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After The Close - U.S. stock prices trended notably lower on Friday, wrapping up an eventful 2016 of trading with some profit taking ahead of the new year. Market breadth was mostly mixed through the midday hour in New York, before a late-in-the-day selloff saw decliners claim a more-than 1.5-to-1 edge over advancing stocks around 3 PM. The NASDAQ was the hardest hit by today’s downswing, as the tech-laden index was giving away a full percentage point at its intraday nadir. While the bulls showed brief signs of life, their efforts proved to be too little and too late to regain control from determined sellers.

Investors looking to celebrate Dow 20,000 will need to wait until 2017 to see that psychologically notable milestone achieved. The rally sparked in early November by the surprise election of Donald Trump seemed poised to drive the averages well past that threshold, but the setting of the benchmark has been delayed by a spate of selling this week. We do not think the pullback seen in recent days is reflective of an overarching change in trading sentiment. Rather, traders were looking to cash in some of their more profitable positions as the final closing bell of the year neared. This would help to explain the particularly steep decline seen today in the basic materials and consumer cyclicals sectors, which have been two of the strongest market performers since Mr. Trump claimed victory.

As for oil, U.S. crude prices per-barrel decreased slightly today, but still trade considerably higher than their year-ago level. In fact, oil prices posted their highest year-to-year gain since 2009, and have more-than doubled from the mid-February low. The primary reason for the turn in sentiment has been OPEC’s apparent success at enlisting most of the world’s producers to adhere to a six-month production limit. Should the cartel successfully oversee a sustained drilling reduction, the global inventory glut that has wreaked havoc on valuations ought to moderate enough to stabilize the market. Accordingly, the energy sector was a leading advancer on a full-year basis.

Taking score for the year, the Dow posted the widest gain amongst the major indices. The 2,613 point advance (15.2%) was aided in no small part by augmented economic enthusiasm in the final quarter. The S&P 500, meanwhile, finished the year 11.5% higher than where it opened, while the NASDAQ barely fell shy of a double-digit growth rate, at 9.2%.

We expect the bulls to awake early in 2017, likely helping the market make a definitive leap over the sentimental round figure. Thereafter, investors will likely begin reflecting on valuations and developing new positions. We believe investors will be eager to reassess their holdings in early 2017. President-elect Trump will assume the office on Friday, January 20th, at which point the traders will begin to look for some follow through on the his purportedly business-friendly policies. A promise to gradually tighten monetary policy will keep the spotlight on the Federal Reserve throughout the year, as interest-rate hikes are expected to be enacted at several points. As ever, stay tuned, and we wish our readers a happy and healthy new year. - 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 - The major averages are flat to moderately lower on the final trading day of the year, and relatively quiet overall. Heading into the noon hour on the East Coast, the Dow Jones Industrial Average is down seven points; the NASDAQ is off 28 points; and the S&P 500 is a few points lower.

Market breadth is mixed with the number of advancing issues outpacing decliners on the New York Stock Exchange, but more stocks falling than rising on the NASDAQ. Meantime, in an indication of the market’s recent strength, there are more stocks hitting fresh 52-week highs than lows.

The tone today seems to be more one of reflection on what occurred in 2016 rather than investors assertively taking new positions. Stocks have had a good run these past several weeks, and Wall Street may be content to ride those gains into next year. Then, too, many traders are taking off early for the holiday.

Although it looks as though the Dow Jones Industrial Average won’t attain the vaunted 20,000 mark this year, stocks still turned in a very respectable showing on an annualized basis. The energy sector led the way on the strength of a recovery in oil prices. After bottoming out briefly at around $26 a barrel in February, crude oil prices have more than doubled, to around $53.50 in NYMEX trading today.

The financial sector was another big winner, with prospects for less regulation, lower taxes, and wider lending margins through higher interest rates lifting sentiment toward bank stocks notably.

Price action across the stock market’s ten sectors is subdued today, though. This morning’s economic data did little to create much excitement. The Chicago PMI (purchasing managers’ index), came in below expectations at 54.6. A reading above 50.0 indicates expansion, but estimates were for 57.0, or about even with November’s strong 57.6 tally. Despite the slightly disappointing figure, there is optimism among manufacturers that the downturn in orders for drilling equipment since 2014 has run its course now that oil prices are holding above $50 a barrel.

Note: The stock market is open for a full day today so that investors wishing to make trades for tax purposes may do so. - Robert Mitkowski

At the time of this writing, the author did not have a position in any of the companies mentioned.

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Before The Bell - We have now reached the end of what has been a truly remarkable 2016, a year that saw a sharp stock market reversal in the early going, some welcome catch-up through the middle months, and a stellar close, especially following the surprise election triumph of Donald J. Trump in November. In all, the equity market goes into the final session of the year holding strong gains, which are all the more impressive given the historic bull market that proceeded this now-concluding year. To be sure, the much-hyped breakthrough of 20,000 on the Dow Jones Industrial Average did not occur, but that was one of the few barriers that was not surpassed.

As to the penultimate trading day of the year, the stock market, chafing from a steep selloff on Wednesday, stumbled a bit higher to start the session yesterday. But there was no buying conviction of note, so that by mid-morning, the sellers were out, although not with any enthusiasm. So, by the noon hour in New York, most of the averages were off modestly, with the Dow giving back about 20 points and with the NASDAQ some 15 points in the red. However, more of the 10 leading equity groups were higher on the day at that point than not, while gaining stocks held a narrow advantage over losing issues.

Meanwhile, things did not change all that much as the afternoon commenced, with the large-cap indexes still posting modest losses, while the smaller cap composites were dancing around the neutral line. It seemed that 20,000 on the Dow would remain an elusive target as the old year concluded. In truth, this is not such a critical event, as we are still close to that milestone, but there is some psychological importance attached to such large round numbers. In any event, getting there appeared unlikely in 2016 as the day wound down.

The same drumbeat of uneven pricing persisted into the middle part of the afternoon, as investors appeared to be checking out for the year. The financial sector was notably weak, with rather sizable retreats recorded by Dow components Goldman Sachs (GS - Free Goldman Sachs Stock Report) and JPMorgan Chase (JPM - Free JPMorgan Chase Stock Report). These have been among that index's major sources of strength the past two months, and some profit taking was only to be expected. Other, heretofore out-of-favor groups and individual, stocks have moved in to take their places on the upside of late.   
         
The market then continued to drift into the close, weighed down by selective profit taking, the absence of critical economic news, and a paucity of earnings data. So, there was little incentive to buy, or to sell, for that matter. It would seem that the stock market has more or less shut down for the year. In all, little changed down the stretch, and the leading large-cap indexes remained lower in unison. The small-cap Russell 2000 Composite held nominally in the win column, with a more substantial gain realized by the S&P Mid-Cap 400. Meantime, bonds gained, as Treasury yields fell.

In all, the Dow fell 14 points; the S&P 500 Index was off by less than a point; and the NASDAQ ended off by nine points. However, seven of the 10 leading equity groups ended higher, while gaining stocks on the Big Board held close to a three-to-two advantage on losing issues.

Meanwhile, looking out onto a new day now, we see that the leading indexes were little changed across Asia overnight, while in Europe so far this morning, the bourses are tracking a bit lower. However, our futures are suggesting a modestly higher open when trading resumes in less than an hour from now. Finally, bond yields are off a bit further as Wall Street moves to close the books on 2016.   - Harvey S. Katz

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