Stocks Enter Fourth Quarter With A Bang, NASDAQ Fades To Red, Oil Rallies

At the open, on the first day of trading in the fourth quarter, stocks powered ahead, posting massive gains on the back of President Trump's successful renegotiation of the NAFTA treaty with Mexico and Canada.

It was a giddy start to October, generally a month with plenty of volatility, due partially to funds which tend to close out their books prior to November, short and long term rules of capital gains taxation, and sometimes explosive conditions in the political realm prior to November elections.

On the trade Monday, the divergence pattern which has persisted for more than a year now, appeared again, as the NASDAQ sold off while the Dow and S&P held onto gains. This divergence of mainstream vs. largely tech stocks has been confounding to index and passive investors, as the old world and new have often traded in opposite directions. The solution has been to own some of both sides, with Dow and dividend-paying stocks on one side and speculative, tech stocks on the other.

In such a case, Monday's moves were a win for the old school, as the Dow powered ahead while the NASDAQ soured during the day. Over the long term, the two varieties of stocks have moved up in tandem, producing quality gains this year.

While stocks were hot and bonds stable, the big move of the day was in the oil field, with WTI crude futures up sharply, above 75.50 into the close. The higher price is possibly a reflection of easing of concerns over trade wars, with the new North American agreement at the forefront. In addition, coming sanctions on Iran - which begin on November 4 - are expected to crimp supply. Crude prices are currently trending at four-year highs. If the condition persists, high prices at the pump for consumers could hurt holiday sales, with the big shopping season less than two months ahead.

Dow Jones Industrial Average October Scorecard:

Date	Close	Gain/Loss	Cum. G/L
10/1/18	26,651.21	+192.90	+192.90

At the Close, Monday, October 1, 2018:
Dow Jones Industrial Average: 26,651.21, +192.90 (+0.73%)
NASDAQ: 8,037.30, -9.05 (-0.11%)
S&P 500: 2,924.59, +10.61 (+0.36%)
NYSE Composite: 13,125.35, +42.83 (+0.33%)

Trump Effect: Stocks Roar To New All-Time Highs Following Presidential Address

How important President Donald Trump's speech before a joint assembly on congress Tuesday night was is not easy to gauge, but, from a Wall Street perspective, he must have hit the high notes perfectly because all major averages were straight up at the opening bell and continued to add to gains throughout Wednesday's session.

The Dow, which blew away the 20,000 Rubicon less than a month ago, added nearly 1.5%, or 303 points, its largest one-day gain since early December. With Industrials leading the way, the other three major averages broke out as well, with the S&P pretty much reaching highs that analysts had been predicting as end-of-year results, yet we're barely two months into the new year.

How this kind of euphoria will eventually manifest itself is still a mystery, especially with stocks tacking higher despite consistent warnings of a valuation trap being set. While stocks continue to ramp on a daily basis, corporate reports are not following the same tune. Additionally, analysts from various houses also revised first quarter GDP estimates lower, with Goldman Sachs and the Atlanta Fed looking for 1.8% growth. JP Morgan and Bank of America are even more pessimistic, at 1.5% and 1.3%, respectively.

In the main, what companies behind the stocks are counting on is a relaxed regulatory environment under President Trump's administration. The President has already issued a variety of pro-business executive orders and his commitment to repealing and replacing the Affordable Care Act (Obamacare) is also being viewed as a positive on two fronts. First, it will free up consumer funds from an expensive mandated coverage nightmare; second, companies will probably get breaks as well in group coverage.

Adding to the speculative high spirits are items currently under the radar such as the President's budget, which includes massive cost-cutting across agencies, a one trillion dollar infrastruture plan that Mr. Trump touched on it in his speech, and trade negotiations with countries outside the framework of international treaties such as NAFTA, TPP and the World Bank.

All told, President Trump's first six weeks in office have been nothing short of miraculous for stocks, though it will take some time to see how it all plays out. Either stock pickers have been set up for a major catastrophe or the enthusiasm and honesty of the new president will indeed guide America and American business interests to new heights.

Lurking in the shadows behind the presidential bluster is the Federal Reserve, which meets in two weeks to decide whether to raise federal funds rates or keep them at current levels. Money is on them keeping the rates at the current 0.50-0.75, though even an increase of 25 basis points would seem to be inadequate to quiet Wall Street's enthusiasm.

At the Close, 3.1.17:
Dow: 21,115.55 +303.31 (1.46%)
NASDAQ: 5,904.03 +78.59 (1.35%)
S&P 500: 2,395.96, +32.32 (1.37%)
NYSE Composite: 11,661.22, +148.83 (1.29%)