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After The Close - The U.S. stock market started the day off on a strong note, but momentum waned as the session wore on. Still, the mixed activity was slightly better than the widespread downturns registered on Monday and Tuesday, particularly in the Dow Jones Industrial Average. Traders appear to be torn between positive economic news and uncertainty from the political arena. Valuations hit all-time highs amidst enthusiasm for the Trump Administration’s business-friendly policies, but profit taking and reevaluation of the timing and fiscal impact of several initiatives have tempered the historic run up in recent days.

This tug-of-war was especially evident in the Dow Jones, which tried on several occasions to mount sustained rallies. The grouping remained in positive territory for most of the day, boosted by Apple’s (AAPL – Free Apple Stock Report) solid quarterly release, and managed to rise above 19,900 at several points in the afternoon. Still, the Dow is well below the 20,000 milestone it broached a week ago. Meanwhile, the NASDAQ saw its performance also boosted by the Apple report, while the broad-based S&P 500 bounced around the breakeven line after pulling back from its opening level. Breadth was mostly negative, influenced by softness in the mid- and small-cap equity markets.

The early-morning trading reflected investor reaction to a pair of encouraging economic updates, as well as some earnings releases. Prior to the opening bell, Automatic Data Processing (ADP) reported that private employers added 246,000 jobs in January, exceeding the 156,000 consensus estimate handily.  Shortly into the day’s session, the Institute for Supply Management reported an expansion of manufacturing activity in January, the 92nd consecutive month of economic growth.  On Friday, traders will receive updated nonfarm payroll data from the Labor Department, which ought to further move the needle.

Still, looming concerns regarding certain policy initiatives by the Trump Administration empowered the bears as we crossed into the afternoon. Recently, moves to suspend immigration from several Middle Eastern nations and his desire to renegotiate a spate of trade agreements have added some volatility to the market. But, overall sentiment, we think, remains confident that lower corporate tax rates and a more lax regulatory environment can spur better results for corporations across a number of industries.

Then, at 2 P.M. (EST), the Federal Reserve released its statement on monetary policy. Though the central bank indicated that the labor and economic environment continue to improve, it voted to stand pat on the current interest rates of 0.50 percent to 0.75 percent. The market averages turned higher, albeit briefly, after the announcement. As the year progresses, investors will clamor for more transparency on the timing of federal funds increases. But, for now, we don’t foresee a rate hike in the first quarter. More likely, the first of two-to-three additional hikes could come as soon as April.

So, with two days of trading left in the week, the S&P 500 and Dow both have their work cut out if they hope to salvage full-week advances. We believe optimism remains high that the new Administration can spur a more vigorous growth environment through policy modifications, evidenced by the late-in-the-day upturn that saw each of the three major indices finish the session in positive territory. – Robert Harrington

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

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12:00 PM EST - The major U.S. equity indexes after two weak showings to start the week, especially for the Dow Jones Industrial average (the NASDAQ and S&P 500 Index rallied a good deal into yesterday’s closing bell to pare Tuesday’s loses), were sharply higher to start the session, but have been unable to hold most of those initial gains as we push toward the midday hour on the East Coast. Helping the markets early on was some positive news from Corporate America, which included a strong report from Apple (AAPL - Free Apple Stock Report). Shares of the technology behemoth rose on the quarterly showing, which included record iPhone sales in the December period. The Apple gain is providing some support for the technology-heavy NASDAQ. The S&P 500 Index recently turned negative and the Dow 30 after moving 100 points higher early on is now breakeven.

This morning also brought some very encouraging news from the business beat. Before the market opened stateside, payroll processing giant Automatic Data Processing (ADP) reported that U.S. private employers added 246,000 jobs in January, far exceeding the consensus expectation of 165,000. (The ADP figures come two days ahead of the latest nonfarm payroll report from the government on Friday.) Then, a half-hour into today’s session, the Institute for Supply Management reported that manufacturing activity expanded in January and the overall economy grew for the 92nd consecutive month. Specifically, manufacturing activity registered 56 last month, an increase of 1.5 percentage points from the December reading. The increase in manufacturing activity was driven by increases in production and employment. New orders growth came in relatively flat.

The central bank’s latest monetary policy decision will come this afternoon following the conclusion of the two-day meeting. The consensus expectation is that the lead bank will hold rates steady this month. (A deviation from the expectation (e.g., a monetary tightening) would probably bring more sellers into the market, as interest-rate hikes are typically not well received by Wall Street.) The Federal Reserve will release its latest monetary policy statement at 2:00 P.M. (EST) today.

Meantime, the spread between advancing and declining issues is mixed, with winning issues holding an advantage on the NASDAQ, but losing stocks maintaining a lead on the NYSE. Still, our sense is that there is a bearish undertone to trading today—and the recent performance of the major averages is reflecting such. Most of the 10 major equity groups are trading in the red, led lower by the consumer, energy (down despite a weaker dollar and higher oil prices), and industrial groups. We are also seeing some selling in the higher yielding areas (i.e., utilities and telecommunications), which is likely due to the spike in fixed-income yields following the release of the aforementioned ADP employment data. Conversely, we are seeing some modest buying in the technology (helped by the Apple report) and financial sectors. The jump in bold yields is helping the financial stocks, most notably those of the banks, today.

Looking ahead to the second half of the trading day, the market will be focused on the Federal Reserve’s monetary policy decision and the accompanying statement. If the statement shows a more hawkish stance by the central bank, we would not be surprised if the selling continues this afternoon. The market is being hurt right now by some nervousness about President Trump’s recent executive orders, which are more on immigration than on economic policies. Recent commentary that the massive corporate tax cuts that the Administration has promised may come a bit later than many pundits originally expected seems to be weighing on the recent performance of the U.S. equity market, as well. 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.

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Before The Bell - After starting the month of January off on a strongly positive note, with the major equity averages all managing to post record highs over the course of the month, including the Dow Jones Industrial Average, which finally managed to ascend to the 20,000 mark, stocks pulled back measurably to end the month, with declines over the final two trading days of that 21-day span. Ironically, it was the change of Administration in Washington that fueled the bullish run from November until late January; it also was disenchantment with some evolving policies out of the Capitol that sparked the subsequent modest reversal.

On point, after stocks had rallied decisively on optimism that the push for lower corporate and individual tax rates, a lessening in regulations, and an increased commitment to the nation's infrastructure would help usher in a period of accelerating GDP growth, some less-than-popular Administration-led initiatives, such as the more restrictive approach to international trade and a tightening up of our immigration policies, have produced recent reversals. The last two sessions were prominent in that regard, as triple-digit losses were suffered by the Dow Jones Industrial Average, which led the way lower.

Specifically, after that 30-stock composite had cut a hundred points off of a one-time Monday loss of 223 points, there was some hope for a Monday-Tuesday reversal yesterday, especially after stocks rallied early in Europe. But that was not to be. In fact, the Dow, in particular, sold off quickly and the deficit continued to mount over the course of the morning into the early afternoon. Losses of note also were incurred until the late afternoon by the S&P 500 Index and the NASDAQ. However, while lower until the final hour of the day's trading, the smaller-cap indexes saw much less pronounced selling even at their low points. 

Then, there is earnings. Yesterday, following a relatively quiet day for Corporate America on Monday, a succession of large and small companies weighed in with their results. And the scorecard was mixed, with one prominent casualty on the day being Under Armour (UAA), the apparel maker. That company disappointed on both the top and bottom lines, and gave cautious guidance for the year ahead. But, while results were wanting to some extent, the reception was decidedly more harsh, with that stock, under mounting pressure in recent months as it was, losing another quarter of its value.

Other casualties included some high-profile tech names and the financial stocks. But the drug behemoths, some of which reported their results, and saw their pricing practices again come under criticism from the new Administration, turned in generally solid performances on the day, as did the telecom and utility stocks. Also, the difference between gaining and losing stocks was narrow on the NYSE, which one could not tell by solely looking at the Dow, which, as noted, was again under pressure yesterday. The better aggregate market tone was reflected in the NYSE's decent advance-decline ratio at the close.         

All told, the market did attempt to find support late in the day, and did so with success, as the losses narrowed sharply, although as was the case on Monday, the market still ended with losses for the Dow and the S&P 500. All told, the Dow, which was relatively weaker into the close, fell 107 points, bringing that index back down to 19,864. The S&P 500 eased slightly, with a late buying rush, while the NASDAQ ended up nominally. Conversely, the S&P Mid-Cap 400 and the Russell 2000 advanced on the day with some last-hour buying. This divided character also could be seen in the breakdown of the stock market, overall.

Now, a new day beckons, and as we look abroad for direction, we see that stocks in Asia were mixed overnight, while in Europe so far this morning, the bourses are tracking nicely higher. And on our shores, the Federal Reserve will shortly conclude its two-day FOMC meeting, with no change in interest rates the overwhelming consensus view. 

Then, there is earnings, with another heavy dose of reports on tap. Meantime, after the close of trading yesterday, Apple (AAPL - Free Apple Stock Report) reported quarterly results and Wall Street gave the issuance a thumbs up, sending that stock ahead by almost $4.00 a share in the pre-market hours this morning.  Finally, on the business front, a key manufacturing survey covering the month of January is due out today, as are car sales for last month.

As to our futures, the early read is higher, especially for the NASDAQ, following the weak showing during each of the last two days.   - Harvey S. Katz 

At the time of this article’s writing, the author held positions in one or more of the companies mentioned.