Closing Market Summary: Averages Close Friday at Record HighsBuyers showed up late to the party on Friday but were still able to recoup modest morning losses and push the major averages to fresh record highs. The uptick during the final hour prevented a mixed finish with the Nasdaq (+0.3%) and the S&P 500 adding 0.4% and 0.2%, respectively, while the Dow (unch) settled just above its flat line.
Today's pause wasn't a surprise given the equity market's recent seven session winning streak. However, below the surface, some uneasiness may be developing among investors as news out of Washington wraps tax reform in a blanket of uncertainty.
The final tax reform plan hangs in the balance as the GOP negotiates the Trump administration's proposed border tax, which has created a rift within the party. This is unfortunate news for investors who await the fulfillment of a tax reform promise that catalyzed the stock market's huge post-election run.
On the other hand, retailers have profited from the stalled implementation of the border tax, evidenced by the 0.9% uptick in the SPDR S&P 500 Retail ETF's (XRT 43.82, +0.39). The news underpinned the consumer discretionary (+0.3%) and consumer staples (+0.7%) sectors, which largely depend on the free flow of goods and services to keep prices competitive.
Consumer staples also received a jolt from M&A news after Kraft Heinz (KHC 96.65, +9.37) revealed that it has proposed a merger with U.K. consumer products giant Unilever (UL 48.53, +5.96). Unilever rejected the initial bid, stating that the offer was fundamentally undervalued, but Kraft aims to keep pursuing the transaction.
In other M&A news, Softbank announced that it is once again entertaining the idea of a T- Mobile (TMUS 63.92, +3.31) and Sprint (S 9.30, +0.30) merger after the first attempt in 2014 was struck down by regulators. The announcement adds fire to a growing competitive battle within the telecom services space (+0.8%) and follows news from earlier in the week from Verizon (VZ 49.19, +0.73) and AT&T (T 41.48, +0.23). The two companies now offer unlimited data plans, a move that was seen as a response to growing competition in the wireless space as the smaller T-Mobile and Sprint have gained ground on the two wireless giants.
The telecom services sector jumped from the lower portion of today's standings to the top of the leaderboard following the news. Utilities (+0.1%), real estate (+0.3%), technology (+0.3%), health care (+0.1%), and industrials (+0.2%) also finished in the green, while the remaining sectors—financials (unch), materials (-0.3%), and energy (-0.5%)—closed with losses.
U.S. Treasuries added to Thursday's gains, closing solidly higher across the board. The benchmark 10-yr yield finished three basis points lower at 2.42%.
Intraday trading volume was below average, suggesting some participants took off early for the extended weekend; however, options expiration masked the reduced participation. By day's end, more than a billion shares changed hands at the NYSE floor.
Today's economic data was limited to January Leading Indicators:
- The Conference Board's Leading Indicators report for January ticked up 0.6% (consensus +0.5%) after a 0.5% increase in December.
- The key takeaway from the report is that the strengths among the leading indicators have become more widespread.
The stock market will be closed on Monday in observance of Presidents' Day.
- Nasdaq Composite +8.5% YTD
- S&P 500 +5.0% YTD
- Dow Jones Industrial Average +4.4% YTD
- Russell 2000 +3.2% YTD