U.S. equities mostly moved higher on Monday despite a harrowing mid-day decline in big-cap tech stocks, which although it was culled into the close, pushed the Nasdaq 100 into the red.
In the end, the Dow Jones Industrial Average gained 0.3%, the S&P 500 gained 0.2%, the Nasdaq Composite gained 0.1% and the Russell 2000 gained 0.7%. No major catalysts were in play as investors await the outcome of the Federal Reserve’s two-day policy meeting that kicks off on Tuesday.
Treasury bonds weakened, the dollar climbed, gold lost 1.1%, and crude oil was little changed. Financials led the way thanks to the backup in long-term interest rates, raising net interest margins hopes, with a 1% gain. Utilities and REITs were the laggards, since they are dividend focused and thus trade in a bond-like fashion, with declines of 1% and 0.5%, respectively.
Silver Spring Networks Inc (NYSE:SSNI) gained 23.9% after agreeing to be acquired in a $830 million deal. Orbital ATK Inc (NYSE:OA) gained 20.2% after Northrup Grumman Corporation (NYSE:NOC) bought it in a $9.2 billion deal to gain increased exposure to the space/missiles business. And Caterpillar Inc. (NYSE:CAT) gained 2% on an upgrade from analysts at UBS.
Click to Enlarge On the downside, Mattel, Inc. (NYSE:MAT) fell 6.2% after the WSJ reported Toys ‘R’ Us could file for bankruptcy as soon as the next few weeks. Stifel noted about 11% of the company’s revenues come from the beleaguered retailer that went private about a decade ago and has since suffered from a general brick-and-mortar malaise as well as a heavy debt load.
Conclusion
Good feelings that ignited this current market “melt up” to new record highs started after Hurricane Irma wasn’t the beast the Weather Channel made her out to be. It continued with an apparent effort at bipartisanship by President Donald Trump. And it was capped by headline fatigue related to Pyongyang. Unless the North hits Guam, Wall Street seems to have written off this latest
And it was capped by headline fatigue related to Pyongyang. Unless the North hits Guam, Wall Street seems to have written off this latest geopolitical flare up.
Two major catalysts are now on the horizon. The first is the Fed announcement on Wednesday where “quantitative tightening” is expected to launch. Investors seem unfazed by this — the end of a swollen $4.4 trillion balance sheet after years of bond purchase stimulus starting back in 2009 — because of the small initial size of the pullback.
The next big catalyst heading into October are hopes for a budget/debt ceiling/tax reform deal out of Washington. The latest is that Trump is looking to trade a softer stance on immigration for increased infrastructure spending and middle-class tax cuts. Moreover, there are reports late Monday that fresh healthcare reform push is underway in the Senate.
All this comes in the contest of an economy that continues to chug along at “Goldilocks” speed. Apple Inc. (NASDAQ:AAPL) looks to be on the verge of another iPhone upgrade super cycle as well with the iPhone X, which will help everything from retail sales to overall S&P 500 earnings growth.
Are there blemishes? Sure, if we look hard enough.
September is historically a tough month for stocks. In fact, it’s the only one with a negative average return. And the folks at the Almanac Trader note that the S&P 500 has declined in 22 of the last 27 weeks after September options expiration (which was Friday) for an average loss of 1%.
Breadth remains a problem as well. Jason Goepfert at SentimenTrader notes that the Dow snagged four record closes in a row last week, but with fewer than half of its components rising.
Check out Serge Berger’s Trade of the Day for Sept. 19.
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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Anthony Mirhaydari is the founder of the Edge (ETFs) and Edge Pro (Options) investment advisory newsletters. Free two- and four-week trial offers have been extended to InvestorPlace readers.
