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The Market Sum | Insight after the bell

By Caleb Silver, Editor in Chief

Wednesday's Headlines

1. Markets Losing Momentum in Record Territory

2. More Delays in U.S.-China Phase One Trade Deal

3. Crude Oil Drops on Inventory Spike

4. Large Caps Show Strong Performance

Markets Closed

Dow
27,492.56 +0.00%

S&P
3,076.78 +0.07%

Nasdaq
8,410.63 -0.29%

VIX
12.62 -3.66%

Bitcoin
$9,342.70 -0.18%

US 10-Yr Yield
1.81 -2.79%

Image: Getty Images

Markets Today

Stocks essentially flatlined on Wednesday as markets remained wary about the prospects of U.S.-China trade talks. The major U.S. indexes began the day in slightly bullish mode, with investors hoping for a continuation of the record-breaking upside momentum that has prevailed within the past week. Optimism surrounding the trade talks has been running high of late, but momentum has appeared to slow, at least for the time being.

Wednesday saw the potential for more delays in the negotiation process after Reuters reported that the heavily anticipated "Phase One" portion of the trade deal, which has been a key driver of recent market gains, could be delayed longer than expected.

The S&P 500 and Dow Jones Industrial Average both ended the day flat to slightly positive, while the Nasdaq Composite closed further in the red and the small-cap Russell 2000 booked a significant 0.6% loss.

U.S.-China Trade Deal Drags On

On Wednesday morning, stocks took a quick dive after reports surfaced that U.S. President Trump and Chinese President Xi are unlikely to meet to discuss the Phase One trade deal until December. The deal was initially expected to be signed at the Asia-Pacific Economic Cooperation summit in Chile later this month, but that meeting was unexpectedly cancelled due to unrelated protests and riots.

With new reports that the deal talks will likely take place in Europe in December, the prospects for a signed deal have dimmed. This is especially the case as the Chinese side has been urging the U.S. to cancel a new round of tariffs on Chinese goods that are scheduled to go into effect in mid-December.

For many months now, stocks have been pushed and pulled by new developments in U.S.-China trade negotiations. And it doesn't appear that this will end anytime soon. With the latest potential delay in signing a partial deal, investor skepticism has grown. If not resolved soon, this could be one of the key factors posing a strong barrier to further record highs.

Crude Oil Hits Ceiling on Spike in U.S. Inventories

Within the past month, oil prices have been on the rise from early October lows as demand has appeared to pick up. But on Wednesday, crude oil took a sharp hit after the U.S. Energy Information Administration reported that U.S. crude oil inventories rose by 7.9 million barrels in the prior week, against a consensus forecast of only a 1.9-million-barrel build. This sizable upside surprise suggests that supply continues to run higher than expected, which should put a damper on rising prices.

Here's a three-month chart of crude oil futures, which includes Wednesday's drop:

Large Caps Show Strong Performance

Trade deal jitters notwithstanding, if you needed more evidence that stocks are doing really well this year, look no further than the table below, supplied by the Bespoke Investment Group. According to Bespoke, stocks in the large-cap Russell 1000 index are up 24.5% year to date, on average. Another interesting statistic from the group: "There are more stocks in the index up 50%+ year-to-date (143) than there are stocks that are down on the year (136)."

Below are the best performing Russell 1000 stocks year to date, listed with their total returns and market caps.

table courtesy Bespoke Investment Group

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(chart courtesy YCHARTS)

Cosmetics maker Coty rose 13.1% today after it beat earnings estimates and gave a positive full-year guidance. Healthcare firm DaVita rose 12.9% after it delivered both earnings and revenue beats. DaVita also raised earnings guidance for FY 2019 and 2020. HP Inc rose 6.4% after Xerox made an offer to buy it.

Oil exploration and production (E&P) company Diamondback Energy fell after it reported misses on both revenue and earnings. Travel companies TripAdvisor and Expedia group fell 11.3% and 7.4% respectively.

Word of the Day

Dow Jones Industrial Average (DJIA)
The Dow Jones Industrial Average (DJIA) is an index that tracks 30 large, publicly-owned companies trading on the New York Stock Exchange (NYSE) and the NASDAQ. The Dow Jones is named after Charles Dow, who created it in 1896, and his business partner, Edward Jones.

Today in History

November 6, 1851

Today in 1851 Charles Dow was born on a farm in Connecticut. He became a reporter and, with his fellow reporter Edward Jones, started Dow, Jones & Company. Dow Jones would publish the first issue of the Wall Street Journal in 1889. In 1896, the Dow Jones Industrial Average, at the time only composed of the top 12 stocks in the market, was calculated for the first time. Over his life he pushed for wider financial disclosure of information from public companies.

Source: https://www.investopedia.com/articles/financial-theory/08/charles-dow.asp