In another astounding upside move, the DOW made its second consecutive 200 plus point gain yesterday. Unlike Monday, when it was the positive reaction to the results of the French election…yesterday, it was the earnings results and the potential for further better reports that motivated the markets to move higher. As an example, DOW component CAT accounted for 52 positive points just by itself.

Today, the markets were enjoying another positive day until they ran out of gas just before the closing bell. The DOW lost 21, the S&P 500 fell 1, and the NASDAQ was off by a fraction today.  

The early motivator for the positivity in equities was the potential for the President’s corporate tax cuts. The idea is to lower the rate down to 15% from its current 35%. The bill would also lower the rate down to 10% for earnings held overseas to try to get them back to this country. As a result, all of the indexes made new intraday highs but settled down when DOW components BA and PG received negative reactions to their reports.  The big loser today was US Steel (X), down 26% for the day as it was clobbered for its worst loss in many years.  STX sold off sharply today with a loss of 16%.

There were a number of positive reactions as WYNN, CMG, PRGO, TSS and EW did well today on their reports. UTX was up nicely on its numbers and ran up to its all time high of 119. AMZN was higher today while FB and ISRG hit record peaks in their prices. 

The price action for the remainder of this week will be a function of the still important earnings that are yet to come…plus the political drama surrounding the reception to the tax cut bill. There is also the issue of raising the debt limit by the end of the week. If the limit isn’t raised, then we could have another government shutdown like the one we had a few years ago.

Donald M. Selkin

These are excerpts from Don Selkin’s Daily Market Notes, abbreviated and updated with permission from the author. Don Selkin is the Chief Market Strategist at Newbridge Securities Corporation, member FINRA/SIPC and provides the Fair Value analysis for CNBC each morning.  The commentary provided in this Market Letter is intended to provide timely market analysis and should not be considered a research report.  This Market Letter may contain, and is limited to: Discussions of broad based indices; Commentaries on economic, political or market conditions; Technical analyses concerning the demand and supply for a sector, index or industry based in trading volume and price; Statistical summaries of multiple companies’ financial data, including listings of current ratings; and, Recommendations regarding increasing or decreasing holdings in particular industries or securities.  This Market Letter does not make a financial or investment recommendation or otherwise promotes a product or service of the firm.   This Market Letter contains only news, facts, and commentary on information previously reported from a news source believed to be accurate and reliable by the author.  These news sources include the following: Bloomberg Financial, Reuters, and the Associated Press.