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After The Close - The U.S. equity market exhibited a slightly positive tone on Monday, as advancing shares outnumbered declining issues from bell to bell. The indexes were more mixed, however. Following last week’s tech-centric selloff, the S&P 500 and NASDAQ rose slightly while the Dow Jones Industrial Average, on the other hand, slipped into negative territory as the day wore on. In addition to the technology sector, telecommunications and industrial-aligned stocks were the strongest performers today. In the final minutes of trading, a selective selloff saw energy and healthcare stocks join the basic materials sector on the losing side of their respective breakeven lines.

Traders were juggling a number of political and geopolitical developments during the week’s opening session. President Trump’s announcement on Friday that the country was prepared to levy an additional $267 billion worth of tariffs on Chinese goods has stirred more uncertainty on that front, while a recent focus on leak investigations has also exacerbated some recent skittishness. Still, given the aforementioned struggles during the prior week, investors took advantage of lower entry levels. More recently, the President’s efforts to replace NAFTA with a newly retooled agreement with Mexico and Canada continue. New trade talks with Japan have also resumed.

Meanwhile, U.S. crude oil declined in per-barrel value after opening markedly higher. Weekly data revealed that domestic inventories were rising, which effectively offset budding optimism that looming sanctions on Iran would reduce foreign output. Also hurting the commodity’s price today is the strengthening U.S. dollar. This has essentially provided a cap on gains here in recent months, as the buying power of foreign nations typically moves inversely compared to the United States’ currency movements. Heightened trade tensions between the U.S. and China have also limited optimism in recent sessions.

Looking ahead, we suspect a more mixed tone in the days ahead. Investors will likely keep a close eye on the above-discussed trade issues, while further uncertainty as it relates to the legal issues confronting the White House are always apt to factor into the day-to-day market movements. We wish our readers a happy Rosh Hashanah and, as always, stay tuned. – Robert Harrington

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

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Before The Bell - The most recent abbreviated trading week on Wall Street (the U.S. equity and bond markets were closed last Monday for Labor Day) went to the bears. For the four-day stretch, the Dow Jones Industrial Average, the NASDAQ, and the broader S&P 500 Index were down 0.2%, 2.3%, and 1.0%, respectively. The big laggard was the NASDAQ Composite, which, in addition to the overall slightly bearish mood on Wall Street, was hurt by concerns emanating from social media industry leaders, particularly those of Facebook (FB) and Twitter (TWTR), again appearing before Congress in a meeting that could ultimately result in regulations of speech on the media platforms. The stocks of those companies led the technology stocks lower over much of the trading week.

On Friday, the attention of the investment community shifted away from the social media dealings on Capitol Hill to the U.S. economy. Of particular importance, were the release of August employment and unemployment figures. Specifically, the Labor Department reported that nonfarm payrolls increased by more than 200,000 positions last month and the unemployment rate held steady at 3.9%. The report also showed that the average hourly wage increased by its largest rate since mid-2009. The report was another positive snapshot of the U.S. labor market, but it had a bit of a “Goldilocks effect” on the U.S. equity market. The data showed that the U.S economy continues to strengthen, but also raised sentiment that the U.S. Federal Reserve may be more prone to tighten the monetary reins going forward. Although we think the market has already built in two more 25-basis-point interest-rate hikes into its valuations, there was increased sentiment that the central bank could be more aggressive with regard to monetary tightening in 2019 if the current economic trends, most notably higher wages, persist over the balance of 2018. Equity investors historically don’t greet monetary tightening sentiment warmly and that certainly was the case on Friday.

The Dow 30, NASDAQ, and the S&P 500 Index declined 79, 20, and six points, respectively, on Friday. The bears were in control from the get-go of trading and held a good portion of the losses to the closing bell. For the session, declining issues led advancers on both the New York Stock Exchange and the NASDAQ, with the spread finishing at more than two to one on the Big Board. All of the 10 major equity groups finished, to varying degrees, in the red. Not surprisingly, the higher-yielding equity groups were the biggest laggards. Those sectors would be less attractive to income-oriented investors if fixed-income yields are on the upswing, which would most likely be the case if the Fed becomes more hawkish on the monetary policy front.

Looking ahead to the week at hand, with third-quarter earnings season still more than a month from commencing, the investment community will need to look other places than Corporate America for some guidance. On the business beat, we will receive a number of important reports, including the latest data on consumer and producer prices, retail sales, and industrial production. The pricing data will be scrutinized to get a better gauge as to how inflation stands. We also will get the latest Beige Book summation of economic conditions from the Federal Reserve on Wednesday afternoon. Likewise, investors will be playing close attention to the dealings on the highly contentious Capitol Hill. Investors should keep in mind that stocks tend to not perform as well in the weeks heading into the mid-term elections. Until then, investors focus will likely be on the economy and international trade dealings, particularly those between the United States and China. On point, Asian technology stocks were weaker overnight after President Trump urged technology behemoth Apple (AAPLFree Apple Stock Report) to bring iPhone manufacturing back home and create more manufacturing jobs for American workers. A lingering dispute between the world’s two-largest economies could potentially derail output for both nations, which would not be good for the health of the global economy. This situation bears close watching.

With less than an hour to go before the commencement of the new trading week stateside, the equity futures are presaging a higher opening for the U.S. stock market. Overseas, as noted, the main indexes in Asia, save for Japan’s Nikkei 225, were lower overnight, while the major European bourses are nicely higher to start the new trading week on the Continent. Investors should note that trading volume stateside may be lighter than normal today, as many traders are taking the day off in observance of Rosh Hashanah, known as the New Year in the Jewish calendar. Lighter trading can often bring some volatility, but we shall see as the U.S. equity market, as noted, is pointing up to start the trading day. 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.