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After The Close - U.S. stocks were largely range-bound on Monday, toggling in and out of positive territory at several points between the bells. The majority of equities finished the day lower than when they came in, as profit taking and rotational trading were dominant trends throughout. The modest sell-off was bolstered by activity in the small- and mid-cap markets, as declining shares outnumbered advancers. This was a shift from the positive tone underlying trading late last week, albeit a slight one.

A mid-afternoon downturn dragged each of the major indexes lower. Still, while they faltered for a stretch during the second part of the day, large-cap issues nearly finished the day higher than where they began. After the grouping hit its intraday nadir with roughly an hour left in trading, the S&P 500 reduced its daily loss, to less-than five points (0.20%), by the final bell. The tech-laden NASDAQ rose slightly, at less than a one-point gain. The Dow Jones Industrial Average rode strength from Caterpillar (CAT Free Caterpillar Stock Report), NIKE (NKE Free NIKE Stock Report), and Disney (DIS Free Disney Stock Report) to a 17-point advance, before a late-day selloff saw the index settle nearly 9 points below Friday’s closing figure.

Most of the market sectors shed aggregate value, with the basic materials and telecom groups faring well. Technology and non-cyclical consumer goods also performed well, on a relative basis. On the other hand, the financial sector continued to digest last week’s decision by the Federal Reserve to raise interest rates only two more times for the remainder of the year. Chicago Fed President Charles Evans echoed the plan today. While this has dampened enthusiasm for banking stocks in recent sessions, including today’s, the transparency will likely help to free trading from Fed-related volatility as the year progresses. Next year, the central bank anticipates enacting at least three rate hikes.

Meanwhile, lower U.S. crude prices dragged the price of utilities and many energy stocks lower. Optimism on the global level, where an OPEC-led accord has reduced drilling from the cartel’s members as a means of stabilizing the marketplace, did little to offset concern about rising domestic stockpiles. Even a lower U.S. Dollar could not turn the commodity’s fortunes, and it lost $0.58 per-barrel on the day.

Looking further out, with a scarcity of major decisions from the Fed in the coming weeks, we suspect trading will focus more on developments from Washington. A showdown over a newly introduced healthcare bill, as well as additional updates from the Trump Administration on its plans to implement tax reform, infrastructure, and economic policies, should hold some influence over the market. – 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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11:55AM EDT - The first day of the new week is seeing the major equity averages trading in a tight band around the neutral line. There is not much in the way of headline stories from the business or earnings beats to push stocks forcefully in either direction. Although the major large-cap indexes are sporting small gains, the underlying tone to trading is negative, with a plurality of declining issues on both the Big Board and the NASDAQ. It also should be noted that the broader small- and mid-cap sectors are weaker, which may give the bears a slight advantage over the second half of the session.

The major averages are not straying too far from breakeven, what we are seeing is some sector rotation. The energy stocks are weak, with the group being hurt by a drop in crude oil prices. Speculative investors that were betting that the November OPEC-led deal on production reductions would help oil prices are now more bearish as U.S. oil output continues to expand. Meantime, the financial sector is in the red, with sentiment that the Fed will be conservative with regard to interest-rate hikes this year hurting the financial services stocks, particularly those of the banks. This morning, Chicago Fed President Charles Evans said such, noting that the central bank is on track to raise interest rates twice more this year after a policy tightening last week. Mr. Evans also noted that the Fed could be more or less aggressive depending on inflation data and fiscal policies from the Trump Administration. Conversely, we are seeing some buying interest in the basic materials space, helped by the weaker U.S. dollar. The technology and telecommunications stocks also are in favor today.

As noted, there is little economic and earnings news of note to move the market today. But there has been some non-earnings news from Corporate America this morning. On the merger and acquisition front, reports surfaced that grocery company Sprouts Farmers Market (SFM) may be in acquisition talks with privately held Albertsons. A deal would add to Albertsons’ portfolio of supermarket brands, which includes Safeway, Vons, and Shaws. Shares of SFM jumped last week when rumors of a possible acquisition first surfaced. Likewise, Vodafone (VOD) is in the spotlight following news that the UK telecom firm is merging its India business with one of its top rivals in the country—Idea Cellular. And investors should note that Walt Disney (DIS - Free Walt Disney Stock Report) continues to win big at the box office. The Dow-30 component and entertainment giant’s Beauty and the Beast movie brought in $170 million in box office dollars in North American this weekend, making it the biggest box office opener so far this year and the seventh-best debut of all time. Walt Disney shares are trading higher today.

Looking ahead to the second half of the trading day, market fundamentals suggest that the little game of tug-of-war going on between the bulls and the bears will ultimately go to the bears. That said, we don’t expect either to pull the rope forcefully, as there is little in the way of market moving news to give either a big advantage today. Stay tuned. - William G. Ferguson

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 - The most recent five-day stretch of trading on Wall Street did not lack headline events, but the news, which included the latest FOMC monetary policy decision, did not have much effect on the U.S. equity averages. Indeed, the major indexes finished Friday relatively unchanged from where they began the week. The Dow Jones Industrial Average, the NASDAQ, and the S&P 500 Index all produced slight gains for the five-day stretch.

Last week’s big news came on Wednesday afternoon when the Federal Reserve decided to raise short-term interest rates by 25 basis points, to 0.75%--1.00%. A monetary tightening in itself would normally pressure stocks, but that was not the case last week, as the market rallied in the hours immediately following the release. The investment community seemed to like that the central bank did not take a more hawkish stance. In fact, the investment community interpreted the announcement to mean that the Fed will still probably tighten the monetary reins three times in 2017. That seemed to help the market, which appears to have priced in that many hikes this year. The Fed did not create any more uncertainty with its commentary and the market responded in kind.  In addition to the Fed news, investors received data on retail sales, residential construction, and consumer and producer (wholesale) prices. The data were decent overall, with stronger-than-expected housing figures (we also learned that builder sentiment came in at its highest level in 12 years this month) offsetting a slightly lower-than-expected retail sales in February.

Looking ahead to the week at hand, it will likely be a far more subdued five-day stretch for the business beat, with no news on the economy that is expected to move the market. We will get figures for existing and new home sales for February and the latest reading on durable goods orders. Likewise, the earnings beat will be light on reports, though we will receive quarterly results from Dow-30 component NIKE (NKE - Free Nike Stock Report), shipping giant FedEx (FDX), and homebuilder Lennar (LEN). With the dearth of reports on both fronts, we would not be very surprised if we saw some more complacency on Wall Street this week.

The lack of many major headlines on the economy and Corporate America may push Wall Street to look more at Capitol Hill, where an important vote will be taking on the plan put forth by the Trump Administration and the House of Representatives to repeal and replace the Affordable Care Act. The forthcoming healthcare debate in Congress will probably be arduous and contentious drawn out process. The recently revealed plan has not given much of a boost to Wall Street. If anything, it probably has had more of a negative impact on stocks. The attention given to healthcare has also pushed the promises of tax reform from the new Administration to the back burner. We shall see what effect the dealings from Washington D.C., which also will include the confirmation hearings for President Trump’s Supreme Court pick Neil Gorsuch, has on the stock market this week.

With less than an hour to go before the commencement of trading stateside, the equity futures are presaging a flat to modestly lower opening for the U.S. stock market. In general, the world equity markets opened the new trading week on cautious footing. The main indexes in Asia were mixed overnight, while the European bourses are holding modest losses as trading moves into the second half of the session on the Continent. Weighing a bit on the international stock markets was the G20's decision to drop a pledge to avoid trade protectionism. Meantime, the Federal Reserve's conservative rate guidance last week continues to push the dollar lower, with the currency falling to a six-week low. The weaker greenback, though, is not helping oil today, as crude prices are down again in both New York dealings and on the Continent. Stay tuned.   - William G. Ferguson 

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