Promises need to be Kept!
Wall Street indexes ended mixed after yesterday’s volatile trading as investors focused on Pres. Trump’s difficulty in passing his new health care bill. Stocks on Tuesday suffered their worst day of losses since the elections on November 8th, investors worried that if the bill doesn’t pass smoothly through Congress, the promises about a tax cut – which were a key element of the rally over the last 2 months – won’t be kept until next year. The S&P 500 has risen 10% since the elections, especially on the background of Trump’s agenda to lower tax rates and massively increase infrastructure spending, though it can be said with great certitude that stock valuations are one on the market’s salient concerns.
The S&P 500 is traded at a 12-month forward PE of 18, compared to the historical average of 14 over the last 10 years.
Stocks, at the beginning of yesterday’s trading, took a turn for the worse, but succeeded in making it back into positive territory. Apple (AAPL) continued to rally another 1.7%, giving all 3 major indexes their biggest upward push. In summary for the day, the Dow Jones tacked on 0.03%, the S&P 500 rising 0.19%. The NASDAQ rose 0.48%. The Russell 2000 ended the trading day down 0.1%. Gold rose 0.3%, crude shedding 0.4%.
It seems like Trump and the Republican Party are losing the support needed to pass their controversial health care bill. The congressional vote takes place today, with a loss in the headcount or a postponement of the vote possibly hurting investor confidence in everything that pertains to Trump’s ability to keep his campaign promises. We can expect an uptick in market volatility if the bill doesn’t pass smoothly today.
One of the stocks standing out in yesterday’s trading was Nike (NKE), which fell 7.05% after the world’s largest sports apparel company missed its revenue forecast last quarter. The stock of Snapchat (SNAP) soared 7%, after the messaging app firm got its second “Buy” recommendation after its hot issue earlier this month.
Crude prices hit a 4-month low after reserve figures pointed to a sharper than expected rise last week.
On the S&P 500, 12 stocks rose to new 52-week highs, 14 dipping to new yearly lows; on the NASDAQ, 22 stocks recorded new 52-week highs, 87 falling to new yearly lows.
About 6.9 billion shares changed hands on U.S. exchanges, compared to the 7 billion average over the last 20 trading days.
Thursday: It looks like it’s a lot harder to kill the “Obamacare” health bill than had been expected; we now have on our hands the biggest test to the Trump rally which has lasted 4 months to date. Investors are waiting to see whether Pres. Trump and the Republicans can pass their replacement bill today and put their growth-oriented agenda back on track.
Investors who have ridden the “Trump train” are now stuck between two stops. Trump could get the number of needed votes – and that would pave the way for the passage of the health care bill, tax reform following suit. The chances of that happening are now lower than they were a few days ago. A standstill on health reform would show that Trump’s lost his magic touch and can’t push substantial reform through quickly.
Also, in the event the health law passes today, the fact that the president’s had to significantly increase the cost of the plan for it to pass would provide insight into the path needed to pass tax reform, among other reform. The sharp decline in the market on Tuesday was the beginning of the process of pricing in a more drawn out timetable for reform, i.e. one that strays from expectations. In the past, the new administration had said that the tax reform is slated to be complete by August, when Congress recesses, but if the dueling over healthcare persists, tax reform could certainly be pushed off until next year, which in its own right could lead to a deeper market correction. We’re talking about chances of a 5%-10% decline in the event efforts to pass the new healthcare bill are aborted.
The Economic Diary, today, will include initial weekly unemployment claims at 8:30 N.Y. time, new home sales figures coming out at the same hour.
Thursday Hot Stocks: FIVE, PVH, MLHR, CTAS, CAG, CAN
Have a great trading day!
|Thursday||8:30||New Home Sales||560K||Medium|
|GIS||General Mills, Inc.||AM||Tuesday|
|LUX||Luxottica Group S.p.A.||AM||Tuesday|
|FIVE||Five Below, Inc.||PM||Wednesday|
|CAG||Conagra Brands, Inc.||AM||Thursday|
|CMC||Commercial Metals Company||AM||Thursday|
|MU||Micron Technology, Inc.||PM||Thursday|
Today’s Picks – Day Trading!
New York Strategy Swing
Today’s Picks – Swing “New-York Strategy
No.1 – AKAO
|Sector||Healthcare | Biotechnology|