The eight week winning streak for the DOW and S&P 500 ended today. At the closing bell, the DOW had dropped 39 points, the S&P 500 was down 2 points and the NASDAQ managed a fractional gain. Had a rally occurred late in the day to put these indices in the green, it would have been the longest weekly streak for the DOW since May 1995 and since January 2004 for the S&P 500.
The market seems to sense that the tax reform bill might not make it. A good part of the recent rally has been in anticipation of such an event. On the other hand, the underlying fundamentals of the market such as good earnings, worldwide economic growth and relatively low interest rates support things on the positive side.
With earnings season winding down and no major economic reports, the market has focused for the past couple of days on the failure to advance the tax reform legislation. We do not have to debate the various provisions of the bill here, but there is a perception that this version is going to explode the deficit. In order to have a chance at passing, it appears that major changes need to be made.
The one economic report released today showed that the mid-November University of Michigan Consumer Sentiment Survey slipped a bit to 97.8. It still remains at a fairly high historical level.
Next week we begin the home stretch for earnings which will be dominated by retailers including both HD and WMT.
Bond yields were higher today with the 10-year Treasury Note up to 2.40% following a jump in European yields. The 2-year Note was at 1.66% showing a little steepening of the curve after it had narrowed in to its lowest level in nine years. The dollar was narrowly mixed against other currencies and gold sold off by falling to $1,276 an ounce. Crude oil was also a little lower at $57.07 and appears to be meeting some resistance over $57. Oil prices have risen for the past five weeks for the first time in over a year.
Donald M. Selkin
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. These are excerpts from Don Selkin’s Daily Market Notes, abbreviated and updated with permission from the author.