After The Close - The market started trading lower on the Veterans’ Day holiday, as sentiment fell concerning a U.S. trade deal with China. Traders sent the Dow Jones Industrial Average down 164 points, while the other indices were lower in tandem. However, a few news stories broke throughout the day, which helped to lift the markets higher. These included that Walgreens Boots Alliance (WBA – Free Walgreens Stock Report), a Dow-component company, received a takeout proposal from a public/private equity company. Additionally, Boeing (BA – Free Boeing Stock Report) provided an update on its 737 MAX planes. Management stated that if the FAA accepts the company's updated training requirements, they are expecting customer deliveries in December and that they expect commercial service to begin in January. These reports sent the market higher, and the Dow eventually reached the green. However, the S&P 500 and NASDAQ remained below breakeven levels. All told, the Dow closed higher by 10 points, eking out a record close. On the other hand, the S&P 500 was down six points, and the NASDAQ was off by 11 points.
Moreover, market breadth was negative, as decliners outpaced advancers by a 1.5-to-1.0 ratio. REITs were among the best performers on the day, while utility stocks were among the weakest. This combination is somewhat unusual given that both sectors tend to benefit from reduced interest rates.
In commodity news, oil prices were modestly lower, as reduced sentiment about global trade hurt demand expectations. Meantime, U.S. Treasury bond yields were slightly higher, as a move away from the safe-haven asset continued. The VIX Volatility Index rose today, as demand for option protection increased.
Looking ahead to tomorrow, not many economic data releases are on the docket. However, a few large companies are expected to report quarterly earnings, both after the bell today and before the bell tomorrow. These releases, along with any developments between the U.S. trade negotiations with China, are likely to drive trading sentiment. - 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 first full trading week of November was another productive one for those long equities. Helped by another constructive collection of quarterly reports, headlined by strong results from Walt Disney (DIS – Free Walt Disney Stock Report) on Thursday afternoon, and some positive developments on the trade front, the Dow Jones Industrial Average, the NASDAQ Composite, and the broader S&P 500 Index finished the five-day stretch with advances of 1.2%, 1.1%, and 0.9%, respectively, and at all-time highs.
On Friday, the major averages spent most of the session bouncing around the neutral line in a tight band. In the end, each of the aforementioned indexes and the small-cap Russell 2000 were able to eke out small gains. As previously noted, quarterly results from Walt Disney (stock finished 3.8% higher) helped the blue-chip composite avoid red ink. For the day, earnings news was rather mixed, which likely was the main reason why the averages were unable to make a notable move in either direction. The economic and trade news was light too. Not surprisingly, the margin between winning and losing issues on both the Big Board and the NASDAQ was razor thin, with slightly more advancers on both exchanges. Likewise, the split between up and down arrows among the 10 major equity groups was even. The healthcare stocks were in greatest demand, while the telecom issues were the biggest laggards.
Overall, the third-quarter earnings season, which is quickly winding down, has been mostly supportive for equities, with more than 75% of the S&P 500 companies beating modest expectations. However, before this earnings season is in the record books, we will get a slew of reports from the retailing sector, including the latest quarterly data from retailing giant Walmart (WMT – Free Walmart Stock Report), this week. Technology giant Cisco Systems (CSCO – Free Cisco Stock Report) is also on the docket.
The economic news, after a light stretch last week that included a better-than-expected report on nonmanufacturing activity from the Institute for Supply Management, will pick up over the next five days, with data due on consumer and producer prices, industrial production, and retail sales. The latter report will be closely watched for clues to how both the retailers and consumers are feeling ahead of the all-important holiday shopping season, which officially kicks off in a little over two weeks with Black Friday. Given the retailing earnings and the retail sales report, investors may want to keep close tabs on the consumer discretionary stocks this week.
Meantime, the commentary from the Federal Reserve will heat up this week, with several FOMC voting members scheduled to give speeches on monetary policy, including testimony before Congress from Fed Chairman Jerome Powell on Wednesday and Thursday. The investment community will be looking for clues to what the central bank might do on the monetary front when it meets later this year. The Fed has cut rates by 25 basis points three times since July in an effort to support growth amid the trade disputes and the slowing global economy. The monetary easing has been greeted mostly positive by the investment community, with the major averages setting a series of all-time highs since the last Fed decision.
With less than an hour to go before the commencement of the new trading week stateside, the equity futures are pointing to a lower opening for the U.S. stock market. So far across the pond, the mood has been bearish. The main indexes in Asia finished lower overnight, while the major European bourses are in negative territory as trading moves into the back half of the session on the Continent. There are a few factors driven the international indexes lower, including commentary from President Trump that there is still no agreement between the U.S. and China to cancel existing tariffs in phases, the ongoing protests in Hong Kong, which are now six months, in duration, and a weaker-than-expected GDP report from Britain amid the Brexit challenges. That said, we would like to take this opportunity to say thank you to our military veterans for everything they have given to this country on this Veterans Day holiday. Stay tuned. – William G. Ferguson