US shares ended higher on Wednesday, as energy investors shrugged off a jump in US oil stocks, and markets took a sanguine view of President-elect Donald Trump’s first speech since he won the November election.
The Dow Jones Industrial Average and Nasdaq Composite even came close to intraday record highs as tickers across the board rose.
Energy investors more than counterbalanced the fall-out among healthcare sector investors following renewed remarks about the sector from Trump.
The S&P 500 market bellwether closed up 0.3% at 2275 and led by First Solar Inc (NASDAQ:FSLR) up 5.1% to $35.08 after it was upgraded by investment analysts at Vetr from a “buy” rating to a “strong-buy” rating. The firm currently has a $39.42 target price on the solar cell manufacturer’s stock.
The oil sector brushed off official data from the EIA which showed that last week US crude oil inventories were 4.1mln barrels. Analysts had expected a rise of just 1.16mln. A week earlier the stockpile tally recorded a drop of 7.05mln.
A day earlier, EIA forecast that US oil production would pick up this year – giving rise to concerns about whether OPEC and Russia will respect their pledge to cut output and prop up oil prices after a two-year recession.
The US oil benchmark West Texas Intermediate was up 3% to $52.38 - its best day in about six weeks and best start to a year since 2013.
Trump’s speech certainly wasted no time in getting down to specifics. Half-way through the speech Trump, who becomes President on January 20, referred to a border tax with Mexico – sending the southern neighbour’s currency into free-fall briefly.
But Trump began his long-awaited address – a rehearsal before the big ceremonial oath swearing inauguration in a week’s time - with comments on how he expected more car companies to move their operations in the US.
“A lot of car companies are moving in,” he said. “A lot of news is going to be announced in the coming weeks…big big factories are going to be built in this country as opposed to another country. I hope GM [General Motors] will be following (Ford and FCA)…I think they will be…”
Later on, in relation to automotive and just about anyone else contemplating output outside of the US, Trump said: ““You think you are going to move your plant…move it to Mexico. It’s not going to happen. You are going to pay a very large border tax…There will be a major border tax on these companies that are leaving and getting away with murder.”
Ford Motor Co shares (NYSE:F), however, never really had any chance to rally and fall. They crawled in a low stag pattern for the entire session, not once managing to rise above the previous session’s close. Ford shares ended down 1.4% at $12.67.
Conversely, General Motors (NYSE:GM) closed up 1.6% at $37.95.
Another sector hit by Trump’s remarks was pharma. Although a darling before the election day, with many investors reckoning that Trump would go easier on the sector when his rival Hillary Clinton vowed to get tough with high-pricing of drugs medications, Trump has now championed that cause after remarks he made in late November.
Shares of US biotechnology stocks, among the high fliers so far in 2017, fell sharply after Trump said the US government would begin negotiating more aggressively on the price it pays for drugs.
The Nasdaq biotechnology index sold off as much as 3% during Trump’s delivery, cutting its gains for 2017 to 5.2%.
Larger drugmakers also faced selling pressure: Johnson & Johnson (NYSE:JNJ), the biggest US pharma group, closed down 1.2% at $114.73, while rival Pfizer (NYSE:PFE) dropped 2.2% before recovering to end down 1.8% at $32.83.
But they had a relatively light ride.
Pharma Bristol-Myers Squibb Company (NYSE:BMY) closed down 5.3% at 56.80, while the top S&P 500 faller was Endo Int'l Plc (NASDAQ:ENDP), down 8.5% to $14.01. Alexion Pharm Inc (NASDAQ:ALXN) closed down 4.9% to $136.66 and Mylan (NASDAQ:MYL), run by a Democrat Senator’s daughter and still reeling from last year’s criticism from Clinton for jacking up prices of its EpiPen product, shares were down 4.3% to $37.28.
The S&P Midcap 400 index closed 0.4% higher at 1686 and led by Msc Industrial Direct Company (NYSE:MSM) up 7.9% to $99.44 after bullish first quarter results.
The S&P Smallcap 600 closed up 0.4% at 843 and led by Veritiv Corporation (NYSE:VRTV) up 12% to $59.00 after investment analysts at Bank of America Corporation assumed coverage on shares of Veritiv in a research note issued on Wednesday. The brokerage set a “buy” rating on the stock.
Early trading
US stocks firmed on Wednesday as investors awaited President-elect Donald Trump’s first press release in six months.
Investors are hungry for clues over Trump’s plans for taxes, job creation, international trade, relations with China and Russia, his disengagement from his business empire, not to mention allegations that Russia has obtained embarrassing information about the next head of state.
A long shopping list and investors will settle for at least some answers. Trump will speak at 1100 ET (1600 GMT).
The market also awaited the latest weekly US energy stock figures from the EIA. Crude oil stocks are forecast to have risen by 1,162 versus a surprise fall of 7.05mln a week earlier. The data is released at 1030 ET (1530 GMT).
The S&P 500 market bellwether was up 0.04% at 2269 and led by pharma Merck & Company (NYSE:MRK) up 5% at $62.94. The US Food and Drug Administration is reviewing a license for Merck’s lung cancer treatment, Keytruda. It's going through an "accelerated approval" program.
The S&P Midcap 400 was up 0.08% at 1682 and led by industrial services group Msc Industrial Direct Company (NYSE:MSM) up 7.5% at $99.12.
MSC released its quarterly earnings results on Wednesday. The company reported $0.95 earnings per share (EPS) for the quarter, topping the consensus estimate of $0.93 by $0.02. MSC Industrial Direct Company had a net margin of 8.07% and a return on equity of 17.62%. The firm earned $686.30mln during the quarter, compared to analyst estimates of $684.94mln.
Pre-Open
US stocks are expected to open flat-to-weaker on Wednesday, ahead of an anxiously-awaited speech from President-elect Donald Trump.
The S&P 500 market bellwether is seen opening around 0.1% lower while the record-breaking Nasdaq Composite and the Dow are seen opening flat.
Investors are awaiting Trump's first news conference in nearly six months, as questions fly over Russia's role in the election year hacking of Democratic groups. Investors are also awaiting news on Trump's plan to disengage from his businesses and on his policy positions on international trade.
He canceled a previously scheduled press conference in December where he was expected to outline how he'd deal with conflicts of interest arising from his sprawling business dealings.
Trump waged an electoral campaign of protectionism as well as jobs creation at home.
Markets will also look to see how Trump handles any questions about allegations that Russia has landed information which could be embarrassing for Trump. It is understood the information involves Trump’s personal and business conduct. Russia denies having such information. Trump speaks at 1100 ET (1600 GMT).
Oil will also feature in the markets a lot on Wednesday.
A day after the EIA said 2017 US oil output is likely to rise, the government agency will release weekly crude oil and gasoline stocks data at 1030 ET (1530 GMT).
Meanwhile, the US Senate will hold a hearing today on the nomination of former ExxonMobil (NYSE:XOM) CEO Rex Tillerson to be the next secretary of state.
The confirmation hearing around 0915 ET (1415 GMT) is likely to focus on the oilman's relationship with Russian President Vladimir Putin. Tillerson is likely to be quizzed on climate change and energy policy as well.
Stock-specific, shares in drug company Merck (NYSE:MRK) are getting a boost premarket after it revealed late Tuesday that the US Food and Drug Administration is reviewing a license for a lung cancer treatment, Keytruda. It's going through an "accelerated approval" program.
Merck shares were up 2.9% at 461.67 pre-market.
On the flip side, the agribusiness Archer Daniels Midland (NYSE:ADM) is seeing shares fall pre-market after the company announced it signed a deal to buy a Kansas-based pet-food producer Crosswind Industries. The shares were down 5.6% at $41.96.
This is the second big pet-related takeover this week. Candy-bar maker Mars announced on Monday that it's buying VCA (NASDAQ:WOOF), a pet health care business, in a multi-billion dollar deal.