After The Close - The market started quite positively today, as the bulls were emboldened by favorable comments made over the weekend by Commerce Secretary Wilbur Ross, which suggested that a partial trade accord could be signed between the United States and China in the coming weeks. The markets hit all-time highs on the Dow Jones Industrial Average, the NASDAQ Composite, and the S&P 500 Index in the first few moments of the trading session. The composites then pulled back a bit as the session progressed, but then strengthened anew near the end of the day. All told, the Dow closed higher by 115 points; the NASDAQ was up 47 points; and the S&P 500 finished 11 points to the upside.
Additionally, market breadth was rather positive, with advancers outpacing decliners by a wide margin. Energy equities, much like on Friday, led throughout most of the day, while utility issues were laggards.
In commodity news, oil prices were up today, as improved sentiment for global trade drove the price higher. Meantime, U.S. Treasury bond yields were moderately higher today across the board, as traders moved away from the safe-haven asset. The VIX Volatility Index was higher today, as demand for options protection rose a bit. Usually, when the markets move higher, the VIX moves lower, so this may portend some profit taking in the future.
Looking ahead, tomorrow will have some economic data released, such as the ISM nonmanufacturing index for October and the International trade gap for September. Additionally, a few large technology entities are slated to report quarterly results this afternoon, while several large companies are on the docket before the bell rings tomorrow. Earnings news will likely drive the market tomorrow, along with any developments regarding U.S. trade negotiations with China. - John E. Seibert III
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before The Bell - The month of October, which ended last week, and has historically produced a few of the most volatile stretches of trading on Wall Street, was anything but this year. The Dow Jones Industrial Average, the NASDAQ, and the S&P 500 index all finished the 31-day stretch with advances of around 1%. The news, save for some uneven economic data mostly earlier in the month, proved quite supportive for stocks. The major averages reacted positively to what is shaping up to be a very supportive third-quarter earnings season, signs of a partial trade agreement between the United States and China (more below), and another interest-rate cut from the Federal Reserve on October 30th. All these factors combined gave the bulls a nice boost over the course of October trading.
And the festivities spilled over into the first trading session of November. The Dow 30, the NASDAQ Composite, and the S&P 500 Index added another 301, 94, and 29 points, respectively, on Friday, with the latter two averages each establishing all-time highs in the process. The blue-chip Dow finished within a stone’s throw of a record high. The buying was all encompassing, as the small-cap Russell 2000 also surged and nearly all of the 10 major equity groups finished in positive territory during a session that saw advancing issues well outpace decliners on both the New York Stock Exchange and the NASDAQ. The leadership came from the economically driven groups, most notably the energy, basic materials, industrial, and technology sectors.
The most supportive equity market news came from the business beat on Friday. Before the market opened, the Department of Labor released better-than-expected employment figures. Specifically, the nonfarm payrolls increased by 128,000 positions (the estimate was for less than 100,000 additions) and the unemployment was little changed at 3.6%. But what the investment community seemed most encouraged by was the sharp upward revisions in the job creation figures for September and August. Also there was a sense that the October jobs figure would have been much higher if not for the General Motors’ (GM) labor union strike. The labor market data trumped another slightly better, but still weak report on manufacturing activity from the Institute for Supply Management. That report showed that economic activity in the manufacturing sector contracted in October, and the overall economy grew for the 126th consecutive month. The October PMI registered 48.3%, an increase of 0.5 percentage point from the September reading of 47.8%, while the New Orders Index registered 49.1% an increase of 1.8 percentage points from the September reading of 47.3%.
In addition to the economic news, the market reacted positively once again to the earnings data on Friday, which was led by Dow-30 components and oil giants Exxon Mobil (XOM – Free Exxon Mobil Stock Report) and Chevron (CVX – Free Chevron Stock Report). Overall, quarterly earnings continued to support equities last week. With more than two-thirds of the S&P 500 companies reporting results, more than 75% of the reports have proven better than expected and have given a boost to the U.S. equity market. The bulk of the earnings season will start to wind down this week, but we will still get data from entertainment giant Walt Disney (DIS – Free Walt Disney Stock Report) on Thursday. Then next week the data from the retail industry starts to flow in, led by industry heavyweights Home Depot (HD – Free Home Depot Stock Report) and Walmart (WMT – Free Walmart Stock Report).
This week, the news from the business beat will be much lighter with the only reports of significance being the latest data on nonmanufacturing activity and the trade gap. That said, we will get the latest reading on consumer sentiment later in the week, which may get some attention with the all-important holiday shopping season for the retailers fast approaching. So far, as seen in last week’s first reading on third-quarter GDP, the U.S. consumer has proven to be the main catalyst behind economic output this year.
The above noted lighter economic and earnings schedules may push the attention of the investment community to the ongoing U.S./China trade negotiations. And on point, the equity futures are presaging some continued buying on trade hopes when the U.S. stock market opens in less than an hour from now. The international averages, including the main indexes in Asia and the major European bourses, have performed well so far today on reports that the two economic superpowers are moving closer to a partial trade accord. Likewise, bond prices fell on such optimism. Stay tuned. – William G. Ferguson