* US stocks rally after U.S.-Mexico deal on NAFTA
* Autos lead European shares higher on NAFTA bets
Aug 27 (Reuters) - Welcome to the home for real-time coverage of U.S. equity markets brought to you by Reuters stocks reporters and anchored today by Chuck Mikolajczak. Reach him on Messenger to share your thoughts on market moves: charles.mikolajczak.thomsonreuters.com@reuters.net
STOCKS CLOSE HIGHER AFTER U.S.-MEXICO TRADE DEAL (1600 EDT/2000 GMT)
Equities closed higher to kick off the trading week, as a deal investors cheered a deal between the U.S. and Mexico to overhaul the North American Free Trade Agreement. Foreign Minister Chrystia Freeland will travel to Washington on Tuesday to continue trade negotiations, after Canada sat out most of the recent talks. major indexes hit records for a second straight session, including the Nasdaq, S&P 500 and Russell 2000. The Dow closed above the 26,000 mark for the first time since Feb. 1.
Gains on the Russell, up 0.16 percent, were muted however, as they have been seen recently as being more insulated from trade tensions and had benefited from escalating tariffs.
Autos were a primary beneficiary of the deal, as Ford F.N rose more than 3 percent and General Motors (NYSE:GM) .GM.N gained nearly 5 percent.
(Chuck Mikolajczak)
*****
HAVE CONSUMER DISCRETIONARY STOCKS PEAKED? (1528 EDT/1928 GMT)
The consumer discretionary sector .SPLRCD has been the second-best performer in the S&P 500 .SPX year-to-date with a 17 percent gain, not far behind the technology sector's .SPLRCT 18.6 percent gain.
A host of factors - higher retail sales, recent tax cuts, low unemployment - might suggest that consumer discretionary stocks have yet more upside. But that may not be the case, writes Lisa Shalett, head of investment and portfolio strategies at Morgan Stanley (NYSE:MS) Wealth Management.
In a note distributed on Monday, Shalett makes the case for a pullback in the sector. One segment within consumer stocks already foretells the rocky road ahead, she says: homebuilders. Indeed, the S&P Composite 1500 Homebuilding index .SPCOMHOME has fallen 15.5 percent so far in 2018 as new and existing homes sales have disappointed. As the Federal Reserve raises interest rates, mortgage costs for home buyers will go up, which isn't great news for the industry, either.
Other data point to a potential downturn in consumer sentiment. The University of Michigan Consumer Sentiment index fell to a 13-month low in August. Shalett also cites David Rosenberg, chief economist of Gluskin Sheff and Associates, who says consumers' intentions to buy big-ticket items have fallen to a 46-month low for durables and a 57-month low for autos. Plus, wage growth remains sluggish.
As a result, Shalett recommends that investors consider moving more money into defensive sectors such as health care, consumer staples and utilities. Health care has in fact outperformed the S&P this year, while consumer staples have substantially lagged, as seen in the chart below.
(April Joyner)
*****
STOCK RALLY HOLDING IN FINAL HOUR OF TRADING (0311 PM EDT 1911 GMT)
Stocks continued their strong gains with under an hour left in the trading session, as trade tensions were eased after the U.S. and Mexico reached a deal to overhaul the North American Free Trade Agreement. Foreign Minister Chrystia Freeland will travel to Washington on Tuesday to continue trade negotiations, after Canada sat out most of the recent talks. such as Caterpillar (NYSE:CAT) CAT.N and Boeing (NYSE:BA) BA.N , which have been highly sensitive to trade skirmishes, helped boost the Dow. Automakers jumped, with Ford F.N , up 2.9 percent and General Motors GM.N , up 4.63 percent.
(Chuck Mikolajczak)
*****
STOCK MARKET NEAR FULL CAPACITY - LEUTHOLD'S PAULSEN (0206 PM EDT/1806 GMT)
The capacity levels of factories, the labor market and the output gap are often used to judge the strength of an economic cycle.
When looking at the U.S. bull market, Jim Paulsen at The Leuthold Group notes a capacity utilization rate is missing to judge how much room U.S. stocks might have for improvement.
Paulsen eyes five factors - trailing 12-month price-earnings multiples, room for the 10-year Treasury yield to fall further, the potential for increased corporate profit margins, the unemployment rate and investor sentiment - to value stocks.
The bull market has been fueled by a massive profit rebound, a return to full employment, a record decline in bond yields, a surge in confidence and a major advance in P/E multiples.
"The bull has exhausted its capacity to rise!" Paulsen says in a note to clients warning the U.S. stock market has neared full capacity.
(Herbert Lash)
*****
MORE ROOM FOR RUSSELL TO RUN AFTER S&P REBOUND (1246 EDT/1646 GMT)
Like the S&P 500 .SPX and the Nasdaq .IXIC , the small-cap Russell 2000 .RUT has hit a new intraday high today. Small caps have had a strong run this year, advancing 12.9 percent in comparison to the S&P 500's 8.4 percent.
Two factors have contributed to the rise in small caps: the U.S. federal tax overhaul and mounting global trade tensions. On average, small caps had a higher effective tax rate than their large-cap counterparts, so they've seen a greater windfall from the overhaul. And small companies tend to be domestically focused, so they're considered by many investors to be relatively insulated from higher tariffs.
As the final quarter of 2018 approaches and the United States takes steps to resolve several of its trade disputes, some investors believe the run-up in small caps may be near its end. Not so fast, says Stifel in a note released late on Friday.
For one, write Stifel chief investment officer Michael O'Keeffe and analyst Jared Brent, earnings for Russell 2000 companies are projected to exceed 25 percent in three out of the four next quarters. Though the largest small-caps are leading the Russell's gains, the index's rally is broad-based, they say, with positive returns in all five of its quintiles. Also, despite the Russell's ascent, its price-to-earnings ratio has fallen 41 percent year-to-date, so small-caps haven't gotten more expensive.
Given all those factors, "as we move into the second half of the year, the market environment is positioned well for U.S. small cap equities to remain one of the preferred markets," O'Keeffe and Brent conclude. So far, that appears to be the case, as the Russell continues its stride even after the S&P's rebound.
(April Joyner)
*****
TRADE OPTIMISM LIFTS STOCKS AS NASDAQ TOPS 8,000
Equities built on initial gains near midday, as the U.S. and Mexico reached a deal to replace the North American Free Trade Agreement, while talks with Canada were expected to begin immediately. majority of the S&P sectors were higher, with only utilities .SPLRCU and real estate .SPLRCR in the red.
The Nasdaq climbed above the 8,000 mark for the first time, led by the big names that have fueled a large portion of the gains during the bull run - Apple AAPL.O , Amazon AMZN.O , Alphabet GOOGL.O , Microsoft MSFT.O and Facebook FB.O .
(Chuck Mikolajczak)
*****
NEW VOLATILITY REGIME? NOT SO FAST (1105 EDT/1505 GMT)
Going by U.S. stock gyrations in August, there is not too much to tell apart this year from the last. One-month volatility has averaged 7.7 this month, compared with 7.3 for August 2017.
So much for the February volatility shock heralding a new volatility regime.
"At the start of the year, investors voiced concern that rapidly rising interest rates would squash the market's advance. Since late January, interest rates have moved within a narrow band, mitigating these fears," Credit Suisse (SIX:CSGN)'s Jonathan Golub said in a client note on Monday.
"Similarly, many predicted that the spike in the VIX signaled a new normal for volatility, another headwind for the market. Contrary to these assertions, the VIX has declined to 12 today from a peak of 37 in early February."
On Monday, Cboe Volatility Index .VIX , the so-called 'fear gauge' was at 12.26.
Meanwhile, speculators in the VIX futures market are betting that shorting volatility will continue to pay. Speculators are the most short volatility futures they have been since late December.
(Saqib Iqbal Ahmed)
*****
S&P EXTENDS ITS BULL RUN WITH GAP AT OPEN (1022 EDT/1422 GMT)
The main indexes gapped higher at the open, with the S&P 500 .SPX gathering steam after closing above the January high on Friday, locking in the bull market that started in March 2009 as the longest ever. With its own gap open, the Nasdaq .IXIC extends a record run that until last week stood in contrast to the S&P, having avoided the February correction the Dow and S&P succumbed to, then rallying to a new high in March and again several times since early June. The Dow is still roughly 2 percent below it's January 26 high.
(Alden Bentley)
*****
STOCKS OPEN HIGHER ON WALL ST ON TRADE HOPES (0941 EDT/1341 GMT)
Stocks opened higher as expected, building on momentum from Friday's session when several major indexes notched record highs, as investors cheered signs of progress on the U.S. trade front.
Materials .SPLRCM and industrials .SPLRCI are the best performing of the 11 major S&P sectors in the early stages of trading, each up more than 1 percent. Industrials have been particularly sensitive to developments on the trade front in recent weeks.
The sector was led higher by Boeing, up 1.41 percent and Caterpillar, up 2.49 percent, which also served to lift the Dow .DJI .
Volumes are expected to be light this week, however, ahead of the Labor Day market holiday in the U.S. on Sept. 3.
(Chuck Mikolajczak)
*****
WALL ST TO OPEN HIGHER ON SIGNS OF TRADE PROGRESS (0902 EDT/1302 GMT)
Futures were pointing to a solidly higher open for Wall Street on Monday, on hopes the U.S. could be making some headway on some trade deals.
U.S. and Mexican negotiators were close to resolving bilateral difference on the North American Free Trade Agreement and will resume talks on Monday morning, although Canada has sat out most of the recent talks. European Union was also being pressed by Washington to speed up negotiations launched after last month's meeting between U.S. President Donald Trump and EU Commission President Jean-Claude Juncker. closed out last week on a high note, with the S&P .SPX , Nasdaq .IXIC and Russell 2000 .RUT all closing at record levels in the wake of a speech by Federal Reserve Chairman Jerome Powell in Jackson Hole, Wyoming. signs of trade progress also lifted risk-sentiment globally. Asian shares gained and European shares were also higher, although British markets were closed for a holiday to thin out trading volume.
(Chuck Mikolajczak)
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Chuck Profile Live Markets
https://reut.rs/2mKwi3Y Futures point to higher open
https://reut.rs/2PEFVhM Wall St opens higher on trade optimism
https://reut.rs/2PDzWdf LM
https://reut.rs/2PLGSVI S&P 500 volatility
https://reut.rs/2Nn61V2 Buy side positions in VIX futures
https://reut.rs/2NrvnkM Stocks higher at midday
https://reut.rs/2PFISyH Russell 2000 vs S&P 500 performance
https://reut.rs/2My4wa5 Russell 2000 earnings
https://reut.rs/2MAPCA4 Stock Market Utilization Rate
https://reut.rs/2NlX4Lv Stocks hold gains in latter stages of trading
https://reut.rs/2PFNq85 Performance of S&P GICS sectors in 2018
https://reut.rs/2MC9hiT Stocks close higher after U.S.-Mexico deal
https://reut.rs/2Mz4gYh
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>