Phobia of Round Numbers: Dow Tiptoes Around 20,000
Stocks on Wall Street ended up yesterday, even after the Fed’s December minutes pointed to concern that faster economic growth under Trump will necessitate a faster rate hike pace to check inflation. In summary for the day, the S&P 500 rose 0.57%, the NASDAQ rallying 0.88%.
Stocks have rallied since the elections, even causing Santa to let out a grin as the market recorded a positive yield over the last 5 days of 2016 and the first 2 days of 2017, in other words, a “Santa Claus rally” in keeping with holiday tradition. The S&P 500 recorded modest gains of 0.3% over the 7-day trading period.
Stocks soared over the last 2 months on the background of expectations that Trump will fuel economic growth with tax cuts, infrastructure spending, and a move to lessen financial industry regulation. In tandem, investors are concerned that Trump’s moves are likely to increase inflation and push the U.S. central bank to hike rates more than expected prior.
The extremely low interest rate environment has sparked a rally of over 200% on the S&P 500 since the 2008 financial crisis – and investors are concerned that a rate hike is likely to limit future gains.
The better than expected December car sales figures released yesterday helped carmaker stocks skyrocket. Both General Motors (GM) and Ford (F) rose over 4%.
The stock of the biotech company, Gilead (GILD) jumped 3% after the company appointed a new chief of hematology and oncology.
Crude traded up 1.8% at the $53.26 barrel level.
On the S&P 500, 27 stocks rose to new 52-week highs, not a single stock falling to a new yearly low; on the NASDAQ, 160 stocks recorded new 52-week highs, 18 falling to new yearly lows.
About 7 billion shares changed hands on U.S. exchanges, above the 6.8 billion average over the last 20 trading days.
Thursday: The 20,000 point level is again in play today, traders focusing on economic releases from the service sector and different employment figures. The Dow Jones closed yesterday at the 19,942 point level – and needs to gain just 60 points to scale past the key 20,000 point level for the first time in history.
A lot of investors’ focus is now on the 20,000 point level on the Dow – and how the market will react when this level is surpassed – and more important than anything else, whether we’ll see a phobia of round numbers, a renewed fear of heights.
The moment the Dow Jones hits 20,000, discussion on Wall Street will focus on whether we’re talking about a resistance level or a springboard likely to fuel new enthusiasm for future gains. The risk factor for investors is that the market is rallying on the background of positive expectations for the plans of the incoming Trump administration without any thought being given to the uncertainty going forward, like the president-elect’s trade policy.
Economists don’t expect Trump’s tax cuts or fiscal spending plan to make a large contribution to the American economy until late 2017 or 2018. The S&P 500 is likely to test the 200-period EMA at the 2,139 point level – situated over 100 points beneath the market’s current level – over the coming weeks. The latest dollar strengthening is likely to constitute an economic risk factor.
Today’s economic figures will start off with the ADP survey for the number of private sector jobs produced. The figure will be released at 8:15 N.Y. time, economists expecting to see 170 thousand new hires, slightly beneath the 178 thousand figure anticipated on Friday for overall economic hiring, which includes both private and public hiring.
First time unemployment claims will be released at 8:30 before opening, economists expecting a decline to 260 thousand from last week’s 265 thousand reading. Markit’s PMI index will be released at 9:45, and the ISM service sector index will be released at 10:00. Likewise, weekly crude reserve figures will be released at 11:00.
Today, we’ll see these earnings reports released in the morning time: Monsanto (MON), Walgreens Boots (WBA), and Constellation Brands (STZ). Ruby Tuesday (RT) will report after the closing bell.
After Closing: After closing yesterday, the department store chain, Macy’s (M), slashed its 2016 earnings forecast, placing the finger of blame on weak handbag and watch sales; the stock toppled 10.85% and is expected to fall again at the beginning of trading today. JWN shed 5%, and JCP, 4.4%.
Thursday’s Hot Stocks: JWN, M, KSS, MON, WBA, and STZ
Today’s Picks – Day Trading
Have a great trading day!