After The Close - The stock market opened nicely higher, and managed to maintain much of its gains throughout the afternoon. Investors were likely feeling more optimistic about trade relations between the United States and China. The recent meeting between President Trump and China’s President Xi, was constructive and may well pave the way for further progress. At the close of trading, the Dow Jones Industrial Average was ahead 288 points; the broader S&P 500 Index was up 30 points; and the technology-heavy NASDAQ was higher by 111 points. Market breadth showed broad support for stocks, as advancers were well ahead of decliners on the NYSE. From a sector perspective, the energy and basic materials issues pressed higher, while the telecom names underperformed.
There were a few economic news items reported earlier today. Specifically, the ISM Index rose to a reading of 59.3 in the month of November, which was better than had been anticipated. Meanwhile construction spending declined by 0.1% in October, where a stronger showing had been expected. Looking ahead, the government will weigh in with its monthly jobs report at the end of the week. That report will be a widely watched by traders. Of note, the nation’s employment situation is one of the areas monitored by the Federal Reserve, as it looks to set its monetary policy.
In the corporate arena, it was a light day for earnings releases. However, there was some M&A news to report. Specifically, shares of TESARO (TSRO) surged in price, on reports that it would be acquired by GlaxoSmithKline (GSK).
In general, stocks have made considerable progress over the past few sessions. Today’s move higher puts the S&P 500 Index back above its 50-day moving average, a level closely watched by technicians.
From here, it remains to be seen if a holiday rally will materialize. – 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 - The name of the game on Wall Street for much of this fall season has been volatility. Indeed, investors enter each new trading week not knowing what to expect. One week the bears hold the upper hand, as we saw during the very disappointing Thanksgiving week. Then another five-day stretch is controlled by the bulls, which is what we saw last week. Our sense is that there are so many variables in play right now that can either roil or embolden investors, including the global economy, international trade disputes, Brexit, oil prices, inflation, and the Federal Reserve and, thus, the wide and at times quite pronounced swings in trading that we are seeing. And on point, the U.S. central bank drove trading last week, with comments from Federal Reserve Chairman Jerome Powell giving the bulls a shot in the arm.
For the most recent five-day stretch, the bulls held the strong upper hand, with the Dow Jones Industrial Average, the NASDAQ, and the S&P 500 Index rallying 5.2%, 5.6%, and 4.8%, respectively. The buying was broad based, with the small- and mid-cap sectors also rallying significantly. The main impetus behind the buying, which include outsized gains for the aforementioned indexes last Wednesday, was comments from Mr. Powell that were interpreted as being more dovish than expected. The prepared commentary raised sentiment that the Federal Reserve may not tighten the monetary reins in 2019 as much as initially expected. Hence, the sustained buying we saw last week on Wall Street, which included respective advances on Friday of 200, 57, and 22 points for the aforementioned averages.
On Friday, the major indexes were helped by mostly news on the international trade front. The day started with a joint press conference between the leader of the United States, Mexico, and Canada announcing the signing of a new trade accord between the three neighboring countries. The market also was emboldened by reports that the President Trump and China’s President Xi were making some progress in reaching a trade deal and ending the dispute between the world’s two-largest economies (see below). However, the trade relationship between these two super powers remains fluid and sentiment can change on a dime, hence the volatile performance we have seen at times, most notably over the last two months, since the tariff talk and subsequent implementation started in early March.
And with third-quarter earnings season now in the record books, we think that the focus of the investment community will be on international trade, oil, inflation (such worries have dissipated significantly in recent weeks), and the U.S. economy. On the latter front, we will get data this week on manufacturing and nonmanufacturing activity, the trade gap, and the much anticipated—and often market moving—report on employment and unemployment. We also will receive the Beige Book summation of current economic conditions from the Federal Reserve on Wednesday afternoon.
But with less than an hour to go before the commencement of the new trading stateside, the big story that will once again drive trading is international trade. The investment community is reacting positively to news from the G-20 summit that President Trump has agreed to delay new tariffs for 90 days as trade negotiations between the United States and China heat up. The United States had threatened to push ahead on January 1st with higher tariffs on $200 billion worth of China-produced goods. The news raised sentiment that a deal will eventually be reached, and the U.S. equity futures are pointing to a sharply higher opening for the U.S. stock market. Likewise, trading overseas (both in Asia and Europe) has been dominated by the bulls, with the major averages in China and Germany, two of the world’s biggest exporters, rallying significantly. Stay tuned. – William G. Ferguson