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After The Close - The major U.S. indexes were up-and-down early on Wednesday, before each settled into range-bound paths that persisted through most of the final hours. The NASDAQ 100 continued to recover from its trying open to the week and outperformed its blue chip and broad-based counterparts. The Dow struggled to remain above its breakeven line and saw more selling pressure in the final hour of trading. The S&P 500 was a little more resilient, while the small-cap Russell 2000 traded firmly in the red for most of the day.

Overall, the bulls appear to have ceded some control in recent sessions as opportunistic sellers collect profits from the historic valuations. The market sectors revealed a similarly mixed tone today. Energy, basic materials, and cyclical goods were the biggest laggards. Technology, yesterday’s lone advancing sector, was joined by noncyclical consumer goods, industrials, and utilities in positive territory today. Generally speaking, with large-cap equities performing well, the negative market breadth could be mostly attributed to softness in small-cap trading.

Some auspicious updates on the economy were published today, including revised productivity data from the Labor Department that showed not only higher output, but lower unit labor costs. Also, Automatic Data Processing’s (ADP) private-sector jobs report revealed the United States added 190,000 jobs in November. Friday morning’s nonfarm payroll update from the Labor Department is expected to echo that rate of growth. That release, as well as next week’s likely interest-rate hike by the Federal Reserve, will be the biggest influences on the market from the business beat over the next several weeks.

Meanwhile, U.S. crude oil slipped nearly 3% lower after a sharp increase in domestic refined gasoline stockpiles offset reductions elsewhere. This may suggest an easing demand environment. Crude production set a weekly production record, according to the Energy Information Administration’s report, while inventories declined 5.6 million barrels. The closure of South Dakota’s Keystone pipeline was the cause for the lion’s share of the drop. Still, given the elevated per-barrel valuations, crude is prone to experience occasional bouts of selling. For now, the outlook for the commodity market remains bullish.

Late-in-the-day selling pared the gains of the NASDAQ. The S&P 500 finished the day roughly even, while the Dow ended the session 40 points lower after its final-hour decline. We would not be surprised to see a similar back-and-forth pattern to persist tomorrow as the market assesses the prospects for tax reform, as well as several other political and economic factors. Stay tuned. – 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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12:00 PM EST - Stocks are little changed around the noon hour on the East Coast following a three-day slump in the S&P 500 and the NASDAQ (the Dow Jones Industrial Average bucked the trend with a 58-point gain on Monday).

Some profit taking is normal after the huge move stocks have made over the past year. It may almost be to some extent a case of ``buy on the rumor and sell on the news’’ with respect to the pending tax package on Capitol Hill.

Investors pretty much have gotten what was hoped for in the past year with a faster pace of economic growth, inroads to reduce regulation and, now, the prospect of lower corporate taxes is set to become a reality. Stocks could surge anew if the expected revision to the corporate tax rate turns out to be at the low end of the range of possibilities.

Meantime, the economy is also a focus, with Automatic Data Processing (ADP) today reporting that the United States gained 190,000 jobs in November. That is a similar figure to what the Labor Department is expected to report as the addition to nonfarm payrolls on Friday before the markets open.

Wall Street will be paying close attention to the jobs report at the end of the week, as well as to the Federal Reserve’s two-day policy meeting next week. The thinking is widely that the Fed will raise short-term interest rates one-quarter of a point, despite the lack of worrisome inflation.

This morning’s revised data from the Labor Department showed a nice rise in third-quarter productivity, but a surprising decline in unit labor costs. Rising wages are normally a sign of a trend toward higher inflation, but the lack of significant wage growth as unemployment has fallen has puzzled economists.

The bond market seems to be taking its cue from the lack of inflation, keeping long-term interest rates in check. A clear-cut move higher in bond yields might well pose a threat to stock prices, although that shift has not yet materialized.

In other markets, oil is trading lower by about $1.30 a barrel to around $56.30 on the NYMEX. Wednesday’s Department of Energy report showed a large buildup in gasoline and distillate inventories more than offset a decline in crude oil stocks. - Robert Mitkowski

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


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Before The Bell - Following Monday's up-and-down trading pattern and mixed finish, the bulls tried to get the ball rolling yesterday morning. And they did so to an extent early on, as the NASDAQ, a major casualty to start the week, began the latest session nicely to the upside, while the Dow Jones Industrial Average, which stormed to another record high on Monday, began yesterday's bull and bear fest in mixed fashion. However, as the morning moved along, the indexes started to strengthen in unison. In fact, as we reached the late stages of the morning, the Dow, the S&P 500, and the NASDAQ were all comfortably on the plus side of the ledger.  

Behind the better early showing was a rebound in technology, with several of the high-profile names that had been recent casualties leading the charge higher. Technology has been the leading performer this year, but had also lost about 4% in the past week. So, yesterday's initial spurt was clearly welcomed by the bulls. Meanwhile, posting mixed results yesterday morning were the financial stocks, which had been clear beneficiaries of the recent Senate passage of a tax reform effort, but were now seeing profit taking. The market, overall, has been celebrating the tax process, which must now be followed up by a compromise House-Senate bill.  

As to individual names, shares of McDonald's (MCD - Free McDonald's Stock Report) gained following some menu changes, notably bringing back the dollar menu. On the other hand, shares of Walt Disney (DIS - Free Disney Stock Report), up sharply on Monday, gave back about half that earlier gain, as the company and Twenty-First Century Fox (FOXA) seem to be negotiating the sale of some Fox assets to Disney. Elsewhere, more of the ten leading sectors were falling than advancing as we reached the early afternoon, while losing stocks held modest leads in both the Big Board and the NASDAQ. Stocks, in fact, seemed to be weakening anew at that time. 

In other news, on the economic beat, data issued yesterday morning showed that U.S. exports were basically flat in October, while imports jumped, thereby producing a widening trade deficit. A materially better result had been forecast. Also of note, a key survey issued at 10:00 AM (EST) yesterday morning showed that non-manufacturing activity had slowed its formidable rate of improvement a bit, with some deceleration in the growth of new orders, employment, deliveries, and prices. Still, the services sector, which this index measures, remains quite vibrant.

Meanwhile, these two surveys were just preludes to the week's most pivotal issuance, which will be out when the U.S. government releases its monthly report on non-farm payrolls on Friday. Expectations are that 190,000 new positions were added in November. In October, a big recovery was set in place as 261,000 jobs were added. Expectations also are that the unemployment rate will have held at a multi-year low of 4.1%. The jobs report is, as noted, critically looked at and can have a material effect on the financial markets. This release is especially timely as the Federal Reserve meets next week to decide on monetary policy.

Regarding the market, the slight weakness noted as the afternoon began increased notably as it moved along, so that as we neared the final hour of trading, the Dow was off by more than 80 points, while the other indexes, save for the NASDAQ, were moderately in the red as well. Also, the NASDAQ's gain, once more than 60 points, had been nearly wiped out. Things then worsened down the stretch, with the Dow moving to a triple-digit loss, for a time, while the NASDAQ turned lower, at last. But the worst casualties could be found in the small- and mid-cap indexes, especially the Russell 2000.  

The Dow then moved in and out of triple-digit loss territory as the session concluded, finally finishing with a deficit of 109 points. The S&P 500 surrendered 10 points; the NASDAQ dropped 13 points; the S&P Mid-Cap 400 shed 15 points; and the small-cap Russell 2000 tumbled 16 points or 1.0%. Elsewhere, losing stocks, once barely ahead of gaining issues fell behind by almost a two-one-count at the close on both the Big Board and the NADAQ, while among the 10 principal equity sectors, the lone gainer was technology. And even here, its winning edge dulled notably from early in the day.  

Looking ahead to a new day, and gazing out overseas, we see that the principal indexes were sharply lower in Asia in the overnight hours. Meanwhile, early action on the Continent is notably weaker, as well, while oil, a marginal gainer yesterday, is backtracking somewhat this morning; and bond yields, off in dealings yesterday, are trending lower so far today. Finally, the action in the U.S. equity futures is weaker, too, in the early going thus far this morning, with the most pronounced downturn in the NASDAQ futures.   - Harvey S. Katz, CFA 

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