After The Close - The major U.S. stock indexes started the first session of the new year on an up note and, for the most part, added to those early gains.
The news was light on the economic front today, but things will pick up later in the week with the Institute for Supply Management’s latest Purchasing Manager’s Indexes for the manufacturing and services sectors and the FOMC’s December meeting minutes due out tomorrow, followed by U.S. non-farm payrolls on Friday.
As for today, with volume well below the average over the last 10 seasonally-slow sessions, one should not read too much into the market’s performance. Yet, a solid showing it was. At the closing bell, the 30-stock Dow Jones Industrial Average held a gain of 105 points, or a little less than half a percent. At its peak in the opening minutes, though, the index had jumped out of the gate with a 145-point advance. The broader S&P 500 fared a bit better, inching up throughout the session to close ahead by 22 points, or a bit over three-quarters of a percent. The tech-heavy NASDAQ, meanwhile, took the gold for the day, gaining 103 points or 1.5%. Among the 10 major market sectors, half posted gains in excess of 1.0%, led by basic materials (up 2.3%) and energy stocks (+2.1%). At the other end of the spectrum, utilities started the year in the doghouse, with a loss of over half a percentage point. Consumer noncyclicals were modestly negative. Elsewhere, oil prices were little changed, with light sweet crude holding on above the $60-a-barrel mark, its highest point in over two years.
Trading was less upbeat on the European bourses today, as strength in the euro and British pound weighed on equities. Both the U.K. FTSE and France’s CAC-40 lost about half a percentage point on the session, while Germany’s DAX fared fractionally better. – Mario Ferro
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 closed out a stellar 2017 on a down note, as brisk selling surfaced in the final few minutes of the session, taking what had been a slightly lower performance into a full-fledged setback. In all, the late downdraft caused the Dow Jones Industrial Average to suffer a 118-point setback. Meanwhile, the NASDAQ fell 47 points, or nearly two-thirds of a percentage point. Losses also were tabulated by the S&P 500 Index, the S&P 400 Composite, and the Russell 2000. It was a ho-hum way to end a big year for those long equities.
As to 2017, it most assuredly was a great year for the bulls. To wit, the Dow surged 25%; the S&P 500 Index rose 19%; the NASDAQ and the NASDAQ 100 jumped 28% and 32%, respectively, and the Russell 2000 added 13% in what was an inclusive buying campaign driven by optimism about lower taxes, a buoyant economy, and a Federal Reserve that seems dedicated to just a gradual monetary tightening program. Now, the test will be whether this clearly pricey stock market can sustain its recent gains and perhaps build upon them.
That could well happen. But with a market P/E of a little more than 20, things will need to go right for the market to build impressively on this past year's gains. Meantime, Friday's session, which had been indecisive until near the close, wound up lower, with bank and health care stocks leading the way down, along with the energy issues. Even with this late dip, which could be ascribed to little more than profit taking, Wall Street closed out on its best year since 2013. Now, the challenge will be to fashion an encore.
Now, though, we shall see if last year's big finish--the market was higher for each of the year's final six weeks--will carry over into the new year and month. In Wall Street's favor, as far as the bulls are concerned, was the rising price of oil, the strengthening in the U.S. economy, and the implementation of the new tax code. Arguing against an extension of the prior year's gains is the frothy multiples now in place and the likelihood that interest rates will rise further in the months to come.
As to the week ahead, it will be a data driven four days, with key reports out later this morning on manufacturing activity across the nation. Last Friday we saw a big report out of the Chicago area on industrial demand. Then, later in the week we will get surveys on non-manufacturing activity and on Friday, the U.S. Labor Department will post its December figures on the rate of job creation and, in a separate survey, the level of unemployment for the latest month. These reports, especially the one on non-farm payrolls, can be market movers.
First, though, a new year and a new month are beginning this morning across the globe. And on that count, stocks began the new year with selective gains across much of Asia. Meantime, on the Continent, Europe's bourses are so far tracking somewhat lower in the early going this morning. In other markets, oil is starting the year off slightly lower and Treasury yields are nominally higher in early dealings. Finally, U.S. equity futures are trending mixed-to-higher at this hour. - Harvey S. Katz, CFA