After The Close - Stocks closed the week higher on Friday despite some uninspiring economic data. At the end of the day, the Dow Jones Industrial Average gained 139 points; the NASDAQ pushed ahead 58 points; and the S&P climbed 13 points. Market breadth was clearly tilted to the upside, with advancing issues easily outpacing decliners on both the Big Board and the NASDAQ.
Investors continue to look on the bright side with respect to trade issues. There is ongoing optimism that an agreement can be reached between the U.S. and China that would lay the groundwork for fair trading relations and enable their respective economies to regain momentum.
Otherwise, this morning’s business data provided further indications of the somewhat slower times at hand. The Federal Reserve published figures that showed February Industrial Production inched ahead .1%, whereas a .4% gain had been the expectation. It seems that the auto sector did not recover as hoped. Meanwhile, capacity utilization edged lower.
The news was not all bad, though, as a consumer sentiment index rose. But the tone of recent data has broadly downshifted a notch, pushing the Federal Reserve to the sidelines.
Given less exciting prospects for first-quarter GDP, the yield on the 10-year Treasury note has fallen below 2.60%. Late in 2018, the 10-year T-note was yielding over 3.20%. (Yields on notes and bonds move inversely to prices.) Bond investors are plainly not banking on much inflation ahead.
Today’s market action saw strength in tech names, such as Apple (AAPL – Free Apple Stock Report). Apple put out an ad that emphasized its commitment to consumer privacy, perhaps partly to get ahead of any government regulations that could be forthcoming. The company may also be angling to get in on any new platforms, such as healthcare, that might come its way, provided adequate safeguards are in place.
One of the exceptions to the upswing in tech was Facebook (FB) shares, where the departure of a couple of top executives raised eyebrows.
Helping the Dow Industrials was a turnaround in Boeing (BA – Free Boeing Stock Report) stock. There was speculation that the beleaguered aerospace giant might have a software upgrade for its 737 MAX jet approved in a few weeks.
Overall, this week ended favorably for investors, although there are hurdles ahead in the form of first-quarter corporate earnings. Earnings season is about a month away. In the meantime, the optimism regarding a trade deal with China is carrying considerable weight. - Robert Mitkowski
At the time of this writing, the author did not have positions in any of the companies mentioned.
Before The Bell - Following a generally constructive first three trading days of this week, the stock market got off on a mixed note yesterday morning, on the heels of a disappointing report on new home sales and concerns about U.S.-China trade negotiations. Also, the market initially faced an uphill climb on a dip in the price of Facebook (FB) shares. All told, the initial trend was rather muted, with the averages mostly lower, but not materially so. There has been no big rush to the exits on most days that have seen some selling, with early weakness often countered by buying later in the day. That is a bull market.
As to the housing sector, data issued before the stock market opened showed that sales of single-family houses in January were at a seasonally adjusted annual rate of 607,000 units. That was a sharp 6.9% below the revised December rate of 652,000 properties. It also was less than the January, 2018 comparable tally. Housing supply also are climbing, with the seasonally adjusted estimate of new houses for sale at the end of January equating to a 6.6-month supply. Housing stocks were mostly lower early in the day on this dour news.
As to other news, there continues to be concern about the inability to fashion a workable trade deal, with the latest news being a report out of a news service suggesting that China and the United States are trying to push back a meeting between the leaders of the two countries from late March to April at the earliest. The U.S. Administration seems in no hurry to set a deal date. As for China, that nation's industrial production expanded at its slowest rate in 17 years according to the latest report. A deal is still likely to be forged, but the earlier optimism has been tempered to a degree.
The market then continued on an irregular path into the late morning and early afternoon with the leading equity averages never straying too far from the neutral line. With so much uncertainty out there, but with little real bad news, the market seemed to be in a holding pattern. So, modest aggregate changes in prices were the rule. As the afternoon continued into the latter stages, the market continued to go back and forth, with the Dow again moving a bit north of breakeven, as we opened the concluding hour of trading. The 30-stock index gained grudging ground even though it was victimized by another soft showing in Boeing (BA – Free Boeing Stock Report).
Things would change little as the session wound down, with some pundits blaming the unimposing performance on lesser optimism that a trade deal will, in fact, get brokered. But that view seems too pessimistic. Indeed, our sense is that if that were the case, the stock market would be declining sharply--due to the large degree of buying in anticipation of an eventual accord. Instead, equities are marking time, and that suggests the Street sees just a brief pause before the buyers return to the fray. So, things were status quo, as we ended an undistinguished session.
At the close, meanwhile, the Dow was ahead by the narrowest of margins, gaining just seven points, while modest losses were tabulated by the other indexes. The small-cap indexes were among the weaker performers. So, following a higher three days, this was likely little more than a brief pause to recharge. As to the day ahead, stocks were higher in Asia in the overnight hours, while in Europe, the bourses are trending upward, as well. Elsewhere, oil is nudging higher, reaching a higher for 2019 thus far and Treasury note yields, up yesterday, are flat. Finally, the equity futures on our shores are climbing at this hour, suggesting a higher opening this morning. - Harvey S. Katz, CFA