After The Close - Stocks got off to a choppy start this morning, but managed to gain considerable ground in the late afternoon. At the close of trading, the Dow Jones Industrial Average was ahead 200 points; the broader S&P 500 Index was up 22 points; and the technology-heavy NASDAQ was higher by 57 points. Nonetheless, market breadth showed a somewhat uneven session, as advancers were ahead of decliners by a narrow margin on the NYSE. Most of the major equity groups made progress today, with solid gains in the healthcare and utility stocks. However, the energy and basic materials issues did not participate in today’s advance.
There was one notable economic news item released today. Specifically, the Chicago PMI increased to 66.4 for the month of November, which was quite a bit better than had been anticipated. Meanwhile, traders are likely looking ahead to this weekend, when President Trump will meet with China’s leader, President Xi, to discuss international trade. Many on Wall Street are hoping that a constructive outcome can be reached, and that major tariff increases might be avoided.
In the corporate arena, a few major companies posted quarterly profit reports over the past 24 hours. Specifically, shares of GameStop (GME) moved lower today, after the specialty retailer provided a weaker-than-expected outlook. Shares of Workday (WDAY) moved up in response to a strong release. In other news, shares of Marriott International (MAR) lost ground on reports of a sizable data breach.
Technically, stocks were quite volatile during the month of November, as traders seemed to be in need of direction. With a month left in 2018, many on Wall Street may be wondering if a yearend rally could still be in store. – 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 - An up-and-down, in-and-out, and altogether choppy November ends in a matter of hours for Wall Street. And, it was anything but smooth sailing for the past few weeks. On point, after the market pulled back sharply in the days leading up to Thanksgiving, under pressure from a deterioration on the global trade stage and intensifying concerns about rising interest rates. Then, after the holiday, the Street received support in the form of an apparent move to ease trade tensions with China and a shift in emphasis by the Federal Reserve, and its Chair, Jerome Powel, suggested that the central bank was now close to a neutral monetary stance.
As to trade, there were comments by Administration officials signaling that the warring parties might be getting closer to a truce. Time will tell if such optimism is warranted. Importantly, and a big part of the dramatic late-month rally (including a 618-point surge in the Dow Jones Industrial Average on Wednesday) were comments from the Fed Chair, and the Federal Reserve Vice Chair, that the bank was now much closer to a neutral interest rate posture than was believed earlier. That would signal we may see fewer rate increases in 2019 following what we still expect will be a slight nudge upward in borrowing costs next month.
Meanwhile, after that stunning gain in the Dow and the other indexes at midweek, the stock market backed off yesterday morning, falling by some 150 Dow points after the first 90 minutes of trading. That pullback likely represented a breather from what might have been an overreaction on the buying front. Of course, there was a dramatic shift in the Fed's appraisal of the situation on the monetary side. On point, the lead bank now suggests it will be data driven in gauging where it goes on the rate front, suggesting that it was not locked into three or four rate hikes next year. So, the bulls cheered.
Then, after that selloff in the morning, which pushed the Dow down to a session-worst decline of some 160 points, the stock market started to come back, hesitantly at first, but more significantly as we moved inside the final two hours of trading. So, as we entered that stretch, the major averages all went positive, with the Dow climbing by some 50 points as we hit the 90-minute mark left to the trading day. Meantime, one of the factors likely behind the early modest selloff was the news that a noted U.S. trade hardliner was to attend the conference between the U.S. President and his counterpart in China.
Returning to the monetary situation, the Fed minutes, issued yesterday, pointed toward another quarter of a point increase in the federal funds rate next month, which would be the fourth such hike this year. At the same time, the minutes indicated that the Fed had misgivings about how trade tensions and corporate debt might affect growth going forward. Meantime, after the likely rise in rates next month, we could see three more increases in 2019, unless the economic data suggest otherwise. That would notably be the case should a trade truce not be brokered with China.
The stock market then took off further as the afternoon progressed, on hopes for a deal with China. The Dow briefly would ascend the 100-point increase mark in the process, while the NASDAQ would strengthen in tandem. However, after that spurt, a little more profit taking set in, causing the Dow, the S&P 500, the NASDAQ, and the Russell 2000 to close modestly lower, with losses between 0.1% and 0.3%. Breaking things down further, losing stocks held a narrow lead on gaining issues on the NYSE, while eight of the top ten equity groups closed lower, with just energy and healthcare gaining modestly.
Now, the month concludes with somewhat positive action overnight in Asia, while in Europe, the leading bourses are trending downward thus far this morning with the G-20 in focus. In other markets, oil prices are lower again; Treasury yields, off slightly yesterday, now are heading south again in early trading; and the U.S. equity futures are suggesting a weaker start to the trading day. Finally, the economic and earnings calendars are light today, so the focus will likely be on the trade meetings. Stay tuned. - Harvey S. Katz, CFA