After The Close - The stock market started in the green today, as fears subsided about the coronavirus. Additionally, decent gains in productivity and wages were seen during the fourth quarter, which indicates a strengthening U.S. economy. The Dow Jones Industrial Average started heading higher, and the other indices rose in tandem. In fact, all three indices eventually rose to all-time highs, posting solid gains. Still, trading was somewhat choppy through a series of higher highs, and higher lows were made. The markets tapered off a bit in the final portion of the session but did not give up much of the day’s gains. All told, the Dow closed higher by 89 points; the S&P 500 was up 11 points, and the NASDAQ closed higher by 63 points.
Moreover, market breadth was rather even, as advancers did not outpace decliners by a notable ratio. Communications stocks were among the best performers on the day, while energy issues were among the weakest, despite a rise in the related commodities.
In commodity news, oil prices were higher today, as reports of a potential OPEC cut helped buoy the market. Still, the coronavirus has caused demand in China to decline at least temporarily. Meantime, U.S. Treasury bond yields were a mixed bag, as short-term rates rose slightly, but long-term rates were lower. The VIX Volatility Index was lower today, as demand for options protection fell some.
Looking ahead, tomorrow will have plenty of economic data released, including nonfarm payrolls and the unemployment rate for January. Additionally, wholesale inventories and consumer credit will be issued. On the earnings front, a few large companies are expected to report quarterly results, both after the bell today and before the open tomorrow. Overall, we think the trading session will be affected by the economic news and any developments concerning the coronavirus. - 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 stock market made it three up days in a row yesterday, as optimism over a jobs release and upbeat sentiment emerging from the possibility that we may be on the cusp of a vaccine breakthrough with regard to the coronavirus combined to send the Dow Jones Industrial Average up by 483 points. That was, as noted, the third consecutive strong gain for the market, with the latest two sessions combining to add nearly 900 points to the blue chip composite.
As to the economic news, Automatic Data Processing (ADP) reported that the nation had added 291,000 private-sector jobs last month, a figure that easily surpassed expectations. To be sure, this data point was just a prelude to the more critical non-farm payrolls report due out Friday morning from the U.S. Labor Department. That issuance is forecast to show a gain of 158,000 new jobs for January, up from 145,000 in December.
Given the strong ADP data, some are expecting an even stronger report from Labor, as well.
In regard to the apparent vaccine breakthrough, while there is still uncertainty around this spreading virus, the risks seem to be easing somewhat, especially as there appears to be some hope that a vaccine may well be introduced in two weeks, or so, rather than years as had been expected. Still, the toll from the virus keeps rising, with some 25,000 reported cases in China and nearly 500 deaths. And the numbers seem certain to rise further.
As to other news on the business front, the Institute for Supply Management issued its ISM survey on non-manufacturing, and this report showed a reading of 55.5 for January, which was slightly higher than the forecasted tally of 55.0. It also was a tad better than the December result of 54.9. Armed with these better metrics and the good news on the vaccine front, the market added to its early gains in the afternoon progressed.
In all, the leading indexes closed near session highs, with the Dow adding the aforementioned 483 points and the S&P 500 climbing 37 points. The advance in the NASDAQ was limited, however, due to a sharp retreat in shares of recently soaring Tesla (TSLA), the electric car maker. That issue, which had climbed to almost $950 on Tuesday, fell back to end the session yesterday at just under 740 a share. For much of the rest of the market, though, it was another session to be aggressively long equities.
Looking out to a new day now, we expect the market, up three days in a row to commence trading this morning with gains. – Harvey S. Katz, CFA