Stocks ended November mixed, with a strong positive impact from the energy sector. The Dow Jones industrials closed slightly higher following a decline after opening higher. However the index did score a gain for the sixth day in seven. The Wall Street Journal noted that November is viewed as the “most eventful in financial markets since the euro crisis ended in 2012.”
Several positive headlines steered the market, but the most impactful was an agreement by OPEC to lower oil production. That sent energy stocks soaring to a gain of 4.8% and crude oil to $49.44 per barrel, a jump of 9.3%. WTI, U.S. crude oil, enjoyed a monthly gain of 5.5%.
Other positive news for the markets: Better-than-expected economic data supported the idea that the November rally was fact-based; a business-friendly secretary of the treasury, Steven Mnuchin, was nominated by president-elect Donald Trump; and there were reports that the European Central Bank will extend its quantitative easing plan through March.
Bond losses in November sent yields to almost 2.5% as expectations of a rate hike in December grew.
At the close, the Dow Jones Industrial Average rose 2 points to close at 19,124, the S&P 500 fell 6 to 2,199, the Nasdaq lost 56 points at 5,324, and the Russell 2000 closed at 1,322, off 6 points. The NYSE’s primary exchange traded 1.6 billion shares with total volume of 5.4 billion shares, and the Nasdaq crossed 2 billion shares. On the Big Board, decliners outpaced advancers by 1.5-to-1, and on the Nasdaq, decliners led by 1.8-to-1. However, on the NYSE, advancing volume exceeded declining volume by almost 3-to-2. Blocks on the NYSE increased to 6,980 from 5,512 on Tuesday.
After surviving the back-to-back sell/buy, sell/buy signals early this year, the 500 has jumped to a new all-time high. And, hopefully this very simple method of determining the long-term trend has helped readers to stay in the market with their serious long-term investments.
Many economists focus on the Dow Jones Transportation Average as an indicator of future business conditions. Their trust in this indicator as an accurate forecast indicates that good economic times are coming, since the index is challenging its annual high made four sessions ago. The new administration is forecasting growth in the 3% to 5% range. Perhaps they are correct.
Conclusion: Despite the “Happy days are here again” outlook, don’t be surprised by a short-term correction. The S&P 500 has sustained a break to open air with no sellers in sight. But without the energy rally, yesterday would have ended lower.
Cautious buying is now our focus: Chasing stocks at higher-than-normal P/E’s is not usually profitable. Therefore consider sectors like the beaten-down biotechs or energy stocks that retreat from yesterday’s pop as candidates for your “Buy List.”
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.
