The Major Averages Pull Back a Bit, Ahead of Debt Ceiling Deadline

Up 300+ points, down roughly 100 points as the Dow Jones Industrial average rose yesterday only to give back small gains. The Dow Jones Industrial Average declined by 97 points to 26,018 after rising at the open to a fresh intraday high. The S&P 500 dropped 0.16% and the Nasdaq fell 0.033 percent. What is most remarkable, however, is the streak that the S&P 500 is seemingly beholden.

Through the close of trading on Wednesday, the index has achieved 393 sessions without a 5% drawdown, the second-longest stretch in the history of the index. The longest stretch occurred between 1994 and 1996, and lasted for 394 sessions. If the current trend continues it will match the longest streak ever at the end of trading on Thursday and surpass it on Friday. The S&P 500 is already in its longest-ever stretch without a 3% decline, a drop that is usually quite common. A decline of such meager magnitude hasn’t occurred since Nov. 7, 2016.

Most of the big banks that have reported Q4 2017 earnings to much fan fair, but some disclosed multibillion-dollar charges or tax provisions. That’s because the banks have deferred tax assets on their balance sheets, offsets that can be used to reduce future tax liabilities or to defer them. Many big banks suffered multibillion dollar losses during the financial crisis that created tax loss carry forwards that can help reduce their future tax bill. Deferred tax assets can also be created when tax authorities recognize revenue or costs at different times than that of an accounting standard. Deferred tax assets are worth less when the tax rate is changed, in this case lowered from 35% to 21 percent given the new tax legislation recently passed.

International Business Machines Corp. shares fell in the after-hours trading session after the company topped analysts’ estimates. IBM shares fell 4.2% to $161.87 after hours, following a gain in the regular session and a 3.7% advance for the week. The company reported a fourth-quarter loss of $1.05 billion, or $1.14 a share, compared with net income of $4.5 billion, or $4.72 a share, in the year-ago period. Adjusted earnings were $5.18 a share. Revenue rose to $22.54 billion from $21.77 billion in the year-ago period, marking an end to 22 consecutive quarters of revenue declines.

American Express shares fell 2% after the credit-card company posted a GAAP quarterly loss and said it has suspended its stock buyback program for now, thanks to a tax charge related to the U.S. tax overhaul. American Express said it lost $1.2 billion, or $1.41 a share, in the fourth quarter, versus earnings of $825 million, or 88 cents a share, in the year-ago period. Adjusted for one-time items, including a $2.6 billion tax charge, the company said it earned $1.58 a share in the quarter. Revenue rose to $8.84 billion, compared with $8.02 billion a year ago. Analysts polled by FactSet had expected GAAP earnings of 72 cents a share and adjusted earnings of $1.54 a share on sales of $8.72 billion. “We ended the year with record billings and strong loan growth,” which helped drive the revenue increase, Chairman and Chief Executive Kenneth Chenault said in a statement.

Tomorrow marks the deadline for a debt ceiling deal to be had. Many are of the opinion that a further “kicking of the can down the road” is at hand. I would be paying attention to the late evening news hours as there will probably be a great deal of rhetoric centered on the issue at-hand. Market volatility levels have risen through much of the week with the VIX rising above 12 today.