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After The Close - The stock market started positively today, as fears over the coronavirus ebbed. The move higher continued throughout the early morning, with all three major indices reaching all-time highs. However, the markets started to roll over once news broke that Dow Jones Industrial Average company Boeing (BA Free Boeing Stock Report) reported that it received no new orders in January. Additionally, news broke that the Federal Trade Commission issued special orders to five large technology firms, which make up a large portion of the S&P 500, NASDAQ, and Dow. These orders concerned their acquisition activities over the past ten years. The news spooked the markets and sent the indices down, in a series of lower highs and lows. The Dow and NASDAQ even fell into the red for a spell. The markets moved slightly back into the green in the final portion of trading. All told, the Dow closed just below breakeven, the S&P 500 was up six points, and the NASDAQ finished 11 points higher.

Moreover, the market breadth was very positive, as advancers outpaced decliners by a 2.4-to-1.0 ratio. REITs were among the best performers on the day, while consumer staples stocks were among the weakest.

In commodity news, oil prices finished slightly higher today, as traders speculated that containment of the coronavirus would help revive worldwide demand for energy. Meantime, U.S. Treasury bond yields were higher today, as demand for the safe-haven asset declined as traders moved back into stocks. The VIX Volatility Indicator ended slightly higher, as demand for options protection increased a bit. 

Looking ahead, tomorrow will be full of economic data, including the Energy Information Administration’s weekly report on crude oil inventories. A sharp build up in supply is expected, as the coronavirus has dampened worldwide demand.

Additionally, several companies, including Dow-component Cisco Systems (CSCO Free Cisco Stock Report), are slated to report quarterly results. Overall, we expect trading tomorrow will be affected by any developments concerning the coronavirus or the political situation at home.   - John E. Seibert III

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 - The major equity averages rallied off of Friday’s losing session and, along with the outsized gains early last week, were able to use yesterday’s productive session, which saw the bulls control trading throughout much of the day, to finish at or near all-time highs. The NASDAQ Composite, on the strength of a more than 1% gain, and the broader S&P 500 Index set new record highs. These gains came as the investment community continues to closely monitor the spreading coronavirus and tries to estimate what impact the deadly virus will likely have on the health of the global economy.

If nothing else, the coronavirus has played a major role in the stepped up volatility we have seen on Wall Street over the last fortnight. The stretch has witnessed sharp swings in trading and 600-plus-point daily moves in both directions for the index of 30 bellwether companies. Our sense is that the mood on Wall Street might be a bit different in recent weeks if the market was not getting a big boost from both a strong fourth-quarter earnings season and some encouraging data on the U.S. economy.

This earnings season—which is a bit longer in duration than normal as the large majority of companies are releasing year-end results that historically tend to come a bit later in the reporting cycle—has been a very good one for Corporate America. Indeed, more than 70% of the S&P 500 companies have either met or exceeded expectations, punctuated by strong results from the technology sector. Technology behemoths Apple (AAPLFree Apple Stock Report), Amazon.com (AMZN), and Microsoft (MSFTFree Microsoft Stock Report) all posted stellar results, and their stocks, and the broader market responded in kind. As noted, this has played a big role in supporting the market during a stretch where the coronavirus and its resulting implications on China’s economy and the health of the global economy, has cast a measure of uncertainty over the broader market. Typically, investors don’t like uncertainty, and often penalize stocks when such occurs, but that has not been the case for the U.S. stock market in recent weeks.

The U.S. economy also has lent some support to stocks. The biggest catalyst came in the form of another strong report from the Labor Department. On Friday, we learned that nonfarm payrolls jumped by a better-than-expected 225,000 positions in January. The report also included an uptick in the labor participation rate, which is an indication that more unemployed individuals are feeling more confident these days about finding a new job. The strong labor figures, combined with the first reading above 50.0 for the ISM’s Manufacturing Index in six months (any figure north of 50. 0 is an indication of an expanding sector) and another solid nonmanufacturing figure, are signs that the U.S. economy is doing well. We will get more on the state of the domestic economy over the next few days when Federal Reserve Chairman Jerome Powell issues prepared remarks before Congress. In general, we think the economic and earnings news may be working in the advantage of U.S. stocks, as investors are seeing the domestic equity market as a safe-haven option, as the fluid coronavirus situation unfoldsWith less than an hour to go before the start of the new trading day stateside, the equity futures are presaging a higher opening for the U.S. stock market. So far the trading overseas has been positive. Indeed, the main indexes in Asia (save Japan’s Nikkei), rallied some overnight, with the coronavirus clearly on the minds of international traders. Likewise, the major European bourses are in the black, as trading moves into the second half of the session on the Continent. Our sense is that investors will be waiting to hear what Fed Chairman Jerome Powell has to say about the coronavirus and what impact it may potentially have on the state of the U.S. economy. Mr. Powell has noted recently the U.S. economy is growing “moderately” and the job market has “strengthened further”. 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.