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After The Close - U.S. stocks opened historically higher on Wednesday morning and never looked back. The major indexes each set all-time highs during today’s trading, as optimism stemming from President Trump’s proposed economic policies continues to embolden the bulls. The broad-based S&P 500 and tech grouping NASDAQ posted wide 32 and 78 point increases, while overall breadth was boosted by positive sentiment amongst small- and mid-cap equities. The blue chips soared, as well. All but two of the Dow Jones Industrial Average’s components registered gains on the day, with JPMorgan Chase (JPM Free JPMorgan Stock Report), Boeing (BA Free Boeing Stock Report), and Apple (AAPL Free Apple Stock Report) leading the way. 

The morning gains got an extra jolt from a positive manufacturing activity report from the Institute for Supply Management. The monthly reading expanded to 57.7 in February, well above the expected rate. The positive reaction was enough to mute disappointment on the construction front. Spending fell 1.0% last month, a far cry from the anticipated 0.5% growth rate. 

During last night’s address to Congress, Mr. Trump reiterated his intention to prioritize American interests over global affairs. Corporate tax reform, financial deregulation, and a $54 billion increase to the Pentagon’s budget were among the plans the bulls have celebrated. The announcement of a $1 trillion infrastructure stimulus also contributed to today’s roaring ascent, though it remains unclear how those funds will be raised without a tax hike. In fact, the elevated price levels of many shares will eventually require some transparency as it relates to the timing and magnitude of these initiatives, at which point there may be a correction to the market.

Meanwhile, the Federal Reserve’s Beige Book was released at 2:00 PM (EST), and it revealed a more-timid brand of economic optimism than the one seen in recent months. Some businesses in regional markets are taking a wait-and-see approach to many of the President’s expected policies. While the outlook remains upbeat, the tone is somewhat reminiscent of the slow-but-steady progression growth rate reported before the election. The central bank’s next meeting on monetary policy begins on March 14th, at which point we believe there is a better-than 50-50 chance that it raises interest rates.

Nine out of ten market sectors registered increases on the day, as a slight retreat in domestic oil prices pulled utilities equities lower. Basic materials achieved the most pronounced advance on the day by a wide margin, propelled by the aforementioned infrastructure revamp. Banks, industrials, and energy stocks also moved impressively higher. So, chalk up another one for the bulls, who may face early challenges from profit takers tomorrow. – Robert Harrington


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

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11:45 AM EST - After a one-day hiatus yesterday for stocks, the major equity averages are in full rally mode today, emboldened by a favorable reaction to President Trump’s speech before a joint session of Congress last night. Some nervousness ahead of the speech gave way to a favorable reaction to the President’s pro-business agenda, which is expected to bring more rollbacks in regulations and a comprehensive tax-reform plan. Those two initiatives are expected to be good for Corporate America and Wall Street, and investors are responding in kind today.

As we approach the midday hour on the East Coast, the major averages are soaring, with the Dow Jones Industrial Average passing the 21,000 mark. The indexes are at record levels, and market breadth is much in favor of the bulls. Advancing issues are leading decliners on the New York Stock Exchange by more than two to one, and the margin is even wider on the NASDAQ. All of the major equity groups, save for the most defensive utilities sector, are nicely higher this morning, with the leadership not surprisingly coming from the most economically sensitive sectors.

In addition to the boost the market is getting from the positive reaction to the President’s speech last night, stocks are being helped by a positive report on the manufacturing sector this morning. At 10:00 A.M. (EST), the Institute for Supply Management issued its latest reading on manufacturing activity, and the major averages quickly added to their already noted gains. Specifically, the Tempe, Arizona-based trade group reported that manufacturing activity expanded to 57.7 in February, which far exceeded the consensus expectation of a gain in the area of 56.0 and represented the 93rd consecutive month of growth. The strong manufacturing data were another strong indicator that the U.S. economy, which expanded by an annualized rate of 1.6% last year, is strengthening. The manufacturing data overshadowed a disappointing report on construction spending this morning, which showed that expenditures on construction fell by 1.0% last month, coming in well short of the consensus expectation of an increase of more than 0.5%. Investors should note that at 2:00 P.M. (EST), we will receive the Federal Reserve’s latest Beige Book summation of economic conditions.

Meantime, lost in all the President Trump talk this morning was some encouraging news from the corporate world. The headline report came from Lowe’s Cos. (LOW), which reported strong quarterly results, beating expectations on both the top and bottom lines. Lowe's reported a better-than-expected 5.1% rise in comparable sales in the fourth quarter, a strong rise after posting respective sales growth  of 2.7% and 2.0% in the third and second quarters.   The stock is surging on that report, and it is helping the consumer cyclical sector, which is one of the leading groups today. The fourth-quarter earnings season, which is nearly in the record books, has been good to stocks. In fact, earnings growth accelerated in nine of the 10 major sectors during the fourth quarter, and the expectation is that we may see further gains in the coming quarters if the economy continues to strengthen and President Trump’s promised changes come to fruition later this year.

Looking ahead to the second half of the session, nothing appears to be in the way of the major stock averages finishing at all-time highs. The question will be whether the Dow Jones Industrial Average will be able to close above 21,000 on the best day so far for stocks in 2017. 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.

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Before The Bell - Wall Street capped off a stellar February, in which the Dow Jones Industrial Average rose by some 5%, and the S&P 500 Index and the NASDAQ gained roughly 4%, on an unprepossessing note, with stocks faltering at the opening bell and never making material headway as the day proceeded. Overall, our sense is that investors were nervous heading up to last night's speech before Congress by President Trump. For weeks, stocks have rallied as optimism has built on hopes that his promised tax cuts, lessened regulation, and increased infrastructure spending would pass through Congress.     

Still, the doings in Washington weren't all investors had on their minds. There also were two key reports issued yesterday morning. Specifically, the government reported that fourth-quarter GDP growth was unchanged at 1.9% in a second GDP release for that period. Expectations had been for an upwardly revised figure of 2.1%. However, consumer spending was revised nicely higher. Also, of note, the Conference Board said its gauge of consumer confidence had come in better than forecast, rising to a 15-year high of 114.8 in February. That score exceeded the 111.6 result in January and February's expectations of 111.0.

Notwithstanding these decent reports, stocks struggled in the morning, with the Dow mostly lower, and the S&P 500 and NASDAQ down throughout. Even worse were the more severe setbacks by the S&P Mid-Cap 400 and the small-cap Russell 2000, which as the morning concluded, were off by close to 1% each. Even the Dow, in the red for much of the morning, sold off more aggressively as the afternoon neared, as a day of moderate profit taking appeared ahead. Any reasonable profit taking would appear overdue given the unrelenting rush to new all-time highs recently. In all, the Dow had secured 12 of them going into yesterday. 

The early afternoon, meantime, brought more selling, with the Dow moving down, just after lunch, to a loss of more than 50 points, before some modest buying resurfaced. Still, the losses persisted, with the S&P 400 and the Russell 2000 each tumbling by more than a percentage point, as the gap between losing and winning stocks widened in favor of the bears. The equity market stayed lower through the middle part of the afternoon, although the earlier lows were not revisited. However, losing stocks would widen the gap with winning issues, as the consumer discretionary stocks fell back sharply.

The weaker performance by this latter group reflected a sharp selloff in Target (TGT) shares. At one point in the mid-afternoon, Target shares were off more than 12% on the back of weaker-than-expected quarterly results and lackluster guidance. The issue, up above $84 a share at one point in the past 12 months, was passing hands for just over $58 at that point. Also weaker were shares of Under Armour (UAA). The stock fell notably yesterday on concerns about an analyst downgrade. Bucking the lower trend, meantime, were the utility stocks, seemingly on falling bond yields.      

The market then continued to press lower as the afternoon wound down, although more on nervousness ahead of the President's address than on the fundamentals. As before, the smaller, more speculative, groups, particularly on the Russell 2000 took a disproportionately large hit, with that composite falling by well over 1% as we moved into the final hour of trading. The market then held range-bound into the close, with the final tallies showing modest losses of 25 and six points, respectively, for the Dow and S&P 500, a somewhat more substantial drop for the NASDAQ, and hefty declines for the S&P 400 and the Russell 2000. 

Looking out to a new day, we see that stocks in Asia were higher overnight, led by Japan's Nikkei, while the main bourses are also pressing forward in Europe so far this morning following last night's speech to Congress by the President. As to our futures, they currently are suggesting a notably higher opening when trading resumes this morning on a generally positive reception of the President's speech last night. In the news, meantime, the Institute for Supply Management will issue manufacturing data this morning, while this afternoon, we will receive the Federal Reserve’s Beige Book summation of U.S. economic activity.   - Harvey S. Katz 

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