The week that was…
The week before last was an excellent week of consolidation for a market needing one. Remember when people were using the Italian political referendum as a convenient excuse for some selling – we said it was cute. Following that, bulls came roaring back in last week – leaving signed bear fur all over the place – bigly. Every single day was up last week; in the end the S&P 500 spiked 3.08% on the week. So this leaves us where we were 2 Fridays ago – in very good shape but short term overbought needing a rest.
The ISM non-manufacturing index was reported up at 57.2 – a very solid move into expansion (over 50), and well above expectations of 55.5. Tuesday was the release of factory orders which jumped 2.7% in October, the fourth straight monthly gain and the largest since January 2015. (Expectations were for a gain of 2.8%)
Thursday, the European Central Bank held its key rates steady but said it would taper its asset purchase plan in April, while leaving the door open for an extension of its economic stimulus program “if necessary.” Otherwise – we’ll do everything you want us to do! Just ask!
The ECB said it would cut its asset-purchase program in April to buying €60 billion ($64 billion) in bonds each month from €80 billion until the end of December 2017, “or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim.”
Taking a step back:
Trump’s election has resulted in a more than $2 trillion jump in the value of global equities over the past 30 days, according to Bloomberg. Consequently, that is about the size of the losses bond investors, like those in U.S. 10-year Treasury notes, have suffered over that period.
Here is a 5 day “intraday” chart of the S&P 500 via Doug Short.
Bespoke Invest blog has an awesome chart on all major indexes and ETF performance for the week, since the election, and year to date! As born out in our charts, amazing moves in the small caps, financials, etc. Mexico is not so happy.
Natural gas was one we missed!
The week ahead…
All ayes on the Federal Reserve which has telegraphed strongly it will finally raise rates for the first time since last December, and only the second time since some of your kids in elementary school were born. On Wednesday comes the one major economic report of the week which is retail sales; expectations are for 0.3% growth. With many of the “go to” sectors of #Trump extended, it will be interesting to see if there is any rotation into mostly ignored areas such as big cap tech.
Short term: The S&P 500 broke above 2016 highs post election, then retraced back to those levels before blasting off this past week. The NASDAQ chart is not quite so flamboyant due to struggles in big cap tech and healthcare.
The Russell 2000 …running…out…of….words….
The prior week took care of the overbought condition of the NYSE McClellan Oscillator – now we ended this past week in a nearly identical spot we saw it 2 Fridays ago!
Long term: Here are 5 year charts on the major indexes; the S&P 500 looks like it’s entering a new breakout phase.
Charts of interest:
Best performance by a Dow component since Election Day? Guess. Boo Yah!
Yoga pants are back! Wednesday evening, Lululemon (LULU) reported its third-quarter earnings rose to $68.3 million, or 50 cents a share, from $53.2 million, or 38 cents a share, a year earlier. Excluding certain items, Lululemon would have earned 47 cents a share. Revenue grew 13% to $544.4 million and total comparable sales rose 7%. Analysts had forecast the yoga-wear maker to earn 43 cents a share on revenue of $541 million. The company’s board also approved a new share repurchase program of up to $100 million.
Healthcare did get hit some due to #Trump and has vastly underperformed in this rally.
President-elect Donald Trump threatened to cut drug prices. “I’m going to bring down drug prices,” Trump told Time in his “Person of the Year” cover story. “I don’t like what has happened with drug prices.”
Western Digital (WDC) jumped to close 8.3% higher Wednesday after the computer hardware maker raised its outlook late Tuesday.
Shares of Tailored Brands (TLRD) , the parent company of Men’s Wearhouse and Jos. A. Bank, rallied nearly 40% Thursday after third-quarter earnings topped Wall Street estimates.
It seems as we’ve been highlighting the transport chart nearly every week since #Trump, but it continues to ascend and astound.
Have a great week and we’ll see you back here next Sunday!