After The Close - The stock market got off to a sluggish start this morning, but turned decidedly higher in the afternoon. At the end of trading, the Dow Jones Industrial Average was ahead about 175 points; the S&P 500 Index was up 18 points; and the NASDAQ was higher by 84 points. Market breadth was positive, with advancers comfortably ahead of decliners on the NYSE. The technology and consumer names led the market higher today, offsetting weakness in the healthcare and utility stocks.
It was a relatively light day for economic news. However, factory orders slipped 0.6% during the month of November, while a stronger showing had been anticipated. Tomorrow, the ISM Non-Manufacturing Index for the month of January will be released.
Meanwhile, the fourth-quarter earnings season continues to progress. This morning, we heard from Sysco Corp. (SYY). Shares of the food distributor traded higher in response to a respectable report. In addition, shares of The Clorox Co. (CLX) moved up after the consumer goods manufacturer posted encouraging results. In M&A news, shares of The Ultimate Software Group (ULTI) surged after the software provider agreed to be purchased by a private equity group.
Technically, the stock market continues to press ahead, as we enter the month of February. The fourth-quarter earnings season has been constructive, so far, and many investors may now be feeling a bit better about the corporate outlook for 2019. In addition, many on Wall Street may be hoping that trade relations between the U.S. and China will gradually improve. - Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before The Bell - It has been a tale of two cities for the U.S. equity market over the last two-plus months. Indeed, after a December that was not a very cheerful one for investors and a fourth-quarter performance that wreaked havoc on equities, the major U.S. equity indexes have rebounded nicely so far in 2019, helped by a very strong month of January, the best in 30 years.
Last week, stocks performed very well again, aided by a number of bullish events, including Friday’s impressive job creation figures (more below). The bulls also were emboldened by a Federal Reserve that has been more dovish than what many pundits would have expected in 2019 (the central bank kept interest rates steady at last week’s FOMC meeting); another round of strong earnings reports, including Friday’s quarterly figures from Exxon Mobil (XOM – Free Exxon Mobil Stock Report); healthy—and mostly supportive—U.S. economic data; and some optimism that the United states and China are making progress on their trade negotiations. On the latter front, President Trump’s top-economic adviser Larry Kudlow said that significant headway on a trade deal has been made, but still more work needs to be done. For the latest week, the Dow Jones Industrial Average, the tech-heavy NASDAQ, and the broader S&P 500 Index climbed 1.3%, 1.4%, and 1.6%, respectively.
On Friday, the trading session was driven mostly by news from the business and earnings beats. The data on the U.S. economy proved supportive, led by a strong labor report. Specifically, the nation added an impressive 304,000 nonfarm payrolls in January and hourly wages rose more than 3% versus the year-earlier period. It should be noted that the uptick in the average hourly wage would have prompted a sizable selloff in 2018, as it would have brought fears of inflation and thoughts that the central bank would be aggressive on the monetary policy front. However, those fears have eased recently, as the Federal Reserve has said that it plans to be more selective—and data driven—with regard to rate hikes this year. Likewise, the investment community greeted a strong rebound in manufacturing activity in January warmly. These solid readings on the health of the U.S. economy and the aforementioned supportive earnings news from Corporate America are helping equities. The Dow Jones Industrials gained 64 points and the broader S&P 500 Index eked out a small advance (up two points) on the week’s final session. But the NASDAQ finished modestly in the red, with the tech-heavy composite hurt by a weak showing from Amazon.com (AMZN) stock. That issue fell after the technology behemoth failed to impress investors with its latest quarterly report. Still, overall the fourth-quarter earnings results have proven mostly supportive for the U.S. stock market. That said …
The earnings news will start to slow down a bit in the week at hand. However, investors should note that the latest results from a large majority of companies are year-end figures, so the duration of the earnings season is longer than normal. This week will get quarterly results from one Dow-30 company when entertainment giant Walt Disney (DIS – Free Walt Disney Stock Report) announces after tomorrow’s closing bell. Investors also will be keeping their eyes on the latest quarterly figures from technology titan Alphabet (GOOG) this afternoon; the FANG companies have delivered mixed results so far this go around. On the business beat, we will get data on nonmanufacturing activity and the trade gap, (Investors should note that the first reading on fourth-quarter 2018 GDP, which was scheduled to be released last Thursday, was delayed due to the recent government shutdown and no date has been provided as to when the report will be finally released.) Meantime, other events that may have an impact on the equity market this week include the ongoing trade discussions between the world’s two-largest economies, Federal Reserve Chairman Jerome Powell’s prepared remarks on monetary policy, and President Trump’s State of the Union Address on Tuesday evening. The President and his Democratic counterparts face another deadline (February 15th) to reach a budget deal and avoid the government from shutting down again. These events will play on big role in what the first full trading week of February has in store for traders.
With less than an hour to go before the commencement of the new trading week stateside, the equity futures are pointing to a relatively flat opening for the U.S. stock market. So far overseas, the trading has been mixed. The main indexes in Asia finished higher overnight, but the major European bourses are nominally in the red as trading moves into the second half of the session on the Continent. Stay tuned. – William G. Ferguson