TSN) and home-improvement retailer Lowe’s (LOW) moved higher on earnings news.   - William G. Ferguson

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

-

1:00 PM EST - The U.S. stock market opened higher this morning, and has managed to hold its gains so far. At just past noon in New York, the Dow Jones Industrial Average is up 171 points (1.4%); the S&P 500 Index is up 22 points (1.7%); and the tech-heavy NASDAQ, which is leading the charge, is higher by 50 points (1.8%). Market breadth suggests a favorable tone, as advancers are swamping decliners by about 7 to 1 on the NYSE. All of the market sectors are making contributions. There is strength in the capital goods, conglomerates, and basic materials issues. There is no real weakness in the market today, but the utility and healthcare issues are underperforming the other sectors.
Technically, the S&P 500 Index displayed some strength on Friday. That up move came on decent volumes, which was also encouraging.  Today’s move, assuming it holds, brings the index back to its 200-day moving average, located at about 1,382. Hopefully, for the bulls, the index can firm up, and even head higher from here. Meanwhile, the VIX, now at just below 16, is lower, which possibly suggests that bullish sentiment is intact.

The economic news was constructive today. According to the National Association of Realtors, existing home sales for October came in at $ 4.8 million, which was better than had been widely expected. Furthermore, the NAHB Housing Market Index showed prices rising a bit more than anticipated in November. Clearly, the recent reports have confirmed that the housing market is on the mend, which assuming it sticks, should be a big boost for the broader economy. Tomorrow, we get a look at housing starts and building permits for October. The Home Builders Trust (XHB) is up over 2% today, probably on the news. Elsewhere, investors may have a sense that the politicians in Washington will act as needed to solve the “fiscal cliff” situation, and that the recovery will not be derailed.

The corporate news was generally supportive, today. Specifically, home improvement retailer Lowe’s (LOW) stock is up on a stronger-than-expected earnings report. In addition, Tyson (TSN) stock is up on encouraging results. Elsewhere, there has been some merger and acquisition activity. Wright Medical Group (WMGI) is merging with BioMimetic Therapeutics (BMTI). Also, Cisco (CSCO - Free Cisco Stock Report) plans to acquire Meraki, a cloud-based computing company. - Adam Rosner

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

10:15 AM EST - Wall Street has started the holiday-shortened week in fine fashion. Specifically, the U.S. stock market, taking its cue from Europe, where earlier this morning the bourses in London, Paris and, Frankfurt were all up by better than 1%, is now gaining strongly.

All told, as we pass the one-half half hour mark in New York, the Dow Jones Industrial Average is up better than 155 points, or more than 1%, while the Standard and Poor's 500 Index is in the black to the tune of 20 points, and the NASDAQ is ahead by 40 points. Advancers, meanwhile, are outdistancing decliners on the Big Board by about ten-to-one, while the ratio of gaining stocks over losing issues is some six-to-one on the NASDAQ. Rising volume, meantime, is well ahead of declining volume, as are new 52-week highs over new lows.

Behind this early Thanksgiving gift to the bulls is evolving optimism in Washington that calmer heads will prevail when it comes to the feared so-called fiscal cliff and that a deal will be brokered in time by the two political parties in Congress that will be satisfactory to the President. The deadline for reaching such an accord is January 2, 2013. Growing concerns about the fiscal cliff have been behind much of the stock market's weakness along our shores in the past two weeks. Now, at least for this morning, such pessimism seems to be abating.   -Harvey S. Katz 

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

Stocks to Watch from The Survey Although a number of companies (mainly retailers and restaurants) are scheduled to report quarterly results after the market closes today, investors don’t have too many earnings reports to pour over this morning. However, Wall Street did receive some good news from home-improvement retailer Lowe’s (LOW), which reported better-than-expected October-period results. Preparations and rebuilding efforts in the wake of Hurricane Sandy helped drive sales and earnings, and the stock is up nicely in the premarket as a result. Investors were also pleased with quarterly financial data from Tyson Foods (TSN), a processor and marketer of chicken, beef, and pork products, as that stock is indicating a modestly higher opening this morning. – Matthew E. Spencer 

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

Before The Bell  - Stocks steadied for a time Friday and then put on a good buying rush in the afternoon to break, at least for one session, the bearish hold on the equity market. However, this modest late-buying spree, which enabled the Dow Jones Industrial Average to close 46 points higher on the week's final trading session, put just a small dent in the aggregate loss for the week. All told, the index of 30 blue chip companies fell almost 2% for the five-day period.

Once again, it was the feared fiscal cliff that was front and center on the collective minds of investors, as the clock continues to tick down on what may be a combination of tax increases and spending cuts that are scheduled to kick in on January 2, 2013 unless Congress and the White House can reach a compromise deal in the interim.

And for much of this past fortnight, which has seen some severe losses in the market, the feeling has been one of pessimism, as the consensus has evolved that a settlement is not assured. Our sense right along has been that some deal will be reached, albeit perhaps at the proverbial 11th hour. Comments out of the Capitol on Friday, meanwhile, seemed to echo such sentiments, as the respective party leaders in Congress appeared to hold out some hope that the feared end result of several years of bickering would not evolve. We shall see.

The feeling among the leadership is that the opening meetings and negotiations on the looming fiscal cliff had been productive to an extent. Further talks, obviously, will now need to be held. The somewhat less dire tidings out of Washington contrasted with some unfortunate metrics from the government on the economic situation at home. Specifically, just before the market opened for trading on Friday, the Commerce Department weighed in with a report showing that industrial production and factory utilization had both contracted in October. Now, a good chunk of those declines were occasioned by the horrific toll take on our productive base by Hurricane Sandy. However, that was not exclusively the case, and there was plenty of overall weakness aside from Sandy. Thus, there are logical concerns about the pace of business activity going forward. Also, output figures for September were revised lower.

Now, a new holiday shortened week dawns, and while there is a bit of optimism in Washington--and that is reflected in appreciable pre-market gains in the equity futures--there still are concerns about the domestic economy, earnings, and the ongoing erosion in business and financial conditions in the beleaguered euro zone. Nevertheless, there is enough hope, apparently, to get the U.S. equity markets off to a rousing start in about a half hour from now. Indeed, as we look at the market, the Standard and Poor's 500 Index futures are ahead by 12 points and the NASDAQ futures are higher by 24 points.

As to Europe, there are hopes that Greece will get the next batch of bailout cash. That expectation is also helping to underpin the markets globally. Indeed, the bourses in London, Paris, and Frankfurt are all up by better than 1% this morning. That strength comes in spite of intensified fighting in the Middle East--notably in Gaza.

As to the week ahead, we will be getting figures later this morning on sales of existing homes for October; a slight dip is the expectation there. Then, tomorrow, before the market opens, we will get data on housing starts for last month, where a pullback of some note also is forecast, Finally, in this holiday shortened week, Wednesday will bring reports on the leading indicators and jobless claims.   - Harvey S. Katz    

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