The week that was…
After being non stop bullish since mid November, we turned cautious last week for a number of reasons: the length of this rally, the small cap index (Russell 2000) which had led this market had weakened significantly, the NYSE McClellan Oscillator went negative, and the DJIA looked like perhaps it had formed a double top. Welp, that was not the correct view as rallies on Tuesday and Wednesday served to make any bearish view wrong yet again. Even Friday’s advanced reading of 4th quarter GDP – which was poor – didn’t dent the market. So we’ll reassess some of the data below.
Finally Dow 20K – certainly not with the fanfare I remember about Dow 10K.
Since the Dow first crossed 19,000 on Nov. 22, the biggest contributors to the blue-chip average’s quick 1,000-point rise were Goldman Sachs Group Inc. (154.6 points), International Business Machines Corp. (90.6 points), Boeing (75.5 points), Walt Disney Co. (69.8 points), and UnitedHealth Group Inc. and Apple Inc. tied at 56 points a piece, according to Dow Jones data.
A slew of major companies such as Microsoft, Google, Starbucks, Intel, Boeing, Ford, etc hit this week – we’ll highlight some larger movers later in the recap.
New home sales fell to a 10 month low. Still, the trend in new-home sales is up: the Commerce Dept. estimates 563,000 new homes were sold in 2016, 12.2% higher than in 2015, making 2016 the best year since 2007.
As mentioned above, on Friday a reading of U.S. gross domestic product showed that economic growth slowed in the fourth quarter and annual growth failed to reach 3% for the 11th straight year. Meanwhile, durable-goods orders also fell in December for the second month in a row.
Gross domestic product, the official score card for the economy, expanded at a 1.9% annual clip from October to December, the Commerce Department said. That’s a marked drop from a 3.5% growth rate in the third quarter and below the 2.2% consensus. For the full year, the U.S. grew just 1.6%, compared with its 2.6% clip in 2015. It was the weakest performance since 2011.
Data: Of the 120 S&P 500 companies that have released quarterly results so far, 78% are beating earnings estimates by a median of 5% while 57% are beating revenue forecasts by an average of 3%
Here is a 5 day “intraday” chart of the S&P 500 via Doug Short.
A while back we had a nifty map showing the largest company in every state (by market capitalization). Here is an offshoot – the largest employer in every state. Walmart dominates the south!
Awesome info graphic v2.0 time. [click to enlarge]
We’re #8! According to Anuj we are the 8th coolest stock blog out there. So there is a free hyperlink Anuj so people can check out your top 7.
The week ahead…
A lot of eyes will be on Apple (AAPL), Amazon (AMZN), and Facebook (FB) earnings.
Economic data comes back to the forefront:
- ISM Manufacturing Wednesday: 54.9 forecast vs 54.7 last month (any reading >50 indicates expansion)
- ISM Non Manufacturing Friday: 57.2 forecast vs 57.2 last month
- Nonfarm payrolls Friday: 175,000 forecast vs 156,000 last month; unemployment rate holding steady at 4.7%.
The Federal Reserve meets which would usually be the center of everyone’s attention but not so much this week.
The central bank is expected to keep rates the same. But it could provide more details on the timing of future rate increases amid signs of rising inflation and a firming labor market.
Analysts at Merrill Lynch are calling for a melt up with potential to S&P 2500.
“Our tactical view: after a Jan/Feb wobble, we believe stocks & commodities will have one last 10% melt-up in H1. Call it the ‘Icarus trade.’ The current melt up, which started back in Feb 2016, will be followed by a meltdown later in ‘17,” they wrote.
Short term: The NASDAQ has taken the mantle from the Russell 2000 in 2017 as the leader of the “Trump rally”. So a bull will say healthy rotation
The Russell 2000 had an on ok weak but certainty we are not seeing the leadership of latter 2016.
The NYSE McClellan Oscillator went negative the prior week but rallied back to positive this week; that said it’s just barely so.
Long term: Here are 5 year charts on the major indexes; everything is gung ho but the NASDAQ is now approaching the top of it’s channel on this long term chart.
Charts of interest:
Mattel (MAT) fell 18% Thursday after disappointing quarterly results late Wednesday.
Qualcomm (QCOM) plunged 13% Monday after Apple filed a lawsuit for $1 billion late Friday, alleging the company sought “onerous” terms in a chip deal.
Disk drive maker Seagate (STX) rallied on earnings mid week.
Telsa Motors (TSLA) didn’t have an amazing week but it’s worth nothing the heck of a move it has seen the past few months – rarely do you see a stock dance along the 10 day moving average like this week after week.
Have a great week and we’ll see you back here Sunday!