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After The Close - The bulls shook off a somewhat disappointing December jobs report on Friday, capping off the strongest opening week to a year in over a decade. The implementation of a 21% corporate tax rate has been a boon for stocks, with investors willing to look past the occasional miss from the business beat in favor of  a more auspicious profit outlook. This morning’s lackluster update on the employment front (the U.S. economy added 148,000 positions versus the 180,000 estimate) is not overly concerning, in our view, because it is not expected to alter the Federal Reserve’s monetary policy.

Each of the large-cap indexes set all-time highs, as valuations continue to be propelled higher amidst broad-based, tax-related optimism. The NASDAQ was the best-performing composite group, while the Dow soared higher behind another impressive showing by aerospace giant Boeing (BAFree Boeing Stock Report). The Russell 2000 was more split, and spent most of the day near its breakeven line.

Looking at the market sectors underscores the mostly positive tone of the session. Technology was the primary driver, though the healthcare and consumer goods groups were strong, as well. Overall, market breadth favored advancing over declining shares. The energy sector, meanwhile, traded lower due to a fall in oil prices.

Indeed, U.S. crude oil returned some of its recent gains. Concerns about over-valuation due to rising U.S. production was the biggest cause of today’s pullback. Previously, OPEC’s drilling accord and turmoil in Iran, one of the cartel’s foremost member nations, were propping prices higher. For the full day, the per-barrel value of domestic crude slipped $0.57, to $61.44.

As the closing bell approached, each of the major indexes ascended to new highs. We expect some intermittent profit taking to challenge the equity markets going forward, but the bulls remain in firm control of the market. Stay tuned. – Robert Harrington

At the time of this article’s writing, the author did not have any positions in the companies mentioned.

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Before The Bell - The triumphant bulls were out in force again yesterday morning, quickly driving the Dow Jones Industrial Average past the magical 25,000 mark for the first time ever, during the opening few minutes of trading. The latest gains were sparked by a strong release on private-sector payrolls. And, after the initial few minutes of trading, the gains increased, so that as we reached the first hour of the session in snowy and windy New York City, the Dow was ahead by about 170 points. That advance enabled the blue chip composite to handily outperform the other indexes.

As to the private-sector jobs report, payroll processor Automatic Data Processing (ADP) reported that the U.S. private sector had added 250,000 positions last month, which was materially ahead of the expectation of 190,000 new jobs. This report was followed moments ago by a survey from the U.S. Labor Department, in which it was noted that the nation had added just 148,000 jobs in December. The forecast had been for a payroll uptick of 180,000. (More on this survey below.) In other news, the Institute for Supply Management will soon report on conditions in non-manufacturing, or the services, sector for December. A solid showing is the forecast there.  

Meanwhile, yesterday morning's market gains were broad, if not sharp, with eight of the 10 leading equity sectors posting gains as we made it through much of the morning, while advancing issues held nearly a two-to-one lead on declining stocks on the NYSE. As has been the case to date in the new year, some of last year's laggards are doing well thus far in 2018, following the exhaustion of tax-loss selling late in 2017. One heretofore weaker group that showed some spark yesterday were the food stocks, several of which had been under pressure in recent weeks.

The stock market then retained its strong edge into the afternoon, with the Dow remaining above the 25,000 level, with its advance staying in the 150-point range through mid-afternoon. If there was nervousness ahead of the aforementioned Labor Department jobs issuance, it was not apparent from the latest trading pattern. In fact, several Dow stocks, including recently strong International Business Machines (IBM Free IBM Stock Report) and drug giant Merck & Co. (MRK Free Merck Stock Report) traded notably higher, while chipmaker Intel (INTC Free Intel Stock Report) faltered for a second day running on design flaw concerns in its semiconductors.  

Stocks continued on their merry way into the close, with the Dow, which hit the latest thousand-point level in less than two months, remaining near session highs. As earlier in the day, gaining stocks led losing issues by a comfortable margin, while just about all of the 10 major sectors ended in the black, with financials and health care among the leaders. In all, at the close, the Dow held a formidable gain on the day of 152 points. Most of the remaining composites posted modest increases.

Looking out to a new day as the East Coast attempts to recover from a severe snow storm and accompanying frigid temperatures, we see that stocks in Asia ended strongly higher once again, despite the tensions with North Korea, while in Europe the latest trends are quite bullish, as well. In this country, meantime, the equity futures, up solidly before the jobs announcement, are now showing little further change following the key issuance. As to the latest employment release, as noted, non-farm payrolls increased by 148,000 last month, which was well off of the consensus forecast for 180,000 new jobs.

Also, the November jobs increase was revised up from 228,000 to 252,000. However, October's payroll gain was reduced from 244,000 to 211,000. So, there was not much in the way of an aggregate revision for the two prior months in job creation. In a separate survey, meantime, the jobless rate came in unchanged at a multi-year low of 4.1%. Further, the labor-force participation rate held steady at 62.7% and average hourly wages rose by 0.3% in December after gaining just 0.1% in November. As to where the jobs are, the increases of note came in health care, construction, and manufacturing.  Conversely, retail-sector jobs declined by 20,000 last month. Overall, then, the report was mixed, as suggested by the muted reaction by the equity futures. - Harvey S. Katz, CFA  

At the time of this article’s writing, the author held positions in one or more of the companies mentioned.