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Stock Indexes Drop, But Oil Stocks Rise; Vote Likely On Tax-Cut Bill | Stock News & Stock Market Analysis

U.S. stock indexes deepened their losses midday Friday, as Senate Republicans scrambled to salvage its tax-cut package. The indexes rallied Thursday on belief that the bill would pass, but doubts delayed a vote late Thursday.

X The S&P 500 dropped 1.1% midday Friday, while the Nasdaq slipped 1.5%. The blue chip Dow Jones industrial average lost 0.9%. The small cap Russell 2000 fell 2.5%.

Volume in the stock market today was running higher on both major exchanges.

The Republican tax-cut package stalled Thursday after the Joint Committee on Taxation said the bill would not generate enough tax revenue to avoid increasing the deficit. That along with a parliamentarian snag derailed the vote Thursday evening. With additional fixes, a Senate vote is expected this morning.

Selling picked up midday Friday after an ABC news report that former national security adviser Michael Flynn would testify against President Trump in a plea deal with special counsel Robert Mueller.

Echo From Reagan Era

Concerns over tax cuts and tax revenue is an old and tiresome story on the Hill. When Reagan sought passage of a tax-cut bill in 1985, the New York Times reported that the Joint Committee on Tax Revenue said it would reduce tax revenue. Reagan prevailed and the tax revenue rose in each of the next five years, proving the panel’s projections wrong. The panel, though, always has a challenging job. Dynamic factors are difficult to predict, and economics is all but dynamism.

In midday stock-market action, blue chips were roughly even between winners and losers. On the plus side, Merck & Co. (MRK) and Johnson & Johnson (JNJ) each initially rose about 1% before gains faded. On the negative side, General Electric (GE) sagged 1.4%.

GE has been a laggard this year. The diversified manufacturer’s stock is down 43% this year.

Apache Up Sharply

In S&P 500, the biggest gainer for the day was oil and natural gas explorer Apache (APA). The stock rose about 6% in heavy volume. Apache is on track for its fourth daily gain in a row. The stock has gained 11% since Monday’s close. Light sweet crude popped 1.31 to 58.71 per barrel.

The Street expects Apache to turn in a profit of 4 cents a share in 2017 after two years of losses. In 2018, analysts expect a profit of  54 cents a share for Apache.

Meanwhile, the exchange-traded fund Innovator IBD 50 Fund (FFTY) slipped about 1% as it tested its 50-day line. The ETF is based on the IBD 50 and is up 38% for the year. The stock  recently pulled about 5% off its Nov. 22 high.

Banks Stir

Money center banks, which are up almost 4% for the week, stirred midday Friday. Citigroup (C) rose 0.63 to 76.13 in brisk trade. Citigroup is trying to clear a 76.24 buy point. The stock crossed above an alternative entry at 74.95 in strong volume Wednesday.

Bank of New York Mellon (BK) added nearly 1% in average turnover, then dropped 1%. The stock is in a shallow, cuplike pattern. The potential buy point is 55.39.

Superregional bank KeyCorp (KEY) rose 1% to 19.21 in moderately higher volume, then lost its gains. The stock is just above a 19.13 buy point in a cup-with-handle pattern.

The bank stocks launched a nice rally about a year ago, rising from November to March. The banks then traded in a shallow, mostly sideways channel until recently. On Thursday, the money centers and superregionals hit 52-week highs.

The superregional group is No. 44 among 197 industry groups. Six weeks ago, superregionals were No. 140. Money centers are No. 75, up from 94 six weeks ago.

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