Markets Take Pre-Holiday Snooze, Close Mixed in Light Trading

Many traders got a head start on Thanksgiving. After breaking records on Tuesday, the markets barely budged Wednesday. Volume was light.

The Dow Jones Industrial Average and the S&P 500 ended Wednesday slightly down. The Nasdaq continued its winning ways and edged into the green.

Super investor Benjamin Graham once said: “Buy not on optimism, but on arithmetic.” Below is the math to keep in mind.

Federal Open Market Committee minutes released Wednesday indicate the Federal Reserve will hike interest rates soon. No surprise there.

The real story is third-quarter earnings. With 98% of S&P companies on the books, quarterly earnings are up 6.25% on a year-over-year basis. About three quarters of companies have reported earnings that exceeded expectations.

Despite previous concerns about market breadth, advances in recent days have been broad based. The Nasdaq stands out. The tech-heavy index is up 57% this year. Signpost ahead: Nasdaq 7,000.

Apple (NSDQ: AAPL), Facebook (NSDQ: FB), Alphabet (NSDQ: GOOGL), Microsoft (NSDQ: MSFT), and Amazon (NSDQ: AMZN) are the five most valuable companies on the stock market. These Nasdaq all-stars have enjoyed an impressive year.

This bull market is more than eight years old but it keeps going and going. The Energizer bunny comes to mind. But it’s more than just earnings. Also powering the bull are solid indicators. U.S. gross domestic product growth is running 3% for the full year.

Home prices are rising.  The Mortgage Bankers Association reported Wednesday that mortgage applications rose 5% last week.

Consumers are positive. The University of Michigan’s consumer sentiment survey also was released on Wednesday. Sentiment eased from a 13-year high. But the mood remains upbeat.

The sentiment index in November fell to 98.5 from 100.7 in October. That’s reassuring ahead of “Black Friday.” The day after Thanksgiving signals the start of the holiday frenzy. The survey showed that sentiment is high enough to prompt shoppers to loosen their purse strings. According to the survey, economic data presents “the best run-up to the holiday shopping season in a decade.”

The holidays make or break many retailers. Investors are girding for the seasonal orgy of consumer consumption. The retail sector was a top performer Wednesday.

Falling unemployment encourages consumers to spend. Unemployment is 4.1%, the lowest in 17 years. Analysts think it could fall even further in 2018.

The government reported Wednesday that weekly jobless claims fell 13,000 to 239,000. That’s roughly in line with estimates. The number of Americans filing for unemployment benefits fell last week after two consecutive weekly increases.

Crude oil jumped Wednesday. Inventory statistics are bearish but traders expect growth to fuel energy demand. West Texas Intermediate rose $1.13 to close at $57.96 per barrel. Brent North Sea crude rose 60 cents to close at $62.92/bbl.

OPEC officials are scheduled to meet next week. Their goal is to nail down details of their production cut deal. Saudi Arabia wants to extend the cut beyond March 2018. But partners are squabbling. Russia might back out.

Risk hasn’t disappeared. North Korea remains a threat. Special counsel Robert Mueller has more indictments up his sleeve. Trump’s pro-business agenda is stalled. Tax cuts are in trouble. Sex scandals dominate the news. Nothing is getting done in Congress.

But investors are shrugging off these concerns. They’re focusing instead on fundamentals. It’s worth remembering that the person in the Oval Office has limited influence over the vast economy.

Republican President Calvin Coolidge once said: “The chief business of the American people is business.” This truism still applies, no matter which party controls Washington, DC. Considering the caliber of our politicians today, that’s reason enough to give thanks.

Wednesday Market Wrap

  • DJIA: -0.27% or -64.65 points to close at 23,526.18
  • S&P 500: -0.08% or -1.95 points to close at 2,597.08
  • Nasdaq: +0.07% or +4.88 points to close at 6,867.36

Wednesday’s Big Gainers

  • Cerner (NSDQ: CERN) +5.02%

Health care IT provider on verge of cloud deal with Amazon.

  • Deere & Company (NYSE: DE) +4.35%

Farm equipment maker posts blow-out Q4.

  • Centene (NYSE: CNC) +3.22%

Managed care provider benefits from Medicaid growth.

Wednesday’s Big Losers

  • Hewlett Packard Enterprise (NYSE: HPE) -7.19%

CEO Meg Whitman’s surprise exit stuns Wall Street.

  • HP (NYSE: HPQ) -4.96%

HPE’s fall weighs on former segment HPQ.

  • (NYSE: CRM) -1.83%

Cloud software company gives current-quarter guidance below forecasts.

Letters to the Editor

“Is Bitcoin a worthwhile investment?” — Melissa P.

Melissa, I’m not a fan of pure plays on the Bitcoin phenomenon.

Investing Daily isn’t afraid of reasonable risk, but Bitcoin presents outsized risk.

That said, certain tech blue chips involved in Bitcoin technology would be suitable investments, if you’re eager for exposure to crypto-currency growth.

Silicon Valley software and chip making stalwarts provide important digital tools for “blockchain” infrastructure. They benefit from Bitcoin’s rise, but would get only slightly dinged if Bitcoin imploded.

Got a question? Drop me a line:

Happy Thanksgiving!

John Persinos is managing editor of Personal Finance and chief investment strategist of Breakthrough Tech Profits.


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