After The Close - The major U.S. equity indexes spent the entirety of today’s session in the green, with stocks turning sharply higher in the afternoon.
On the economic front, the day got off to a less-than-auspicious start when the National Association of Realtors announced that pending home sales were down 2.2% in December. Last month’s reading was down 9.8% from the year before, and was the 12th-straight month of year-over-year declines. The drop was attributed to lower consumer confidence in the wake of the stock market’s late 2018 swoon, record high home prices, and rising mortgage rates.
This news was counterbalanced somewhat by ADPs report showing that 213,000 nonfarm private sector jobs were added in January, coming in above consensus estimates. Most of the gains (68%) came from the service sector, with notable increases in healthcare/social assistance and leisure/hospitality.
However, although fourth-quarter earnings season remains in full swing, the big news for investors came from the Federal Reserve. In addition to leaving interest rates unchanged, the lead bank indicated that it would be patient regarding future adjustments to the fed funds target rate. Furthermore, in light of recent economic and financial developments, it was suggested that the Fed may wind down the runoff of securities from its balance sheet.
At the closing bell, the 30-stock Dow Jones Industrial Average was up 435 points (1.8%) while the broader S&P 500 was ahead by 41 (1.6%). The tech-heavy NASDAQ fared the best of the lot, gaining 155 points on the session, or 2.2%. Most of the major market sectors ended the day in positive territory, led by technology stocks (+2.8%) and basic materials (2%). Telecommunications was the only segment in the red, shedding about one-quarter of a percentage point. Altogether, advancing issues outpaced declining stocks by nearly four-to-one on the NYSE.
Elsewhere, oil prices also had a strong day. Light sweet crude advanced 1.8%, to around $54.25 a barrel, making for a 20% gain over the past month. Meanwhile, trading was more mixed on the European bourses today. Britain’s FTSE 100 led the pack with a gain of 1.6%, while France’s CAC-40 wasn’t too far behind with an advance of just under 1%. Germany’s DAX bucked the trend, however, shedding one-third of a percent. - 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 - Wall Street's recently resurgent bulls attempted to fashion a Monday-Tuesday reversal yesterday following a moderate stock market setback to begin the week on Monday. And, for a few minutes, it looked as if this attempt to rally the market would be successful, as the Dow Jones Industrial Average, the S&P 500 Index, the NASDAQ, the S&P Mid-Cap 400, and the small-cap Russell 2000 all advanced after the opening bell was sounded. But that upbeat mood lasted just a few minutes. In fact, as we passed the half hour mark of trading, the large-cap composites had all fallen into negative territory.
As for the market, it seemed to be a tradeoff between optimism on earnings and some caution on trade talks with China and fears that the attempt to stave off a second government standoff, once the three-week truce concludes, could be at hand again, balanced out by overall optimism on corporate earnings. Then, as the morning rolled on, the Dow re-emerged on the winning side with a solid move into positive territory, which brought that 30-stock index into the winning column by some 100 points. From there, the market did some backing and filling as the morning ended, but with the Dow straying positive throughout.
Meanwhile, as the day progressed, the big story remained corporate earnings. This is the biggest week for such tidings, and as of this writing, more than 70% of the companies that have reported their quarterly results have beaten bottom-line expectations. So, for the most part, earnings are being supportive, although there have been some high-profile misses, to date. Of course, there are other things going on that are affecting market sentiment, most notably the hoped-for U.S.-China trade deal. Things there are continuing to go slowly, and that could well remain the case going forward.
As to other news, the Federal Reserve began its two-day FOMC meeting yesterday, amid general expectations that the bank will leave interest rates unchanged at this time. The meeting will end this afternoon with a Fed announcement. Also buttressing the case for no rate hike at this time is the fact that business data from overseas continues to be very week. Also, as to the economy, the Conference Board issued its monthly reading on consumer confidence yesterday and learned that this gauge of sentiment had fallen for the third month is a row, going from 124.9 to 120.2.
The market's choppiness would then continue into and through the afternoon, so that as the session moved to its end, the Dow, after some anxious moments, would retain its green arrows, closing up 52 points, while small losses would be tallied by the S&P 500 Index (off four points) and the NASDAQ (down 57 points). The smaller indexes would change little, while data would show that gaining stocks held a moderate lead over declining issues on the Big Board. All of this was ahead of a big earnings and economic report day. Further, the Fed will conclude its latest FOMC meeting.
Now that new day has begun, and we see that stocks were mixed in Asia overnight, while in Europe, the bourses are trading with early gains for the most part. Also, oil prices, up yesterday, are climbing again so far this morning and Treasury note yields, off yesterday, are edging higher at this time. Finally, along with many earnings reports, key economic issuances, and the Fed announcement, the U.S. equity futures are suggesting a nicely higher market opening this morning. - Harvey S. Katz, CFA