After The Close - The futures markets started higher today, as news broke late last night that the U.S. Congress reached a tentative deal on funding for the budget that would avoid another government shutdown. A positive reaction to this story caused the market to trade much higher in the early portion of the day. The move then accelerated, as hope increased about the possibility for a trade deal between the U.S. and China. The Dow Jones Industrial Average climbed by more than 400 points at its apex, while the other indices followed suit. However, momentum petered out near the end of the day, causing the final hours of the session to be marked by sideways action. All told, the Dow wound up higher by 373 points, the NASDAQ gained 107 points, and the S&P 500 rose by 35 points, and notched its first close above the 200-day simple moving average since December 3, 2018.
Additionally, market breadth was very positive, as advancers outpaced decliners by a 3.2-to-1.0 ratio. Materials stocks were among the best performers on the day, while real estate investment trusts were among the weakest. These were likely impacted by higher yields.
In commodity news, oil prices rose today, as Saudi Arabia plans on making deeper March supply cuts than originally expected. In addition, bond yields rose today, as a flight from the safe-haven asset occurred. Too, the yield curve steepened a bit, which augurs well for financials. Meantime, the VIX Volatility Index fell today, as demand for option protection was lower.
Looking ahead, tomorrow will be full of economic news, including the Energy Information Administration’s weekly status report on oil inventories. Too, some inflation data will be released via the Consumer Price Index. This will likely be an important data point for the U.S. Federal Reserve when making interest-rate policy. Meantime, earnings season is winding down. Dow component Cisco (CSCO – Free Cisco Stock Report) issued earnings after the closing bell, along with several other companies. - John E. Seibert III
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before The Bell - The stock market, sensing some possible optimism on the global trade side, moved into the first part of yesterday's session on a nice up note, with the Dow Jones Industrial Average quickly gaining 90 points. This move came after some Administration officials suggested that high-level talks between the President and his counterpart in China, thought earlier to be off, could still take place by the middle of next month. But, as of this writing, no firm plans had yet been put into effect.
As such, perhaps, the market soon started to backtrack somewhat after that moderately faster start, so that after 90 minutes, or so, of the trading day had passed, the Dow had fallen into negative territory. However, the descent never became significant, with the low point, reached in mid-afternoon, falling just shy of 100 points in that index. Overall, the Dow moved back and forth in jagged fashion, with a modicum of buying into the close enabling the 30-stock composite to finally close off by 53 points.
The S&P 500 Index followed a similar script, but that more broadly configured composite, unlike the Dow, would spend the majority of the session in the green, ambling into negative territory on just a few occasions, and then not very convincingly. General uncertainty on the trade front, amidst some mild optimism about a possible meeting between the respective heads of state in our country and China contributed heavily to the in-and-out trend seen yesterday in this core index. In the end, the S&P would rise a scant two points.
As for the NASDAQ, it too would follow a choppy path, but also stay on the plus side of the ledger for just about the entire session on some firmness in technology. In the end, it would conclude 10 points higher. So, overall, it was a day for little more than marking time, ahead of further earnings reports and this Friday's deadline to reach a permanent budget accord before a possible second government shutdown ensues. Encouragingly, after the close of trading, the two sides indicated that they had reached a tentative deal.
Looking at the day in summation, it was a mixed opening to the trading week, with the big item, uneasiness and some cautious optimism about the trade standoff with China. To a lesser degree, there were concerns regarding the Friday budget deadline. Given all this, we sense that Wall Street acquitted itself rather well. As to China, there is some optimism that the economic travails taking place in the world's second largest economy could help get that nation to the negotiating table in a serious manner. We shall see.
Looking ahead to as new day now, and casting our eyes overseas, we see that stocks were strongly higher. In Asia in the overnight hours on optimism about a U.S. budget deal, while in Europe, the major bourses are trending nicely upward, as well at this hour. Elsewhere, oil prices are climbing on possible OPEC output curbs, and Treasury yields, which closed at 2.66% on the 10-year note yesterday, are now at 2.69%. Finally, the U.S. equity futures are now pointing to a much higher opening when trading resumes later this morning on that possible budget deal. – Harvey S. Katz, CFA