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Stock Market News For Nov 29, 2018

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U.S. stock markets witnessed a strong rally on Wednesday after Fed chair Jerome Powell indicated that key rates were close to a “neutral” level. Moreover, investors’ confidence on equities gathered steam following news that President Trump is looking for a way out to ongoing trade disputes with China. Additionally, third quarter GDP data confirmed robustness of the U.S. economy. All three indexes jumped up following these positive developments.

The Dow Jones Industrial Average (DJI) closed at 25,366.43, rallied 2.5% or 617.70 points. The S&P 500 Index (INX) increased 2.3% to close at 2,743.79. Meanwhile, the Nasdaq Composite Index (IXIC) closed at 7,291.59, gaining almost 3% or 208.89 points. A total of 8.04 billion shares were traded on Wednesday, higher than the last 20-session average of 7.82 billion shares. Advancers outnumbered decliners on the NYSE by 3.95-to-1 ratio. On the Nasdaq, advancers had an edge over decliners by 3.58-to-1 ratio.  The CBOE VIX decreased 2.8% to close at 18.49.  

How Did the Benchmarks Perform?

The Dow ended in positive territory for third successive day with twenty-seven components of the 30-stock index closing in the green while remaining three closed the red. Notably, the blue-chip index posted its biggest single-day gain since Mar 26 and is up nearly 1080 points in the first three trading sessions for the week started Nov 26.

The S&P 500 also closed in the green for third straight session. Moreover, the benchmark index recorded its biggest single-day gain since Mar 26.  The Technology Select Sector SPDR (XLK) and Consumer Discretionary Select Sector SPDR (XLY) were major gainers with 3.5% and 3%, respectively. Notably, ten out of total 11 sectors of the broad-market index closed in the green while only one finished in the red.

Meanwhile, the tech-heavy Nasdaq Composite continued its bull-run for three consecutive days buoyed by strong performance of tech behemoths. The tech-laden index recorded its biggest single-day gain since Oct 25. 

Fed Chairman Hints Soft Monetary Policy

On Nov 28, the Fed Chairman Jerome Powell indicated that the interest rate may be close to a neutral level while delivering a speech at the Economic Club of New York. He stated “Interest rates are still low by historical standards, and they remain just below the broad range of estimates of the level that would be neutral for the economy — that is, neither speeding up nor slowing down growth,”

Powell’s latest comments regarding the benchmark interest rate was in sharp contrast to his earlier statement that there is a long way to go for the rate to hit a neutral level. Although Powell hasn’t given any indication that the central bank will not opt for a fourth rate hike for 2018 in December, market participants, who were closely watching this event are of the opinion that the Fed is going to reduce the current pace of rate hikes reflecting a soft monetary stance.

Notably, possibility of a fourth rate hike in Decenter and continuation of tight monetary policy in 2019 were one of the major reasons for stock market routs in October and November. Recently, President Trump has severely criticized the Fed chairman for his hawkish stance which significantly undermined Trump’s fiscal stimulus.

A Ray of Hope on Trade War Front 

On Nov 28, citing U.S. government officials, The New York Times reported that President Trump is looking for a respectable compromise deal with China to resolve the eight month old tariff conflict between the two largest trading partners of the world. The newspaper reported that Trump is highly concerned about the negative impact of trade war on U.S. economy, particularly on the financial sector. Notably,President Donald Trump and Chinese President Xi Jinping are scheduled to meet on the sidelines of a G-20 summit in Argentina at the end of this week.

On Nov 27, U.S. National Economic Council Director Larry Kudlow said the U.S. government has reopened negotiations on trade-related issues with China at several high powered levels. Healso stated that President Trump is hopeful that an amicable solution to the eight-month old trade related conflict between two largest trading partners in the world can be reached during the upcoming G-20 summit.

Following these developments, shares of trade-sensitive stocks like Caterpillar Inc. (CAT - Free Report) and The Boeing Co. (BA - Free Report) increased 5% and 4.9%, respectively. The Boeing carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Economic Data

In its second estimate, the Department of Commerce confirmed that the U.S. GDP for the third quarter of 2018 expanded by 3.5%. The figure was in line with the consensus estimate. However, consumer spending, which constitutes around 70% of the U.S. economy, grew at 3.6% instead of 4% estimated earlier. On the other hand, business investment on equipment rose 3.5% in contrast to the earlier estimate that it had remained flat over the period.

The Department of Commerce also reported that the U.S. trade deficit for the month of October increased to $77.2 billion from a revised $76.3 billion deficit in September.

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