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After The Close - After posting selective gains through most of the morning hours, the market adopted a negative tone during the second half of Tuesday’s trading. The primary factor at play remains the Senate’s recently approved tax reform bill, which sent the Dow and S&P 500 to all-time highs early in the week. Since yesterday’s opening bell, however, investors appear to be taking advantage of the elevated valuations as the specifics of the proposal are digested.

The sellers were likely emboldened by today’s economic releases on the national trade deficit and the ISM non-manufacturing index, which were both considered somewhat disappointing. Traders will look for relief on Wednesday when the revised third-quarter productivity report and a monthly employment reading from Automatic Data Processing (ADP) are published. Looking at the sectors, a rebound by technology equities was offset by aggregate losses in the other nine major industry groupings. Basic materials, industrials, and utilities sectors recorded the widest deficits today.

Meanwhile, U.S. crude oil registered a modest $0.15 per-barrel gain today. Investors expect a decrease in domestic inventory levels when that report is released after the closing bell. The update from American Petroleum Institute (API) is likely to reveal a 3.5 million barrel drop from last week’s tally, while government data will be released mid-morning tomorrow. With likely-favorable global demand trends in 2018, we could see domestic crude rise above $60 a barrel (it finished today at $57.63) in the first half of 2018.

In the final hour of the session, the NASDAQ toggled between positive and negative territory while the Dow and S&P 500 both remained well below their breakeven lines. Market breadth favored declining shares by a 1.7-to-1.0 margin, underscoring the negative tone particularly among small-cap equities. The bulls will look to regain momentum tomorrow, though we expect to see a similar tug-of-war occurring as the investors continues to assess the potential impact of the proposed tax reform measure. – Robert Harrington

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

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12:15 PM EST - The stock market is making selective progress today. At roughly noon in New York, the major averages are mixed. The Dow Jones Industrial Average, which is somewhat weak, is off 34 points; the broader S&P 500 Index is up two points; and the NASDAQ is higher by 35 points. There are some pockets of softness in the market today, as declining issues are just ahead of advancers on the NYSE and the NASDAQ. Further, the major equity sectors are quite divided. Specifically, the technology stocks are forging ahead, and the financial issues are also advancing. In contrast, the utilities and basic materials issues are quite weak today.

Traders received a few economic news items this morning. Of note, the nation’s trade deficit came in at $48.7 billion for the month of October. This month’s deficit was somewhat wider than the September figure, and also weaker than had been anticipated. Further, the ISM Non-manufacturing Index for the month of November came in at 57.4, which was slightly lower than analysts had expected. Tomorrow we will get a look at latest monthly employment figure from Automatic Data Processing (ADP), as well as the revised third-quarter productivity report.

Meanwhile, a couple of corporations posted their financial reports over the past 24 hours. Specifically, shares of Toll Brothers (TOL) are trading lower, after the home builder posted weak results and provided an unimpressive outlook. In contrast, shares of AutoZone (AZO) are up sharply in response to a better-than-anticipated release.  

Technically, the stock market continues to press ahead, as the year draws to a close. However, with valuations already elevated, a sizable holiday rally may be hard for the bulls to deliver. - Adam Rosner

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 celebrated last Friday night's passage of the tax reform bill with a booming and, at first, very inclusive rally yesterday morning. On point, after the Senate passed its version of tax reform (a joint House-Senate versions must still be formulated and approved before it will be submitted to the President for signing), stocks soared anew at the open, with the Dow Jones Industrial Average jumping by just over 300 points on strength in the industrial stocks. The other indexes climbed initially, as well, in a broad-based early rally.

In addition to corporate tax relief--a reduction in the stated rate from 35% to 20% is the cornerstone of this major reform package--the market's bulls also were celebrating merger news. Specifically, the Dow Industrials also were helped by news that 21st Century Fox (FOXA) has reportedly revived talks to sell part of its business to Walt Disney (DIS - Free Disney Stock Report). Both stocks surged ahead at the open, with Disney, a member of the blue-chip composite, jumping at one point by more than $7.00 a share.

However, as the tax bill is mainly of assistance to the industrial companies on the corporate side and less to the technology group, the Dow continued to press notably higher, while the NASDAQ gave up its gain and fell into the red by late morning. In all, as the morning ended, the Dow had retained some 70% of its best advance, rising by 210 points, but the NASDAQ, dominated as it is by tech stocks, had given back some 20 points, after having once been off by nearly 50 points. 

Meanwhile, one concern for corporations is that there is some talk of making the tax cut 22%--not 20%. In fact, as some profit models have already factored in the lower rate in their forecasts, there was some uneasiness if the higher rate were to be adopted. For now, though, that is just a talking point. Breaking the day's action down at that time, advancing stocks were ahead of declining stocks by just over two-to-one, while seven of the ten major equity were higher on the day, at that point.   

This split between the Dow and the other key indexes then continued as the afternoon got under way. At first, the Dow retained a strong gain in the range of 150-200 points, while the NASDAQ remained modestly in the red. This pattern would continue until we moved inside the final half hour of trading. At that point, the split widened, with the S&P 500 Index and the small-cap Russell 2000 both turning lower. Then, the NASDAQ plunged as we moved into the close, while much of the Dow's gain withered away.    

As the bell sounded, the leading averages were all at their nadir for the day, with the Dow, once up by better than 300 points, ending ahead by a mere 58 points. However, it was the NASDAQ that held the headlines, plummeting by 72 points. Meanwhile, gaining and losing stocks were about even on the NYSE. Losing stocks were ahead of gaining issues on the NASDAQ. Also, while six of the top ten groups ended higher on the session, two of the groups that fell, technology and health care, tumbled by well over one percent.

Looking out at the start of a new day, we see that after a mixed-to-lower close in New York yesterday that stocks traded lower in Asia overnight, while in Europe so far this morning, the key bourses are tracking downward, as well, at this time. Also, oil prices are down so far, while interest rates are largely mixed. Finally, U.S. equity futures are moving in an uneven fashion at this hour, with the Dow again suggesting some strength.   - Harvey S. Katz, CFA 

At the time of this article’s writing, the author held positions in one or more of the companies mentioned.