Wall Street ended on a negative note Friday, ending a string of three triple-digit days for the Dow Industrials. The thirty-stock average settled at 23,358, with a net loss for the week of 64 points or 0.27%. The S&P managed to close with half of the percentage decline, but the NASDAQ gave up nearly 0.5%. The Russell 2000 and the S&P Small Cap Indexes provided traders with gains of 1.2% and 1.7%, respectively on hopes a tax reform deal will ultimately pass this year; with smaller companies likely to benefit more from tax relief. While crude oil stabilized at $56.55/bbl. the energy sector took a 3.5% hit, led primarily by oil service companies. Tech and industrials – this year’s clear leaders – ebbed, as investors rotated into more conservative plays, namely telecom and consumer goods. And safe-haven gold climbed $23.40/oz. to settle at $1,295.80.
Republican-backed tax-cut legislation passed in the House on Thursday, with the Senate expected to finalize its own bill this week. If some compromise of the two congressional plans can be agreed, corporate taxes may be cut to 20% from the current 35% rate, providing U.S.-based companies to stay competitive with their foreign counterparts. The prospect of personal tax cuts sent retail stocks higher, led by strong results from big-box stores Wal-Mart and Home Depot and specialty retailers Foot Locker and Abercrombie & Fitch, as well as positive guidance from RH parent Restoration Hardware.
This week, the Conference Board releases it leading economic indicators for October with a consensus estimate of a 0.7% rise vs. September’s decline of 0.2%. Existing home sales, October’s orders for durable goods and the University of Michigan’s consumer-sentiment number for November will also affect equities during the holiday-shortened trading week. On the earnings front, we will hear from conservative candidate Deere & Co. with a fourth quarter estimate of $1.45 per share compared to $0.90 a year ago, along with its outlook for 2018.
Continued wrangling on tax reform have traders on edge and headlines out of Washington are providing volatility as we head into this year’s final weeks of trading. For now, I remain cautiously optimistic on the outlook for stocks, viewing any recent selling as constructive, given the elevated level of the market. In the meantime, enjoy the Thanksgiving holiday.
Here is the answer to last week’s trivia question: Major U.S. air carrier TWA (formally Trans World Airlines), founded in 1921, was ultimately taken over in 2001 by? Delta Air Lines, Continental Airlines, American Airlines or United Airlines. Answer: American Airlines, then parent company AMR Corp.
Today’s Trivia Question: The ticker symbol RACE is associated with which company’s common stock? International Speedway Corp.; Ferrari, NV; Churchill Downs, Inc.; or Adidas, AG.