After The Close - The stock market put in a mixed session today, as traders took profits in the technology names. At the close of trading, the Dow Jones Industrial Average was ahead 104 points, while the broader S&P 500 Index was off nominally, and the NASDAQ was lower by 88 points. Market breadth showed a divided session, with decliners just ahead of advancers on the NYSE. As noted, the technology sector was down sharply, with steep losses in the semiconductor stocks. However, the financial and consumer names managed to log solid gains.
Meanwhile, the economic news was largely upbeat today. According to the second estimate, the nation’s economy (as measured by GDP) expanded at an annualized rate of 3.3% in the third quarter. This figure was in line with had been expected. Meanwhile, pending home sales rose 3.5% in the month of October, coming in well ahead of the consensus forecast. Tomorrow will be a busy day for economic reports. Of note, we will get a look at the latest monthly personal income and spending figures. The weekly initial jobless claims also will be due out, along with a report on business conditions in the greater Chicago region.
Meanwhile, a few corporations weighed in with their financial reports over the past 24 hours. In the technology sector, shares of Autodesk (ADSK) plunged on concerns about the company’s business outlook. Shares of Marvell (MRVL) also moved lower, even though that technology company delivered a respectable report.
Technically, the stock market experienced profit taking in the technology sector today. A pullback in many of these names is not surprising, given the gains that have been achieved this year. Furthermore, it should be noted that valuations in many cases have become elevated, and some consolidation may be in order. - Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
12:10 PM EST - The major stock market averages are mixed at midday. Right around the noon hour on the East Coast, the Dow Jones Industrial Average is ahead 48 points, but the NASDAQ is off about 100 points and the broader S&P 500 is down a handful of points. Most of the profit taking on the NASDAQ appears to be in a few big names, such as Amazon.com (AMZN) and Alphabet (GOOG) that have posted sizable gains this year.
On the plus side, market sentiment is still being supported by favorable economic news. The Commerce Department reported this morning a revision in third quarter to 3.3%, up from the 3.0% originally reported. That marks the fastest pace of growth in three years, and two consecutive quarters of 3.0%-or better advances.
The revision came about largely as spending on transportation equipment was greater than earlier estimated. Increased travel and moving goods to consumers making purchases online are behind the uptick.
Improved business momentum appears set to continue through yearend and into early 2018, as well. Consumer confidence is at a 17-year high; the unemployment rate is at a multiyear low; and corporate profits are on the upswing. Those positive trends are helping to lift investor sentiment.
The economy’s strength was noted in a speech today by outgoing Federal Reserve Chair Janet Yellen, who noted the more broad-based nature of the underpinnings. Meanwhile, testimony yesterday by her proposed successor, Jerome Powell, suggested a smooth transition. Interest rates will probably continue to rise in gradual fashion. Mr. Powell also seemed to indicate his feelings that banks are sufficiently regulated. Those calming words are helping the financial sector outperform today.
Elsewhere, oil prices are slightly lower in NYMEX trading, ahead of the start of a big OPEC meeting tomorrow in Vienna. Quotations are down about $0.40 a barrel, to $57.60, partly on a report from the Energy Department this morning showing that domestic production continues to rise. There is a concern that increasing output from the United States will overshadow any moves by OPEC to support the market.
Heading into the afternoon session and in the days ahead, negotiations on tax reform may take center stage now that a bill has reached the full Senate. - Robert Mitkowski
At the time of this writing, the author did not have positions in any of the companies mentioned.
Before The Bell - After limping into the post-Thanksgiving weekend session with a mixed-to-lower showing on Monday, the bulls had the momentum back yesterday. On point, Wall Street started the latest trading day with solid gains and then proceeded to press forward with nary a hiccup for the remainder of the session. True, there was a rapid pullback early yesterday afternoon on news that North Korea had fired a missile into the waters off the coast of Japan. That headline event sent the Dow Jones Industrial Average, once up by more than 190 points, back down to less than a 100-point advance.
However, that selloff, which took the NASDAQ, which had lagged the Dow on some weakness in technology, into the minus column as well, was just a brief affair with the market regaining its footing shortly thereafter. Then, the same forces that had sent stocks soaring at the open were back in play for the balance of the day. Essentially, the bulls have been having their way for the past year and then some on hopes that the accession of Donald Trump would mean the eventual passage a major tax reform measure. And that eventuality may be getting closer by the day, as the Senate may vote tomorrow on a bill that already has passed the House.
Our sense that some package of tax cuts will pass before yearend, although refinements in the earlier House bill probably will evolve. In other news, the economy continues to show enviable strength, with data on new home sales showing a strong gain for October in a release on Monday and a survey on consumer confidence, issued by the Conference Board yesterday morning surging to its highest level in 17 years. That one-two punch suggests that the nation's gross domestic product will advance by 3%, or more, in the current period.
The market's comeback yesterday suggests that the shock effect of news out of North Korea is less than it had been in months past. Indeed, stocks rather quickly regained all of their gains from earlier in the day. In all, the three major composites, the Dow, the S&P 500, and the NASDAQ all had reached all-time highs in the morning. Then, the earlier nominated Jerome Powell--to be Federal Reserve Chair--turned out positive for the Street as he implied that his accession would result in few central bank changes. In sum, he suggested that he would keep the current slow tightening rate policy intact.
Moreover, in another positive turn, Mr. Powell intoned that current regulations on the financial sector were tough enough, and he also supported some easing of burdens on smaller banks. Taken together, this was enough to quickly throw the bears off stride and generate a full rebound--and then some--by late afternoon. Thus, it was a full-fledged bullish surge as we head toward the final days of a strong November for many equity traders. Add in some upbeat tidings from Black Friday and Wall Street's bulls would seem poised to fashion an impressive Santa Claus rally.
Then, in the final hour, the bulls received more good news as the Senate took a step toward passing a bill aimed at reforming the U.S. tax code, as the Senate Budget Committee approved its tax plan, bringing the full Senate closer to a floor vote that may take place as early as tomorrow. With that news in hand, the Dow's gain surged past 250 points. It would seem that a tax package will pass either late this year or in 2018. As the final bell sounded, the Dow was up 256 points; the S&P 500 was ahead 26 points; and the NASDAQ was better by 34 points.
Looking out on a new day, now, we see that stocks were trading mostly higher in Asia overnight, while in Europe, the key bourses are now up in early trading this morning. Elsewhere thus far today, oil is down and interest rates are up slightly. As to the U.S. equity market in the hours ahead, the futures are trending nicely higher at this hour. How well stocks do over the balance of the week will, in part, be a function of the progress being made in the Senate on the aforementioned revisions to the tax code. Stay tuned. - Harvey S. Katz, CFA