U.S. equities drifted lower on Thursday, risking a breakdown out of a tight two-month consolidation range just one day ahead of the inauguration of President-elect Donald Trump. This seems, on the surface, a little odd given Trump’s surprise victory boosted markets in a historic run to record highs.
But sentiment has turned recently, keeping the Dow Jones Industrial Average below the 20,000 threshold, as doubts have emerged over his aggressive stance on foreign trade, risks of an increased rate hike tempo and the specter of a showdown with budget hawks in Congress as the debt ceiling approaches once more in March.
In the end, the Dow lost 0.4%, the S&P 500 gave back 0.4%, the Nasdaq Composite dropped 0.3% and the Russell 2000 ended the day 0.9% lower. Treasury bonds were mostly weaker, the dollar mostly stronger, gold lost 0.9% and oil gained 0.4% but finished off its best levels after inventory data showed an unexpected build.
Industrial and telecom stocks led the way with gains of 0.6% and 0.3% respectively. Netflix, Inc. (NASDAQ:NFLX) gained 3.9% after a fourth-quarter earnings and revenue beat with record subscription adds. Higher cash burn as content costs rise was a blemish on an otherwise impressive report. Tesla Motors Inc (NASDAQ:TSLA) gained 2.3% after being upgraded to overweight by analysts at Morgan Stanley highlighting the Model 3 launch and lower potential competitive pressure from big tech companies like Apple Inc. (NASDAQ:AAPL).
Yield-sensitive REITs and utilities were the laggards, down 1% and 0.9%, respectively. AK Steel Holding Corporation (NYSE:AKS) fell 5.5% after being downgraded to “sell” at Citigroup on an expected decline in steel prices in the second half of 2017 due to increased supply.
After the close International Business Machines Corp. (NYSE:IBM) fell 2.3% after reporting better-than-expected results as investors were disappointed by the 19th consecutive revenue drop. American Express Company (NYSE:AXP) fell 1% on an earnings miss and weak guidance.
On the economic front, the news was mostly positive:
- Initial jobless claims fell pushing the four-week average to the lowest since November 1973.
- December housing starts rose 5.7% from the year before.
- The Philly Fed manufacturing index increased to its highest level since 2014.
Heading into Inauguration Day, it’s worth noting that new presidents have seen market losses as they’re sworn in two-thirds of the time. Trump’s post-election rally has been historic (just edging out Calvin Coolidge and William McKinley).
As a reminder, the Dow fell 5.3%, or 805 points, when President Obama was inaugurated in 2009 and 2% when President Reagan was inaugurated in 1981. Food for thought.
Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters. A two-week and four-week free trial offer has been extended to InvestorPlace readers.
