After The Close - The stock market started the new week on Wall Street with a constructive session. At the close of the day, the Dow Jones Industrial Average was ahead roughly 201 points; the S&P 500 Index was up 40 points; and the NASDAQ was higher by 150 points. Buying was widespread, with advancers easily outpacing decliners on the NYSE. All of the major equity sectors made progress, with the technology and basic materials issues leading the market higher.
Meanwhile, there were a couple of economic reports released this morning. Specifically, retail sales rose 0.2% during the month of January, which was a better-expected showing. In addition, business inventories increased 0.6% in December, which was also a constructive figure. Tomorrow, the February Consumer Price Index (CPI) will be reported.
In corporate news, shares of Boeing (BA – Free Boeing Stock Report) took a step back today. No doubt, the recent crash of two airliners created concerns for investors. The weakness in this key stock put considerable pressure on the Dow Jones Industrial Average earlier this morning. Meanwhile, in the technology space, shares of Nvidia (NVDA) marched higher today, after the semiconductor company announced that it will be buying Mellanox (MLNX) for nearly $7 billion. The purchase is expected to help Nvidia expand its data center business.
Technically, stocks softened during the first few trading days of March. However, today’s strong advance may signal that sentiment is turning positive again. Looking ahead, investors will likely want to see that trade negotiations between the United States and China are making progress. - Adam Rosner
At the time of this article’s writing, the author had a position in Nvidia (NVDA).
Before The Bell - The first full week of trading in March produced results that we had not seen since December; that was the bears holding the upper hand when the five-day stretch came to a close. Although the bulls did attempt a late-session rally on Friday it was not enough to overcome the notable selling early in the day. The losses during the week’s final session made it five consecutive down days for the Dow Jones Industrial Average, the NASDAQ, and the broader S&P 500 Index. It marked the first time since November 2016 that each of these three major averages finished in the red for five straight days. For the week, the respective indexes finished 2.2%, 2.5%, and 2.2% to the downside. Investors should note that the Dow 30 and the S&P 500 once again met resistance at their respective 26,000 and 2,800 levels, where the buying seems to stall.
Last week, the bears were emboldened by a number of events. At the start of the week, one would have thought that news that the United States and China may be inching closer to a resolution to their trade dispute would help stocks, but such tidings did not last for long when many pundits opined that the possible trade deal may not be all that big of a win for the United States. There were also some rumors later in the week that the two sides may be farther off to striking a deal that many thought entering the week. The trade news, coupled with some mostly uninspiring data of late on the U.S. economy and continued worries about a global economic slowdown, gave the bears some ammunition as the week progressed—and hence the spate of profit taking we saw on Wall Street. That said, the selling was pretty orderly and contained, and the volatility in the equity, as measured by the CBOE Volatility Index (or VIX), did not spike like we grew accustomed to seeing during the final quarter of 2018. That may be a sign that the bulls can quickly change the narrative if the news cooperates.
The big news on Friday came from the business beat. Before the market opened, the Department of Labor reported that nonfarm payrolls increased by an underwhelming 20,000 positions in February, far short of the consensus expectation and down significantly from the more than 300,000 pace recorded in the previous month. The unemployment rate narrowed to 3.8%. At first, the jobs data unnerved investors, as the report, along with weaker-than-expected reports over the last fortnight on manufacturing activity and housing starts, brought concerns that the domestic economy is slowing. And on point, the estimate for first-quarter GDP was revised lower, from nearly 2.0% to 1.1%. However, as trading progressed on Friday, the buying picked up, with sentiment growing that the weak monthly jobs report will probably keep the Federal Reserve from raising interest rates very much in 2019. Overall, equities tend to fare much better when the central bank is either cutting rates or taking a more dovish stance on future monetary policy. The lead bank’s more dovish remarks, including those of Fed Chairman Jerome Powell, since mid-December have been a big catalyst for stocks thus far in 2019, notwithstanding last’s week stretch of selling.
Turning to the week at hand, the investment community’s attention will likely continue to be on the trade and the business beat, especially with the record books on the fourth-quarter earnings season nearly closed. On the economic front, we will receive a number of important reports, including data on producer and consumer prices, consumer confidence, industrial production, and durable goods orders. And just moments ago, the Commerce Department in a report delayed by the recent government shutdown said that sales at U.S. retailers rebounded slightly in January, led by Internet stores and home centers, after the biggest decline in 10 years. Specifically, retail sales rose 0.2% in January; the expectation was for an increase of 0.1%. Investors also should note that the retail sales report for February is scheduled to be released this Friday. Meantime, the investment community will be keeping close tabs on the trade news. Our sense is that the final outcome on the trade negotiations will play on huge role in what direction the U.S. equity market heads this spring.
With less than a half hour to go before the commencement of the new trading week stateside, the equity futures are indicating a somewhat mixed opening for the U.S. stock market. The NASDAQ and S&P Index are set to open higher, but we are looking at a sizable drop for the Dow 30, mostly due to selling of shares of Boeing (BA – Free Boeing Stock Report). Over the weekend, reports surfaced of a deadly crash involving the aerospace giant’s 737 Max 8 aircraft in Ethiopia, the second fatal accident involving the aircraft in six months. China, Indonesia and Ethiopia have grounded their Boeing Co 737 MAX 8 fleets on Monday while an investigation into the deadly crash progresses. We expect this news to pressure many of the airline stocks during today’s session. Meantime, so far overseas, the performance has been positive for the international indexes. The main averages in Asia finished higher overnight, while the major European bourses are modestly in the black, as trading moves into the second half of the session on the Continent. The new week has also brought some M&A news, as reports surfaced that U.S. chipmaker NVIDIA (NVDA) plans to buy Israeli chip designer Mellanox Technologies (MLNX) for $6.8 billion, trumping rival Intel (INTC – Free Intel Stock Report) in a deal that would help the company boost its data center business. Stay tuned. - William G. Ferguson