Relatively large moves Monday (up) and Tuesday (down) were followed by the small volatility the rest of the week that has marked almost all of 2017. The NASDAQ jumped 1.4% Monday, the largest gain since Nov 7th as the relatively moderate selling the prior week was offset.
“Tech got beat up unfavorably over the past week or two, but as the group’s earnings remain strong, we expect buyers are coming in to take advantage of the depressed prices,” said Peter Lewis, a managing partner at Murphy Capital Management. “Tech valuations are probably nearly the high end of the band, but if earnings and merger activity keep going, that could bode well for the sector.”
Oil has quietly had a few rough weeks here; this is one steep decline since late May…
“Oil is not in short supply with U.S. producers drilling and pumping as soon as oil prices rise over $50. Meanwhile demand for oil and gas continues to decline as we get more efficient with our fuel consumption,” said Maris Ogg, principal at Tower Bridge Advisors.
“It looks like oil prices decoupled from the U.S. equity market as investors realize that lower oil prices are not a sign of weakening global demand and therefore economic slowdown, but rather it’s due to excessive supply from the U.S., Iran and Russia,” said Quincy Krosby, chief market strategist, at Prudential Financial.
But is no longer a big part of the market….
“The energy sector is now one of the smallest sectors comprising 6% of the S&P 500, and as such its impact on overall earnings is rather limited,” Ogg said.
Very interesting action in healthcare considering the uncertainty about legislation in Congress…. you’d almost think lobbyists
writing advising on the bill are going to get a lot of goodies. A “discussion draft” of the health-care bill aims to cut Medicaid and eliminate penalties for people who don’t buy insurance.
Biotech too… helped by hopes of “less regulation”…
A New York Times report said President Donald Trump has drafted an executive order that would ease industry regulations. Several proposals in the draft come from industry or simply seem to benefit drug companies, the Times reported, including a study of how drug prices vary by country and reconsidering trade agreements using that information. The move would be a change in tone for the president, who has previously said drug companies are “getting away with murder” and vowed to bring prices down. Still, several of Trump’s previous drug price proposals would likely only be possible through legislative action and not an executive order, the Times article noted.
Economic data this past week was sparse, and not market moving so not worth mentioning.
Here is the 5 day weekly “intraday” chart of the S&P 500 …not per Jill Mislinski.
Good read: Real world effects of the shrinking brick & mortar industry.
Jeff Bezos is now the 3rd richest human on earth and his empire is massive…
The week ahead…
Once again no major economic news reports in the week ahead – those come the following week. Personal income (+0.3%) and spending (0.1%) come out Friday and are probably the more interesting items of the economic week. Nike reports, and Yellen speaks in London Tuesday; considering she just spoke a week and a half ago I wouldn’t expect much in terms of new revelations.
“We expect Yellen to reiterate the message that the global economy is improving but that ‘gradual’ removal of policy accommodation (at least in US) remains appropriate,” writes Deutsche Bank economist Brett Ryan.
Short term: That outside reversal day in the NASDAQ the week prior on a Friday did lead to some choppiness but unlike in other eras nothing sustained at this point. Both the S&P 500 and NASDAQ are just riding the 20 day moving averages now and consolidating some gains.
The Russell 2000 remains stuck in this lengthy range in yellow.
The NYSE McClellan Oscillator is a bit choppy but went red most of last week; so a bit of caution here until it gets back to black and stays there.
Long term: Here are 5 year charts on the major indexes; we are a broken record here but it would take a very severe selloff to change prospects here.
Charts of interest / Big Movers:
Tuesday, Chipotle (CMG) dived 7.3% after the burrito chain said Monday that it is spending more on marketing as it looks to recover from its E.coli crisis.
Wednesday, Red Hat (RHT) jumped nearly 10% after the open-source software company late Tuesday posted earnings ahead of forecasts.
Good news in retail as La-Z-Boy (LZB) surged 22% Wednesday following better-than-expected earnings on Tuesday after market close.
But this *IS* the retail sector so it couldn’t be possible that some stock in the sector didn’t implode – Friday Bed Bath & Beyond (BBBY) dropped 12% after the home-furnishings and accessories retailer late Thursday posted fiscal first-quarter earnings and sales that missed expectations.
Also Wednesday, Advanced Micro Devices (AMD) rallied 11% after the chip maker on Tuesday launched a new generation of chips for the servers that drive computing in data centers.
Thursday, Oracle (ORCL) leapt 8.6%, posting its best daily gain since December 2014 after its earnings report late Wednesday easily beat analyst expectations.
I continue to be amazed this company exists but it does… Blackberry (BBRY) sank 12.3% after the software-and-services company swung to an unexpected quarterly profit but its sales fell short of expectations.
Never heard of it but congrats to the biotech lottery pick Portola Pharma (PTLA) which jumped 47% Friday on reports the company received approval for a anticoagulant drug.
Have a great week and we’ll see you back here Sunday!