By Mark DeCambre and Victor Reklaitis, MarketWatch
'This is beginning to look a little too frothy for our liking,'
says Bank of America Merrill Lynch strategist
The Dow Jones Industrial Average rose more than 100 points in
late-morning trade Thursday, as stronger-than-expected quarterly
results from a few industrial giants overcame some early choppy
action.
Market strategists and traders attributed volatile markets to
investor exhaustion after repeated records. Meanwhile, the European
Central Bank left its monetary policy unchanged, as expected.
What are the main benchmarks doing?
The Dow rose 115 points, or 0.4%, to 26,364, with shares of 3M
Co. (MMM), Boeing Co. (BA) and Goldman Sachs Group Inc. (GS),
helping to offset a reversal lower in shares of Caterpillar.
Meanwhile, the S&P 500 index traded up 4 points, or 0.1%, at
2,841. The Nasdaq Composite Index traded 14 points, or 0.2%, at
7,428.
On Wednesday, the Dow rose 0.2% to a record close
(http://www.marketwatch.com/story/dow-futures-rise-as-market-rally-shows-no-sign-of-abatement-2018-01-24),
while the S&P 500 finished 0.1% lower and the Nasdaq Composite
lost 0.6%.
The three equity gauges are up between 6.1% and 7.4% so far in
2018, adding to last year's sizable gains as investors cheer the
expanding U.S. economy and growth in corporate profits.
What's driving markets?
Improved earnings from corporations so far as been the impetus
for rising stock-market values, but the market is showing signs of
exhaustion, some traders and analysts said.
The European Central Bank, as expected, left interest rates
unchanged
(http://www.marketwatch.com/story/ecb-leaves-monetary-policy-unchanged-2018-01-25)
on Thursday and repeated that it expects to keep interest rates at
present levels for an "extended period" and "well past" the end of
its asset purchase program, which is due to expire in September.
Investors will focus on the ECB's news conference set for 8:30 a.m.
Eastern Time.
Follow:ECB live: How will Draghi handle a surging euro?
(http://www.marketwatch.com/story/ecb-live-how-will-draghi-handle-a-surging-euro-2018-01-25)
Meanwhile, Treasury Secretary Steven Mnuchin said on Thursday at
the World Economic Forum in Davos, Switzerland that the U.S. dollar
"is not a concern of mine," noting that "in the longer term, we
fundamentally in the strength of the dollar." The remarks made
during a panel discussion at the forum were an attempt to walk back
comments the Treasury secretary made a day ago, which implied that
he preferred a weaker dollar.
What are strategists saying?
"The market has been racing nonstop towards the finish line and
just got a cramp in its leg," said Michael Antonelli, equity sales
trader at Robert W. Baird & Co. "The market should be going
higher on some of these [corporate quarterly] reports, but this
market now strikes me as a runner that has run out of steam, he
said.
"While we remain bullish for the year as a whole, this is
beginning to look a little too frothy for our liking," said James
Barty, a Bank of America Merrill Lynch strategist, in a note on
Thursday.
U.S. stock indexes and global benchmarks have been "fast out of
the blocks" in the new year, Barty said. "Could equity markets melt
up? Possibly," he added. "But additional shorter-term hedges make a
lot of sense when things are as frothy as this."
Which stocks look like key movers?
3M shares were rising after the manufacturer reported
fourth-quarter results that were better than expected on an
adjusted basis and increased its quarterly dividend by 16% to $1.36
a share. Shares were up 2.4%, contributing about 40 points to the
price-weighted Dow.
Caterpillar Inc. shares (CAT) declined 1.7%
(http://www.marketwatch.com/story/caterpillar-shares-jump-3-as-earnings-and-guidance-top-estimates-2018-01-25)Thursday,
even after the company reported better-than-expected earnings for
the fourth quarter and offered upbeat guidance for 2018. The
company's shares had been on uptrend before giving up its
gains.
Celgene Corp.'s stock(CELG) added 0.9% after the
biopharmaceutical company reported a fourth-quarter profit
(http://www.marketwatch.com/story/celgenes-stock-gains-after-profit-beats-expectations-2018-01-25)
that rose above expectations. The company swung to a net loss of
$81 million, or 10 cents a share, in the quarter to Dec. 31, from a
profit of $429 million, or 53 cents a share, in the same period a
year ago.
Shares of American Airlines Group Inc.(AAL) retreated by 3.3% on
Thursday after the company reported fourth-quarter earnings
(http://www.marketwatch.com/story/american-airlines-reports-q4-earnings-ahead-of-wall-street-forecasts-2018-01-25)
that were above Wall Street expectations.
Facebook Inc.'s stock (FB)rose 0.6% action, looking by reports
that U.K. Prime Minister Theresa May plans to blast
(http://www.independent.co.uk/news/uk/politics/theresa-may-davos-speech-facebook-twitter-terrorist-propaganda-donald-trump-a8176281.html)
social media companies again for providing platforms to terrorists,
child abusers and slave traders. May, who is expected to make these
remarks at the World Economic Forum in Davos, Switzerland, has
previously criticized
(https://news.sky.com/story/tension-between-theresa-may-and-facebook-over-extremism-online-10904140)
such companies along these lines.
Ford Motor Co.'s stock (F)looks set for a down day, off 3.3%,
after the car maker late Wednesday reported disappointing
fourth-quarter results and reiterated a bleak outlook
(http://www.marketwatch.com/story/fords-bleak-outlook-worsened-by-outside-factors-2018-01-24).
(http://www.marketwatch.com/story/fords-bleak-outlook-worsened-by-outside-factors-2018-01-24)Amazon.com
Inc. shares (AMZN) are up 0.4% in premarket trading Thursday after
an analyst at DA Davidson raised his price target on the stock to
$1,800.
Home Depot Inc. (HD) said it would pay one-time $1,000 bonuses
for U.S. hourly associates following corporate tax cuts. Shares for
the home-improvement retailer were little changed. Shares were off
0.8%.
Freeport-McMoRan Inc. shares (FCX) jumped 1.8% premarket
Thursday, after the mining and metals company posted
better-than-expected
(http://www.marketwatch.com/story/freeport-mcmoran-shares-jump-3-premarket-after-earnings-beat-2018-01-25)
fourth-quarter earnings.
Kroger Co. shares (KR) are up 2.3% in Thursday premarket trading
after reports that the grocer is in talks to join wi
(http://www.marketwatch.com/story/kroger-shares-jump-on-reports-of-alibaba-partnership-2018-01-25)th
online retailer Alibaba Group Holding Ltd. (BABA).
Apple Inc. shares (AAPL) fell 0.6% in Thursday morning
(http://www.marketwatch.com/story/apple-stock-falls-after-morgan-stanley-lowers-target-2018-01-25)
trading after Morgan Stanley analysts weighed in on the question of
iPhone X supply and demand Thursday.
Intel Corp. (INTC)and Starbucks Corp.(SBUX)are expected to
report results after the close.
What economic data could help drive markets?
Initial U.S. jobless claims rose by 17,000 to 233,000
(http://www.marketwatch.com/story/us-jobless-claims-rise-one-week-after-dropping-to-45-year-low-2018-01-25)in
the seven days ended Jan. 20., below the 240,000 forecast of
economists polled by MarketWatch.
Check out:MarketWatch's Economic Calendar
(http://www.marketwatch.com/economy-politics/calendars/economic)
And the leading economic index jumped 0.6% in December, marking
the third straight strong
(http://www.marketwatch.com/story/us-economy-primed-for-fast-start-to-2018-leading-indicators-show-2018-01-25)increase
and suggesting the U.S. is likely to grow rapidly in early
2018.
Separately, new-home sales were at a 625,000 seasonally adjusted
annual rate in December
(http://www.marketwatch.com/story/new-home-sales-droop-in-december-but-cap-a-strong-2017-2018-01-25),
the Commerce Department said Thursday.
What are other assets doing?
European stocks
(http://www.marketwatch.com/story/european-stocks-fall-to-1-week-low-as-all-eyes-on-ecb-2018-01-25)were
lower as the ECB's President Mario Draghi acknowledged the eurozone
economy is improving, sending the euro higher while most Asian
markets closed lower. Gold futures and oil futures were gaining,
and the ICE U.S. Dollar Index was extending its recent drop
(http://www.marketwatch.com/story/dollar-falls-further-as-mnuchin-defends-weak-buck-comments-2018-01-25)
that has taken it to three-year lows.
(END) Dow Jones Newswires
January 25, 2018 11:22 ET (16:22 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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