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Stock Market News for January 05, 2018

Markets managed to maintain last year’s momentum on the third trading day of this year following solid job additions in U.S. private sector and significant rise in business activity in China and Europe. Also, expectations of better earnings season had a positive impact on investor sentiment.

All the three key U.S. indexes touched new all-time highs on Thursday, with the Dow touching the psychological level of 25,000 for the first time. The blue-chip index registered its fastest 1,000-point rise since its inception in May 1896. Also, the 30-stock index posted 1,000-point increase five times in 2017 on the back of Trump’s pro-growth economic policies, upbeat economic data and strong corporate earnings.

How the Benchmarks Fared?

The Dow Jones Industrial Average (DJI) increased 0.6%, or 152.24 points to close at 25,075.13. The S&P 500 rose 0.4% to close at 2,723.99. The tech-laden Nasdaq Composite Index closed at 7,077.92, gaining 0.2%. The fear-gauge CBOE Volatility Index (VIX) decreased 0.6% to close at 9.10. A total of around 7.0 billion shares were traded on Thursday, higher than the last 20-session average of 6.3 billion shares. Advancers outnumbered decliners on the NYSE by a 1.46 -to-1 ratio. On Nasdaq, a 1.50-to-1 ratio favored advancing issues.

Private Sector Adds 250K New Jobs In December

On the domestic front, U.S. private employers added 250,000 jobs in December, higher than analysts’ expectations of around 195,000 jobs, according to the Automatic Data Processing, Inc. ADP. This was also quite better than November’s revised number of 185,000.

Coming to earnings, the exact earnings impact of the tax legislation will become clear once it is signed into law, but preliminary estimates suggest a material earnings boost. S&P 500 earnings in 2018 are already expected to be up 11.7%, with the growth pace expected to roughly double as a result of the tax legislation. Solid job creations in the private sector and strong earnings outlook boosted sentiment.

Additionally, out of the 11 key S&P 500 sectors, eight of them managed to close in the green. The Financial Select Sector SPDR (XLF) advanced 1%, becoming the biggest gainer among the S&P 500 sectors. Some of its key holdings including The Goldman Sachs Group, Inc. GS and Wells Fargo & Company WFC rose 1.4% and 1.3%, respectively. Both Goldman Sachs and Wells Fargo have a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

China, Eurozone Indicators Improve

Global stocks increased on Thursday after business activity in China and the Eurozone picked up on the last month of 2017. China's Caixin China General Services Business Activity advanced from 51.9 in November to 53.9 in December, reaching its highest level since August 2014. Additionally, Caixin Composite Output Index rose from 51.6 in November to 53.00 in December, indicating fastest growth rate for a year.

Moreover, per IHS Markit’s survey data, Purchasing Managers’ index, which measures the business activity, of the Eurozone increased from 57.5 in November to 58.1 in December, settling at its best level since Feb 2011. Business activity in the Eurozone has now increased for 54 straight months. Encouraging business activity data in China and the Eurozone had a positive impact on both the global and domestic markets.

Stocks That Made Headlines

Macy's Holiday Comps Fails to Lift Investor Sentiment

Despite taking a slew of measures to improve performance Macy’s, Inc.’s M holiday sales witnessed only a modest gain during the holiday season. (Read More)

L Brands Comps Up in December, Stock Down on Soft Q4 View

L Brands, Inc. LB shares tanked 12.3% yesterday after the company updated earnings estimate for fourth-quarter fiscal 2017, which is below analyst expectation. (Read More)

JC Penney Posts Upbeat Holiday Sales, Reiterates FY17 View

J. C. Penney Company, Inc. JCP reported positive comparable-store sales (comps) this festive season, unlike the prior year. (Read More)

Zacks Editor-in-Chief Goes "All In" on This Stock

Full disclosure, Kevin Matras now has more of his own money in one particular stock than in any other. He believes in its short-term profit potential and also in its prospects to more than double by 2019. Today he reveals and explains his surprising move in a new Special Report.

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Wells Fargo & Company (WFC): Free Stock Analysis Report
Goldman Sachs Group, Inc. (The) (GS): Free Stock Analysis Report
L Brands, Inc. (LB): Free Stock Analysis Report
Macy's Inc (M): Free Stock Analysis Report
J.C. Penney Company, Inc. Holding Company (JCP): Free Stock Analysis Report
Automatic Data Processing, Inc. (ADP): Free Stock Analysis Report
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