Market bulls continue to make anyone even moderately cautious (hand raised) look a fool. A technical breakout mid week on the indexes took the market out of a sleepy range that was looking a bit dangerous. Monday and Tuesday were the normal sleepiness we’ve come to expect from this slow and steady grind up of 2017 but some fireworks Wednesday and Friday. Earnings season began in earnest late in the week with major financial stocks reporting “meh” results but the market shook it off. For the week the S&P 500 gained 1.4% and the NASDAQ 2.6%.
Janet Yellen had been SLIGHTLY hawkish the past few months but her Congressional testimony mid week was viewed as dovish and traders saw that as a reason to BUY BUY BUY.
Yellen said “the evolution of the economy will warrant gradual increases in the federal-funds rate over time to achieve and maintain maximum employment and stable prices.” Yellen’s remarks come as other central bankers have been expressing a desire to taper easy-money policies that have been in place in the aftermath of the 2008-’09 financial crisis. A so-called more hawkish tilt by global central bankers also had led some to believe that the Fed might be encouraged to ramp up its pace of rate increases despite sluggish inflation.
“It seems like [Yellen’s] dialing back a little bit of the hawkish sentiment from last time,” said Karyn Cavanaugh, senior market strategist at Voya Financial. “She’s back to looking at inflation a little bit more. The market was a little worried but she’s back to the same dovish Yellen.”
That’s the central banker we’ve all come to know and love!
Economic news light and non essential so we will ignore it other than retail sales on Friday which was ignored by the market despite being weak.
Sales at retailers fizzled out in the late spring after getting the season off to a fast start, likely dampening U.S. economic growth in the second quarter. Sales at retailers nationwide fell 0.2% last month to mark the second straight drop and match the biggest decline of the year, the government said Friday. Economists had forecast a 0.1% increase in June sales.
Internet retailers continued to grab market share, mostly from traditional department stores whose sales have fallen sharply over the past year. So-called nonstore sales rose 0.4% in June. Retail sales have climbed a scant 2.8% in the past 12 months, about half as fast as they were rising at the start of the year.
Here is the 5 day weekly “intraday” chart of the S&P 500 .. not via Jill Mislinski.
This is the 3rd week in a row we’ve highlighted the transports in our weekly review – they continue to rock!
Emerging markets went bonkers late this past week:
The percent of people invested in stocks is at very low levels; the scares of 2008-2009 remain.
44 millions people have side jobs in the U.S. Wow!
Among those in this group of side-hustlers, 28% of younger millennials — ages 18 to 26 — are the most likely age group to have a side hustle, such as working as an Uber or Lyft driver or connecting with online marketplaces, such as TaskRabbit, which match freelance labor with local demand. Eighty-six percent of all side-hustlers do it at least monthly, and 36% of them earn more than an additional $500 a month. Younger baby boomers (53 to 62), many of whom lost their jobs during the recession and are scrambling to make up the income difference as retirement nears, are the most likely age group to earn at least an extra $1,000 a month.
The week ahead…
Earnings season will continue to be in focus as we have a few weeks heavy on S&P 500 type companies:
John Butters, senior analyst at FactSet, projected earnings per share to rise 6.5% in the April-June quarter.
Among notable earnings to watch are Bank of America, Goldman Sachs Group, International Business Machines, Morgan Stanley, Visa, Qualcomm, Microsoft, Netflix, and General Electric.
Economic news in the U.S. will be light and non essential.
The European Central Bank will announce on Thursday. While the central bank is not expected to announce policy changes, any comments by President Mario Draghi in the post-meeting press conference will be closely eyed for any hints of more hawkishness. “Draghi is likely to remain steadfast in maintaining its ultra-accommodative policy stance, but again recognising a more balanced outlook,” National Australia Bank said in a note.
Investors will eye China’s latest GDP data. China’s economy is estimated to grow 6.8% in the second quarter, according to a Reuters poll of 65 economists, down from a 6.9% pace in the first quarter.
Short term: The breakouts over a downtrend line on the S&P 500 Wednesday and the NASDAQ Thursday are definitely things technicians love to see!
The Russell 2000 popped it’s head yet again out of “THE BIG YELLOW RANGE ™” Wednesday – this has led to IMMEDIATE failure after failure since early June. Let’s see if we have a change in nature in the week ahead.
The NYSE McClellan Oscillator hit its highest level since late April on Friday.
Long term: Here are 5 year charts on the major indexes; for “non trader types” this is all gravy.
Charts of interest / Big Movers:
This is starting to get hilarious. But let me repeat “It was a week – therefore brick & mortar stocks – despite the overall market rally, got hit!” On Monday, Abercrombie & Fitch (ANF) shares lost more than a fifth of their value after the retailer early Monday said it terminated a potential buyout of the company, and Best Buy (BBY) tumbled 6.3% amid worries about heightened competition.
There was some good news in the sector Thursday as Target (TGT) said it now expects a surprise “modest increase” in same-store sales for the fiscal second quarter, citing improved traffic and sales trends. Its stock climbed 4.8%.
Tuesday, Amicus Therapeutics (FOLD), surged 26% in heavy trading after the Food and Drug Administration cleared the company to submit a new drug application for its Fabry disease treatment.
Wednesday, NRG Energy (NRG) soared more than 29% after the company launched transformation plan to cut costs, slash debt and divest assets.
Remember how Snap (SNAP), the parent of SnapChat was going to be the next big thing? Not so much in the stock market at least.
Friday, CyberArk Software (CYBR) shares dropped 16% after the cybersecurity firm reported weaker-than-expected earnings, weighing upon other computer security shares.
Have a great week and we’ll see you back here Sunday!