The week that was…
Three very quiet days were bookend-ed by moderate moves on Monday (down) and Friday (up). This despite a lot of generally market moving events such as a Federal Reserve meeting and the monthly employment data. Major NASDAQ names ala Apple, Amazon, Facebook took the stage midweek and Trump’s comments about rolling back Dodd-Frank reforms Friday helped boost the financial sector.
Trump signed an executive order directing the Treasury secretary to review Dodd-Frank legislation, implemented in the aftermath of the 2008-09 financial crisis. The president signed a separate order that will delay the implementation of the “fiduciary rule,” which requires that the financial advisers and brokers who handle individual retirement and 401(k) accounts act in the best interest of their clients. Deregulation, proponents say, could improve the sector’s profitability, especially in an environment with rising interest rates, which is typically good for banks.
On the economic front, the first week of the month brings a big haul of interesting data but Friday’s employment data is always front and center.
The U.S. generated 227,000 new jobs in January, the biggest gain in four months, comfortably topping the 197,000 that had been expected. However, the unemployment rate rose to 4.8%, and wage growth was an anemic 0.1%. Combined employment gains for December and November, meanwhile, were 39,000 lower than previously reported.
ISM Services came a bit below expectations at 56.5, while ISM Manufacturing beat expectations with a reading of 56. Any reading over 50 indicates expansion.
The Federal Reserve was …dovish again?
The Fed held steady on interest rates and offered a positive view of the economy, but the central bank declined to telegraph the timing of its next hike, which fostered some concern that the Fed may fail to produce three interest-rate increases in 2017, as its most recent forecasts imply.
Here is a 5 day “intraday” chart of the S&P 500 via Doug Short.
Just for fun: If you want the market to go up, you want the Atlanta Falcons to win Sunday night!
If the Super Bowl is won by a team from the American Football Conference, stocks will fall for the year, while if a team from the National Football Conference wins, the market will gain. “Oddly enough, this indicator has been correct 80% of the time since 1967,” said Sam Stovall, chief investment strategist at CFRA, said in a Monday note with the title, “Wall Street’s Odd Infatuation with Correlations that Lack Causation.”
The week ahead…
Economic data takes a back seat; nothing much on the horizon here. Earnings season continues but we are now in the latter stages of the S&P 500 type companies and we’ll start to see more from smaller companies. The Fed is off the table for 6 weeks and we are back to focusing on Trump I suppose. Readers should continue to focus on the support trendline (see chart below) in the S&P 500 for near term momentum to hold up.
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. We can see a very important trendline of support on the S&P 500 chart at least for near term momentum.
The Russell 2000 had a very good Friday after being a laggard in 2017. But right now the index is simply range bound – bulls will get excited if we see an exit over the top of the box, and bears likewise if the bottom of this box is broken (1340 level).
The NYSE McClellan Oscillator went negative again in the middle of this past week, which raises some worries but Friday’s rally pushed it back up over 0. This indicator might be showing us the rally is getting tired as it is not sitting permanently in the red but we are seeing more trips below zero of late.
Long term: Here are 5 year charts on the major indexes; everything is gung ho.
Charts of interest:
Apple (AAPL) soared Wednesday after it posted results that beat expectations, prompting a number of analysts to raise their price targets on the tech giant. The company’s results were helped by stronger-than-forecast iPhone sales. The company also posted a 19% rise in services revenue. The stock finished up 6.1% in its biggest one-day pop since July 27.
“China demand was stronger than expected,” analysts wrote. Core China sales rose 6% from a year ago, and more than half of iPhone sales there were to first-time buyers, they said.
Tuesday, Under Armour (UA) tanked 26% Tuesday after the sportswear company posted revenue below forecasts and said its chief finance officer is leaving the company, citing personal reasons. It’s been a horrid year for this company but still it is #3 in the “sports apparel” industry behind Nike and Adidas and it sure looks interesting for those who have a 3 year time horizon.
Polo Ralph Lauren (RL) sank 12% after the fashion retailer delivered disappointing quarterly results and announced its chief executive will step down after less than two years at the helm of the company.
Friday, FireEye (FEYE) tumbled nearly 16% as investors focused on continuing heavy losses for the company over another earnings beat.
Also Friday, GoPro (GPRO) – after rallying sharpy Monday – sunk 13% after the company missed fourth-quarter revenue expectations and issued a weak forecast late Thursday.
Visa (V) rallied after the credit-card company late Thursday beat earnings forecasts.
It is interesting to note the dollar chart – we saw a massive rally post election but there has been quite a selloff in 2017.
In recent weeks, political risk, namely, jawboning from the Trump administration, has rattled the U.S. currency, which coughed up 2.6% in January, marking its biggest monthly drop since March, when it declined 3.6%, according to FactSet data. After its Nov. 4 lows, the dollar vaulted higher on the back of expectations that Trump’s pro-business agenda would revitalize the economy and deliver a fillip to dollars. But on Jan. 17, currency traders pushed the dollar lower after Trump expressed concern about the strength of the currency, describing it as “too strong,” considering where currencies like China’s yuan and the Japanese yen were trading.
Have a great week and we’ll see you back here Sunday!