After The Close - The major U.S. stock market started the day on an up note, but the major indexes spent the rest of the session wavering above and below the unchanged mark, and keeping to a fairly narrow range.

The biggest news of the day, at least as far as the markets were concerned, was the historic tax bill passed by Congress which effectively lowered the U.S. corporate tax rate from 35% to 21%. Anticipation of some sort of tax reform was one of the major driving factors behind the sizable advances in stock prices following Donald Trump’s election last November. With that major hurdle out of the way, and probably largely priced into the market, it appears that investors are now pausing to take a breather, and perhaps some profits off the table. The market’s next piece of business to focus on will likely be determining which companies stand to gain the most from the new legislation.

At the closing bell, the 30-stock Dow Jones Industrial Average, unable to shake off a mid-afternoon slump, ended the day with a loss of 28 points. Meanwhile, the broader S&P 500 was off by two, and the NASDAQ was down by three.

Among the 10 major market sectors, declining shares held the edge, led by utilities, which shed about half a percent. Meanwhile, consumer noncyclicals and healthcare issues each lost about a third of a percentage point.

On the plus side of the ledger, basic materials put in a good showing, gaining a full percent on the session, thanks to big gains from the likes of Schnitzer Steel (SCHN) and Alcoa (AA). Energy shares were also up a percentage point, largely owing to advances in oil & gas exploration stocks. Oil prices moved up nearly one-percent, to $58.10 a barrel, following word that crude oil inventories in the U.S. came in lower than expected last week.

Elsewhere, it was a down day on the European bourses, with the bears taking over the reins late in the afternoon. Germany’s DAX fared the worst of the lot, shedding 1.1%. France’s CAC-40 did a bit better, only losing half a percent on the session, while the U.K.’s FTSE ended a quarter of a percent below the breakeven mark. – Mario Ferro

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


12:10 PM EST - The major U.S. equity indexes, which are on an historic run since last November’s Presidential election, mostly on hopes of some major tax cuts and reforms to the tax code, are trading in mixed fashion so far today, as those hopes are close to becoming a reality. Is it a case of buy the rumors, sell on the news, or investors taking bit of a breather as they await for the passage of the legislation? Tax reforms are set to be finalized perhaps as early as later today when the House of Representatives takes the measure up for vote, one that is likely to get enough support. Our sense is that right now it may be the latter, with investors’ showing some fatigue, as the Dow Jones Industrial Average is within a stone’s throw of the 25,000 mark and the NASDAQ recently briefly climbing past the 7,000 level.

Thus, as we hit the noon hour on the East Coast, the two aforementioned indexes and the broader S&P 500 Index are none too far removed from the neutral line. Overall, there appears to be some selective profit taking on display with the major averages at or near record highs. The margin between advancing and declining issues is razor thin on both the New York Stock Exchange and the NASDAQ, and there is a mixture of up and down arrows among the 10 major equity groups.

Shining the spotlight on the top-10 sectors, we are seeing some selling in the consumer staples and technology groups, with the latter likely the case of profit taking following the run-up, which, as noted, saw the NASDAQ recently climb above 7,000 in intra-day trading. Conversely, we are seeing some modest buying in the basic materials and industrial sectors, with the weaker U.S. dollar, on the forthcoming likelihood of tax reform, helping some of the commodities. A weaker greenback typically helps demand for commodities, as they are priced in U.S. dollars.

Meantime, we did get some news from the business beat, but that report is being overshadowed by the dealings on Capitol Hill. Specifically, the National Association of Realtors reported that existing home sales rose 5.6%, to a seasonally adjusted annual rate of 5.81 million units, in November. It was the fastest pace in nearly 11 years, when properties sold came in at annual pace of 6.42 million in December 2006. The vibrant demand for housing is a sign of further strengthening in the economy after a steady, eight-year expansion. In general, there are signs that the younger millennial generation is now in the market for a home. This, along with an abnormally low supply (roughly 3.4 months), is helping keep home prices on the upswing, rising 5.8% year over year in November. The homebuilding stocks were little changed on the report.

Looking ahead to the second half of the session, trading is likely to be guided by the dealings from Washington D.C. The big question investors face right now is will the likely passage of the most sweeping tax reform bill in decades fuel a further Santa Claus rally on Wall Street as we head toward Christmas or will it be the case of buy the rumor, sell the news. Given how Corporate America and Wall Street will likely benefit from the tax system overhaul, we would have to lean toward the former at this time. 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.


Before The Bell - Although the stock market continues to be heavily influenced by the course of the tax reform effort, and the outlook there remains upbeat for full Congressional passage this week, there also are other things to consider. And yesterday morning, it was a selloff in the technology group. Specifically, there was a downgrading of the shares of tech icon Apple Inc. (AAPL - Free Apple Stock Report) weighing on the minds of traders. So, as that market leader headed modestly lower on a brokerage house expression of caution--as the rating on the stock was lowered from buy to neutral--technology, in general, weakened. 

This downturn in tech, which helped to send the entire market moderately lower, followed a somewhat higher open on the day as investors looked ahead to a Congressional vote on the tax bill. Highlighting the tax package is a proposed cut in the corporate rate from 35% to 21%. The lowering in the headline tax rate should help prop up the bottom lines of most companies. The average company, based on current rates, pays roughly 27% of its income to the federal government. Still, such potential good news aside, some profit taking emerged within the first hour and a half of market action.   

Meantime, in other market moving news, the government reported that housing starts increased by 3.3% to an annual rate of 1.297 million homes in November. That was modestly above the forecast number of 1.250 million housing units. Also, building permits, a more forward-looking metric, came in at a seasonally adjusted annual rate of 1.298 million homes. That, however, was a tad below the prior-month tally. Overall, the housing trend remains quite constructive, and such resiliency should help the aggregate economy going forward. Data on sales of existing homes are due out later this morning.

Following the lower first half of the trading session yesterday, which saw the market head into the noon hour holding respective losses of some 45 points in the Dow Jones Industrials and 30 points in the tech-driven NASDAQ, with weakness most apparent in the technology and utility sectors, six of the 10 leading groups were trading lower at that time. In all, losing stocks held about a three-to-two lead on gaining issues on the Big Board as we hit the half-way mark of the session. Meanwhile, there was little change as we began the afternoon trading, with the losses continuing at first.        

However, as we moved more deeply into the afternoon, the losses appeared for a time to ease, with the Dow almost getting back to breakeven. Still, as we moved inside the final two hours of the session, the market was still positioned for a moderately lower day. Then, as we headed down the stretch, the House of Representatives voted to pass the first major overhaul of the American tax code in some three decades. The GOP was rushing ahead to pass the reform measure before yearend, in spite of the unpopularity of its main features according to most polls. The Senate voted for the measure in the evening.   

Following passage by the House in the afternoon (a second vote will be needed, later today, as the aforementioned vote did not comply with Senate rules), the stock market fell somewhat lower on interest rate concerns, finally ending the choppy session with the Dow giving back a modest 37 points. Losses of 31 points in the NASDAQ and nine points in the S&P 500 Index rounded out the large-cap picture. Now, with the quest nearly completed, we shall see if the tax-related surge will continue.

Meanwhile, following this generally lower session stateside, we see that stocks in Asia were weaker overnight, while in Europe, the leading bourses are moving downward, as well, at this hour. In addition, oil is higher and interest rates, up strongly yesterday, are moving a tad lower. Finally, U.S. equity futures are heading higher at this hour.   - Harvey S. Katz, CFA 

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