The week that was…
A sleepy week indeed as almost all the “action” came out of a gap up Tuesday morning and a gap down Friday morning (which was met with buyers). Outside of those events, the indexes stuck closely to unchanged most of the week. Earnings began in earnest but outside of some individual high profile stories it was a lot of beating lowered expectations.
“Despite a couple of good reports, we’re in the midst of another earnings season that is hardly painting a bright picture,” said Mark Luschini, chief investment strategist at Janney Montgomery Scott. “Having another quarter where profits contract is not an underpinning for stocks to advance, and the market is searching for, if not demanding, a catalyst to move higher. At the moment, one is lacking.”
On Tuesday it was reported that the Consumer Price Index climbed 0.3% last month, the largest jump in five months, driven by more expensive gas and rising housing costs. That caused some chit chat about “higher inflation” that is about to hit the economy but that talk has been out there for YEARS now, and there has been very little significant inflation. Wednesday, the Federal Reserve Beige Book suggested that the U.S. economy remains on track for modest growth while wages continue to rise steadily. Not market moving.
Existing-home sales ran at a seasonally adjusted annual rate of 5.47 million, the National Association of Realtors said Thursday. That was a 3.2% increase from a slightly revised 5.30 million pace in August and a 0.6% increase compared to September 2015. Sales stumbled in July and August after touching a 9-year high in June. Still nowhere peak levels of the bubble but a solid recovery to “normalization”.
Thursday was a day of central bank focus as Mario Draghi – head of the European Central Bank – said they had neither talked about extending its quantitative-easing program, nor tapering it. The ECB met expectations by leaving interest rates steady and keeping intact its program of buying €80 billion ($88 billion) a month in bonds within the eurozone. Analysts said Draghi’s comments left the door open for more easing to be announced at the December meeting.
Over the weekend news broke that AT&T reached a deal to buy Time Warner (TWX) for $80 Billion!
Here is a 5 day “intraday” chart of the S&P 500 via Doug Short. One thing to note is the heavy selling volume bars on the close of each day – that looks a bit ominous?!
Misc. tidbits: Estonia – the most technologically advanced country in the world? Tuesday afternoon is the time to buy airline tickets.
The week ahead…
Alphabet (GOOG) and Apple (AAPL) earnings coming down the pike. Since those are the type of companies the masses like to obsess about here are the expectations:
Alphabet is expected on Thursday to report third-quarter earnings of $8.63 a share on revenue of $17.99 billion. Google’s parent company posted earnings of $7.21 a share on revenue of $15.03 billion in third quarter 2015.
Apple is projected to post fiscal fourth-quarter earnings per share of $1.66, down from $1.88 in the year-earlier period. Revenue is also forecast to shrink to $46.99 billion from $50.98 billion, largely as sales of iPhones drop off.
Economic data will continue to be the “not market moving” type so focus on earnings. New home sales (Wednesday) and GDP for the third quarter (Friday) will be ones to at least keep an eye on.
Katie Stockton seems mildly enthused about the week ahead via a technical standpoint:
“Short-term momentum has improved slightly week over week and breadth is oversold by some measures, giving next week a bullish bias,” said Katie Stockton, chief technical strategist at BTIG. “However, the election has created some level of uncertainty that could keep the S&P 500 range-bound until mid-November. A breakout above it (2160) would be a positive short-term technical catalyst,” she said.
Short term: The S&P 500 was stuck in a wedge of shorts and broke out of that to to the downside the week prior to this past one – nothing changed this week in that regard. The index finished just above the May 2015 highs at 2135 after hanging around there all week. The NASDAQ without a quick recovery could be building a bear flag. The short term remains iffy.
The Russell 2000 broke downward out of this channel and is sitting right above VERY key support at 1200.
The NYSE McClellan Oscillator somehow recovered to positive mid week but it was fleeting and a tiny move over 0. Until you see a consistent pattern of positive readings ala July it is difficult to have an uber bullish hat on.
Long term: Here are multi year weekly charts again. You can see the break in the S&P 500 massive uptrend mid 2015 and a lot of choppy action since; but no break of the 200 week moving average.
Charts of interest:
The U.S. dollar continued to surge for a second week.
Netflix (NFLX) surged Tuesday after results blew past Wall Street expectations.
Neftlix added 3.57 million streaming subscribers in the most recent quarter after it reported the weakest subscriber expansion in two years the prior quarter. In July, Netflix had projected 2.3 million in additional subscribers for the September quarter. Internationally, Netflix added 3.2 million subscribers, compared with its guidance of 2 million.
Netflix reported third-quarter profit of $51.5 million, or 12 cents a share, up from $40.76 million, or 9 cents a share. Revenue rose to $2.29 billion from $2.1 billion. Analysts had projected earnings of 6 cents a share on $2.28 billion in revenue.
Also on Tuesday, Harley Davidson (HOG) revenue topped estimates and the iconic motorcycle maker said it would cut costs in the fourth quarter.
Thursday, eBay (EBAY) plunged 11% after the company gave a weak holiday forecast.
Friday, Reynolds American (RAI) soared after British American Tobacco PLC offered to buy the remaining stake in its U.S. peer it doesn’t already own for $47 billion.
Have a great week and we’ll see you back here next Sunday!