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After The Close - U.S. stock prices traded higher on Friday, a turnaround from the bearish market tone exhibited on Thursday. But the tentative path forged early yesterday trading gave way as we approached lunchtime in New York, when a broad-based rally began.  The run up persisted nearly uninterrupted, save for some short-lived profit-taking campaigns. In fact, the Dow Jones Industrial Average rose to within a fraction of a point from hitting 20,000, and came close on several occasions thereafter. The NASDAQ, which has flirted with its own milestone, set a new intraday trading high when it crossed the 5,500-point marker definitively in the early afternoon.

Having already parsed through private sector employment data yesterday, investors were mostly concerned with this morning’s nonfarm payroll update from the Labor Department. And while the addition of 156,000 jobs in December marked the 75th consecutive month of positive gains, the best streak on record, it was well below the expected tally (185,000). The 4.7% unemployment rate, meanwhile, was in line with expectations. But optimism stemming from an impressive hourly wage increase likely drove the mid-morning upturn, which catalyzed the impressive midday buying spree.

More important, this all likely serves to reaffirm the Federal Reserve’s plans for 2017. The central bank will attempt to tighten monetary policy by implementing three rate hikes during the year, with more likely to follow thereafter. The wage hike may underscore some inflationary pressure bubbling under the surface, which the interest rate increase aims to quell.

Though less fervent than in the immediate aftermath of November’s vote, the post-election rally continued to stoke optimism during today’s run up. President-elect Trump’s promised overhaul of the corporate tax code and regulatory environment, as well as his plan to boost national security and American infrastructure, has empowered bullish investors who foresee the economy growing under a more business-friendly Administration. Mr. Trump is set to be inaugurated in two weeks, after which traders will look for follow through on some of these plans as they appraise their anticipated impacts.

Elsewhere, oil prices held modestly higher for most of the day. But, concerns that adherence to OPEC’s production limit is wavering pulled per-barrel valuations down for the day. Some regions, like Iraq and its Kurdish state, are unlikely to oblige, which could lead to more problems in other areas. A strong dollar continues to temper the growth rate here, as well. Either of these two developments could undo some of the stabilizing measures undertaken in recent months, but investors appear to be cautiously optimistic that inventory levels will be successfully reduced by the accord.

Looking at the sector activity, the day was mostly mixed, with technology and industrials offsetting daylong weakness in the basic material and telecomm spaces. As the closing bell neared, market breadth was split, as a spate of selling among the small-cap offerings held back strength delivered by large-cap equities. The NASDAQ held firmly above 5,500, at about 5,521, while the Dow settled about 40 points shy of its milestone. That the Dow came so close to crossing that threshold underscores its psychological importance. We think the bulls will be keeping their champagne on ice over the weekend, before making another push at the barrier when the market opens on Monday morning. - Robert Harrington

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.


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12:10 PM EST - Stocks got off to a tentative start this morning, but have since firmed up quite a bit. As we entered the afternoon session in New York, the Dow Jones Industrial Average is up 68 points; the broader S&P 500 Index is ahead nine points; and the NASDAQ is higher by 36 points. Market breadth still shows a mixed session, with winners and losers about even on the NYSE. The sectors are divided, with strength in the technology and industrial issues, offset by weakness in the basic materials names.

Traders received a key economic report early this morning. According to the government, non-farm payrolls increased by 156,000 for the month of December. This showing fell short of last month’s number, and was also lower than had been anticipated. The headline unemployment rate edged up to 4.7%, just slightly higher than it had been. However, hourly wages moved up a bit during the month, possibly suggesting that inflationary pressures are building. While the report was a bit mixed, the Federal Reserve will probably continue on its current efforts to lift interest rates. Of note, the initial weakness in the market this morning may have reflected some of the uncertainties surrounding this issue. Elsewhere, the nation’s trade gap widened to $45.2 billion in November, and the monthly factory orders also were a bit disappointing.

In corporate news, a couple of companies delivered financial reports over the past 24 hours. Specifically, shares of The GAP (GPS) are trading higher after the apparel retailer posted stronger-than-anticipated holiday sales. This showing stands in contrast to some of the weakness recently displayed by other operators in this space. Elsewhere, shares of Ruby Tuesday (RT) are off sharply after the restaurant operator posted weak quarterly results.

Technically, stocks have encountered a bit of resistance lately. But, a pause here is understandable, and even healthy, given the strength we have seen over the past few months. - Adam Rosner

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.

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Before The Bell - After racing through the canyons of Wall Street on Tuesday and Wednesday, the bulls slowed their impressive advance notably early yesterday morning, as those optimists saw some initial incidental profit taking. As suggested, the pullback wasn't very sharp, with the Dow Jones Industrial Average, which ended Tuesday's session fewer than 60 points from the key psychologically level, off just modestly. Also, the NASDAQ was generally in the plus column throughout the early stages of the morning, while the S&P 500 Index was little changed.

As to the influences on trading, in addition to overdue profit taking after the recent run to higher ground, stocks were affected by a deluge of economic data issued either before trading began or early in the session. To wit, Automatic Data Processing (ADP) said private-sector employers added 153,000 jobs last month. That was well below the forecast of 170,000. Conversely, new jobless claims came in at 235,000 for the latest week. Expectations had been for 260,000. These items were, of course, a just prelude to the much more closely watched U.S. Labor Department jobs report just released (see below).         

Also, the Institute for Supply Management issued data, some 30 minutes into the trading day, in which its non-manufacturing index reported a result of 57.2 for the latest month. That figure was well above a neutral reading of 50.0 and the consensus estimate for December of 56.6. The November tally also had been 57.2. Thus, this key sector remains strong, as does manufacturing, figures for which had been issued on Tuesday by the ISM and had shown a solid month-to-month increase to close out the old year. Also, the dollar fell back for a second time in as many days.

Regarding the latest non-manufacturing report, notable strength was shown by new orders, which surged above 61, and by prices. However, employment, albeit growing, increased by less than in November. Still, these generally upbeat tidings aside, the market remained lower throughout the morning, deteriorating sharply as we approached the lunch hour on the East Coast. In fact, it then looked as though one more day would pass before the Dow could muster the strength to reach 20,000. And even the NASDAQ was turning lower at that time after earlier having been a strong outlier.

Among individual groups, the retailers were weak, with the shares of brick and mortar store chains Kohl's (KSS) and Macy's (M) falling sharply after each had reduced its 2016 profit forecast on Wednesday. In all, Kohl's stock was off almost 20% at midday on that lowered corporate outlook. Conversely, technology strengthened somewhat, which explains the relatively solid early showing by the NASDAQ. All told, though, except for some pockets of strength, the market was drifting lower as the first half of the trading day concluded.       

However, after the Dow had dropped by some 130 points around noon and the NASDAQ had fallen into the red by 15 points, or so, buying did resurface as the afternoon unfolded. And, indeed, the comeback was appreciable, if still partial. Even so, the Russell 2000 and the S&P Mid-Cap 400 Index remained off by almost a percentage point. Further, losing stocks on the Big Board held a three-to-two advantage on gaining issues in the mid-afternoon, although more of the 10 leading equity groups were then higher on the session than not.  

Meanwhile, little changed as the afternoon wound down and as Wall Street prepared for the just-issued jobs report, which saw the nation add 156,000 new positions in December. A materially greater increase of 185,000 jobs had been the forecast for the month. In November, there had been a 204,000 rise in non-farm payrolls; initially, the November tally had been given as 178,000. As to the jobless rate; in November, that statistic had fallen to a cyclical low of 4.6%. The December tally, expected to have risen to 4.7%, came in at that figure. 

Importantly, we think there was enough strength in the employment situation, even with the job creation miss, to likely persuade the Federal Reserve to raise interest rates later this month. Elsewhere in the report, we see that the labor-force participation rate held largely steady at 62.7%, which remains below an idyllic pace. Breaking the report down we see that job increases were tallied in health care, social assistance, food services, financial services, and in transportation. Encouragingly, jobs also rose last month in manufacturing, gaining 17,000 positions in all.

Returning to equities, the market closed on a mostly weaker note, if much less of one than earlier on, for Wall Street's first loss in three sessions this week, with the Dow ending off 43 points. Meanwhile, the NASDAQ closed up 11 points. Underscoring the weakness in the secondary issues, the Russell 2000 Index was lower by 16 points, or more than 1%, while losing issues held a lead on winning stocks on the NYSE. Finally, more of the 10 key sectors rose in price than fell on the day. Now, looking ahead to the new day after generally lower sessions overseas, our futures are suggesting a slightly weaker opening when trading resumes shortly.   - Harvey S. Katz 

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.