After The Close - The major U.S. indexes were uniformly strong on Monday, carrying over Friday’s bullishness into the new week. The Dow Jones Industrial Average was the strongest of the bunch, adding as much as 400 points during the bell-to-bell rally. Cisco Systems (CSCO - Free Cisco Stock Report) and 3M Company (MMM - Free 3M Stock Report) led the way for the blue chips, while the S&P 500 and the NASDAQ both benefited from strength in the technology sector. In fact, only utilities stocks failed to register and aggregate gain. Market breadth favored advancing shares by a nearly two-to-one margin, while volatility lowered to pre-correction levels.
The aforementioned technology sector was particularly strong today, gaining over 1% in composite market value. The so-called FAANG group of equities – Facebook (FB), Apple (AAPL- Free Apple Stock Report), Amazon.com (AMZN), Netflix (NFLX), and Alphabet (GOOG) – were all strong in trading today, with each of them erasing the losses of early February’s modest market correction. The industrial and healthcare groupings were two other groupings that led Monday’s charge.
Meanwhile, U.S. crude oil also enjoyed a solid run-up today. Strong demand trends and positive developments overseas both supported the commodity, which rose to a three-week high during the session. Specifically, Saudi Arabia indicated it would continue to limit drilling in accordance with OPEC’s efforts. This, coupled with some cautious optimism from last week’s domestic inventory report, worked to maintain bullishness in this market.
Looking forward, investors will likely focus again on interest rates in the next few days. With new Federal Reserve Chair Jerome Powell set to deliver remarks to Congress on Tuesday, the central bank’s future monetary outlook will play a role in how the indexes perform for the rest of the week. At the same time, earnings season will wrap up next week, so the slew of corporate data will also be closely watched. – Robert Harrington
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before The Bell - A feverish spate of buying on Wall Street on the final day of the abbreviated trading week helped push the major market averages into positive territory for the four-day stretch. (The U.S. equity and bond markets were closed last Monday in observance of President’s Day.) Indeed, the Dow Jones Industrial Average, the NASDAQ, and the S&P 500 Index posted respective outsized gains of 348, 127, and 43 points. Friday’s bullish showing resulted in rallies of 0.4%, 1.4%, and 0.5%, respectively, for the aforementioned indexes.
The buying was broadbased on Friday and considerable into the closing bell. All total, advancing issues led decliners by a whopping margin on both the New York Stock Exchange and the NASDAQ, to the respective tunes of more than four to one on the Big Board and almost three to one on the NASDAQ. From a sector perspective, all 10 major equity groups finished well into positive territory, with the leadership coming from the technology, energy, and utilities sectors. It also should be noted that an amount of nervousness in the market again subsided, with the S&P 500 Volatility Index (or VIX) down roughly 15% over the four-day stretch.
Although inflation concerns—and higher bond yields—remain at the forefront of the investment community’s focus, some other encouraging signs helped the market late in the week. Among the positive developments were continued strong reports from Corporate America and encouraging data on the U.S. economy. On the earnings front, investors reacted positively last week to strong quarterly results from The Home Depot (HD – Free Home Depot Stock Report) and Hewlett Packard Enterprise (HPE), with the latter coming on Friday. There also is an overwhelming sense that the next few earnings seasons are likely to be strong ones for Corporate America, helped by the recently enacted tax legislation.
Looking at the week at hand, it will be a very busy one for the business beat, with a number of important reports on the economy due over the next five days, including the latest reading on new home sales at 10:00 A.M. EST this morning. Other notable reports this week include the latest data on consumer confidence, personal income and spending, durable goods orders, and manufacturing activity. We will also get a revision on fourth-quarter GDP on Wednesday morning.
But, perhaps the biggest event for Wall Street will occur tomorrow morning at 10:00 A.M. EST when new Fed Chair Jerome Powell gives his first prepared remarks to Congress. The market will be watching his testimony very closely for more clues about how the central bank plans to tackle the recent uptick in inflation. Last week, the minutes from the last FOMC meeting showed that the Fed may be a bit less hawkish this year than many pundits were expecting. The consensus right now with regard to the Fed’s monetary policy course seems to vary a bit, which has played a big hand in the volatility we saw in the equity market this month. Investors also should note that Fed President James Bullard is speaking right now, and his recent remarks have had an impact on trading; Mr. Bullard has taken a more dovish stance than some of his Fed peers in recent weeks.
With less than an hour to go before the commencement of the new trading week stateside, the futures are indicating a nicely higher opening for the U.S. equity market. So far today, trading overseas has been bullish, with the main indexes in Asian finishing in the black overnight and the major European bourses trading in positive territory right. The bulls look to be in good shape to today. Investors should note that bond yields are down again today, and the Russell 2000 futures are leading the charge higher in pre-market actions, which augurs well for the continued rally on Wall Street, as the small-cap stocks tend to provide direction for the market. Stay tuned. - William G. Ferguson