On Tuesday, stocks regained much of the ground lost to the profit-taking of the last week. The Dow Jones Industrial Average rose over 100 points, up 0.6%, the S&P 500 gained 0.7%, and the Nasdaq jumped 0.9%. But the clear leaders were the small-caps as represented by the Russell 2000, up 1.7%.
The rally, especially by the Russell 2000, was attributed to President Donald Trump’s moves to support infrastructure projects. He also cited the need to make the permit process for such projects less onerous by streamlining the paperwork. And, he signed documents that start the two oil-pipeline projects (Keystone XL and Dakota Access) that had been blocked under the Barack Obama administration. He said that the pipelines would be built using U.S.-produced steel and that the contracts would be “re-negotiated.”
E I Du Pont De Nemours And Co’s (NYSE:DD) stock jumped 4.5% after reporting better-than-expected earnings. The company also announced that it expected the merger with Dow Chemical Co (NYSE:DOW) to close in the first half of 2017.
The benchmark 10-year Treasury fell as “risk-on” strategies replaced the uncertainties of the last two weeks. The Wall Street Journal Dollar Index rose 0.4% vs. a basket of 16 currencies.
At the close, the Dow Jones Industrial Average gained 113 points, closing at 19,913, the S&P 500 rose 15 to 2,280, the Nasdaq vaulted to 5,601 for a gain of 48 points, and the Russell 2000 closed at 1,369, up 21 points. The NYSE’s primary exchange traded 865 million shares with total volume of 3.8 billion shares. The Nasdaq crossed 1.8 billion shares. On the Big Board advancers outpaced decliners by 2.8-to-1, and on the Nasdaq advancers led by 2.6-to-1. Blocks on the NYSE increased to 6,771 from 5,957 on Monday.
Yesterday’s big technical news was the break to new highs, both intraday and closing, by the S&P 500. The 500 broke the Jan. 6 closing high of 2,277 by 3 points, supported by six strong cyclical sectors led by Materials, which led all others with a 2.5% gain helped by the good report from DuPont.
More important from a technical viewpoint, the index not only regained its 20-day moving average but used it as a springboard to jump through the old high. Volume was just average, and MACD as well as momentum (not shown) were flat. This indicates that despite the very positive “on-risk” nature of the day, the big stocks will continue to plod, and not race, to new daily highs.
Conclusion: The small-caps are the place for traders to concentrate their efforts. This is because the big companies have more pressure from a strong dollar and other global headwinds.
But it is clear that even the Big Boys, like DD, are benefiting from an emphasis on increases in earnings and revenues with less dependence on the Federal Reserve’s interest-rate policies. The bull may be getting old, but his strength is increasing due to his enriched diet of higher earnings.
Today’s Trading Landscape
To see a list of the companies reporting earnings today, click here.
For a list of this week’s economic reports due out, click here.
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