After The Close - The stock market moved nicely higher this morning, but eased somewhat as the session progressed. At the close of trading, the major averages managed to remain in positive territory. Specifically, the Dow Jones Industrial Average was ahead 68 points; the broader S&P 500 Index was up two points, and the NASDAQ was higher by eight points. Market breadth was mixed, with advancers roughly even with decliners on the NYSE. From a sector perspective, the energy and healthcare names moved up, while the telecom and utility issues retreated.
There were no major economic reports issued today. However, tomorrow will be a busier day. Specifically, we will get a look at the latest monthly retail sales figures, as well as a business inventories report for the month of March. In addition, the Empire Manufacturing Survey, which follows business conditions in the greater New York region, will also be released.
In the corporate arena, it was a relatively quiet day for profit reports. However, shares of NXP Semiconductors (NXPI) moved nicely higher on M&A-related news. On a related note, shares of Xerox (XRX) slipped, as plans to merge with Japan-based Fujifilm appear to have been terminated.
Technically, the stock market has rallied for several consecutive sessions. However, with the first-quarter earnings season now concluding, it remains to be seen if the bulls can keep their buying campaign intact. – Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before The Bell - The most recent five-day stretch of trading easily went to the bulls, with the bears not putting up too much of fight at any point last week. The market displayed a rather calm pattern of trading, which was atypical of what we have seen thus far in 2018. The investment community focused on earnings and the economy last week, instead of worrying about trade wars, global tensions, and rising interest rates, and what we saw was a far less volatile stock market during the first full-trading week of May. For the five-day span, the Dow Jones Industrial Average, the NASDAQ, and the broader S&P 500 Index advanced 2.3%, 2.7%, and 2.4%, respectively.
As noted, the investment community focused on corporate earnings and the business beat, and clearly liked what it saw. The news on the economy was encouraging—initial weekly unemployment claims fell to 211,000, the lowest level in a half-century—and it also calmed fears about inflation. The report from the Labor Department on producer (wholesale) and consumer prices only showed modest increases. This raised sentiment that the Federal Reserve will not have to be too aggressive with regard to tightening the monetary reins over the remainder of this year. Such sentiment is typically viewed positively by Wall Street, and that was certainly the case last week, with the major averages, save for the NASDAQ Composite on Friday, climbing over the final two days of trading.
The market’s breadth was modestly positive on Friday, with advancers holding a slight lead over decliners on both the New York Stock Exchange and the NASDAQ. Most of the top-10 sectors were in the black, but other than the healthcare group, none too far removed from the neutral line. The leadership came from the healthcare stocks, which rose despite commentary from President Trump that pharmaceutical prices were too high. Conversely, the financial group was a laggard, with a pullback in fixed-income yields weighing on the performance of the banking stocks. Bond yields, which pushed past 3.00% earlier in the week, fell back under that mark on the benign inflation data and historically low initial jobless claims figure.
Turning to the week at hand, the earnings news from Corporate America will continue to wind down, but not before we get a number of noteworthy reports from the retailing sector. Sector behemoths, The Home Depot (HD – Free Home Depot Stock Report) and Walmart, Inc. (WMT – Free Walmart Stock Report) are scheduled to release their latest quarterly results. The expectations are for a solid showing from this struggling sector, with business helped by improving consumer confidence and the Tax Cuts and Jobs Act. Thus, we recommend that subscribers keep a close eye on the consumer cyclical and noncyclical sectors. In general, the first-quarter earnings season has been a big success for Corporate America and provided support for the equity market. On the business beat, we will receive a few important reports, including the latest data on retail sales, housing starts, and industrial production. The retail sales data also will bring attention to the aforementioned consumer discretionary group.
With less than an hour to go before the commencement of the new trading week stateside, the equity futures are presaging a modestly higher opening for the U.S. stock market. Overseas, the main indexes were up overnight, while the major European bourses are in positive territory as trading moves into the second half of the session on the Continent. The prospects of U.S.-China trade tensions easing are giving a boost to the world equity markets today. The two bickering superpowers are scheduled to hold a second round of trade talks this week to try to resolve an escalating trade dispute. Stay tuned. - William G. Ferguson