Stock indices recorded their sixth consecutive closing high on Thursday. This was the first time in over two decades that this has happened. The move higher was probably buoyed by some signs of economic strength but also by optimism that Trump’s tax cuts that would help business are likely to become reality.
The S & P 500 reached 2,552 on Thursday up almost 0.6 percent, its longest record-making streak since June way back in 1997. It has gained 350 percent from its low of March 2009. Of course, all this resulted in trumphant tweets by President Trump: “Stock Market hits an ALL-TIME high! Unemployment lowest in 16 years! Business and manufacturing enthusiasm at highest level in decades!”
The market was pleased with news that the US trade deficit was narrowing and exports rebounding which could help growth in the third quarter. The number of Americans applying for unemployment also fell last week more than was predicted. Netflix was a bg gainer rising 5.4 per cent on the day as it raised the price on two of its membership plans.
The rally may also have been extended as the House of Representatives passed a 2018 budget resolution that may help the Republicans push through tax reform. Michael Underhill, chief investment officer at Capital Innovations said: “All eyes seem focused on the prospect of U.S. tax legislation. But the need for relief and reconstruction following the tragedy of three major hurricanes has superimposed a new agenda on Congress. How this may reshape the broader fiscal agenda — and the ability to get it done — is top of mind with investors, so any perceived progress is moving the market upward.”
The Dow Jones Industrial Average (DJIA) was up about 114 points or 0.5 percent at 22,775. The Nasdaq composite laden with technology stocks closed up about 50 points or 0.8 percent at 6,585. All three major indices closed at record highs for the third day in a row on Thursday. However, on Friday there were signs that the indices may have topped out at least for a while.
Both the S & P 500 and the DJIA suffered minor losses on Friday. However the technology heavy Nasdaq composite inched upward to another record. The DJIA was off a marginal two points to 22,773.67 that nevertheless ended a seven-day winning streak. The S & P was only off marginally as well losing just 2.74 points or 0.1 percent ending an eight-day winning streak. The Nasdaq ended up 4.82 points or 0.1 percent to 6,590.18. Over the week all three indices showed gains with the DJIA gaining 1.7 percent, the S & P 500, 1.2 percent, and the Nasdaq 1.5 per cent.
Surprisingly, a dismal jobs report did not result in a steep decline in stocks. Non-farm payrolls actually decreased by 33,000 in September, the first monthly decline since back in 2010. Analysts had expected 75,000 more jobs. The decrease is attributed in part to the effects of hurricanes Harvey and Irma.
As reconstruction begins job numbers may increase again. The unemployment rate continued to decline to 4.2 percent from 4.4. Wage rates rose slightly to 2.9 percent year over year compared to 2.7 percent in August. The market may have some concern about tropical storm Nate that could reach the Gulf Coast perhaps in Lousiiana by later this weekend
Michael Antonelli, of Robert W. Baird said: “Markets had been ludicrously overbought, with the S&P 500 rising for eight straight days by Thursday. Markets could have dropped even if we did not have a negative reading on the jobs report.The reaction on the market suggests that nothing has changed when it comes to rate hikes in December.”
European stocks traded mostly lower. We will know better next Monday whether there will be more declines in the market over if this was jut a weekend pause in a long-continuing bull market. As the appended video illustrates many analysts are expecting a further decline soon.
