Despite a slew of economic data and earnings reports, it was another LOW volatility week for the major indexes. While we don’t discuss the Dow Jones Industrial Average due to its narrow breadth (30 stocks), one of the stories of the week was the 9th consecutive gain in that index – with 8 of those being records.
BUT that was offset by weakness in the small caps which we’ll talk about below when we look at the Russell 2000.
As of Friday, with 84% of S&P 500 companies having released second-quarter results, 73% have reported better than expected earnings and 70% have beat sales estimates, according to FactSet.
Apple (AAPL) earnings were of course front and center and when it does well it can hold up a lot of indexes:
The iPhone maker reported fiscal third-quarter earnings of $8.72 billion, or $1.67 a share, compared with $7.8 billion, or $1.42 a share, a year earlier. Analysts had forecast earnings of $1.57 a share.
Pretty amazing that a market capitalization this huge is up >30% year to date!
On the economic front Tuesday we saw 2 reports of interest:
- The ISM manufacturing index fell to 56.3 in July from 57.8, while construction spending slipped 1.3%. (any reading in ISM over 50 indicates expansion)
No reason to overreact to one data point but the most interesting report for the week from this set of eyes was ISM non manufacturing which fell to 53.9 in July from 57.4 in June. Analysts expected a reading of 56.9. That’s a pretty steep drop for 1 month so let’s see if there is a rubber band effect back upward in a month.
Friday saw the monthly employment data – gains were reported at 209,000 with a 4.3% unemployment rate. Economists had predicted a 175,000 increase. Average wages climbed 0.3% to $26.36 an hour. Hourly pay increased 2.5% from July 2016 to July 2017, unchanged from the prior month.
Wages usually rise 3% to 4% a year when an economy was is running at full throttle. But a slew of factors appear to be holding wages down, including low productivity, global competition and a reluctance among many Americans to switch jobs in the shadow of the Great Recession.
Here is the 5 day weekly “intraday” chart of the S&P 500 .. via Jill Mislinski. (Friday is missing but the S&P 500 gained 0.2% on the day)
Not a good month for CNBC as Fox Business passed it in ratings!
FBN averaged 174,000 Business Day viewers, which is essentially primetime for financial news networks. CNBC averaged 145,000, which is a 28 percent drop from July 2016, while FBN grew 17 percent over the same time period.
The week ahead…
Next week is the phase of earnings season when we move from mostly S&P 500 type companies to some of the medium to smaller fare.
The big economic report week was last week so we have a few weeks of “non market moving” type stuff, although to be fair most of the economic news this year has been a snoozer to the market.
Trump’s on vacation as is Congress. What could go wrong????
Short term: The breakouts in the 2 major indexes held steady. Last week we said “Some catching up of the moving averages are probably in order…” That happened this past week.
The Russell 2000 fell back INTO “Great Yellow Range ™”. This came about a week and a half after an “outside reversal day” – so it’s nice to see some technical indicators working! But more broadly the Dow Jones Industrial Average is at records while the Russell 2000 cannot hold a rally.
The NYSE McClellan Oscillator went red this week again so some caution is again in order.
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 week in the biotech lottery, the winner was Dynavax Technologies (DVAV) which surged 71.4% after a Food and Drug Administration advisory committee said the safety data for its hepatitis B vaccination supported its approval.
Tuesday, Sprint (S) jumped 11.2% as the telecom company posted a profit for the first time in three years.
Wednesday, Illumina (ILMN) jumped 14.8% after the DNA-sequencing company reported strong revenue results late Tuesday.
Thursday, Tesla Motors (TSLA) rose 6.5% after the electric-car maker posted a smaller-than-anticipated quarterly loss late Wednesday.
Generic drug maker Teva Pharma (TEVA) plunged nearly 18% Thursday after the drugmaker missed fiscal second-quarter profit expectations and slashed its full-year outlook. Friday was a disaster too!
Fitbit (FIT) jumped 15.1% after the fitness-tracking device maker reported results late Wednesday and news that the company’s smartwatch will hit stores soon.
3D Systems (DDD) dropped 21.3% after the 3D printer maker reported results and offered an outlook late Wednesday that fell below the Street view.
Friday GoPro (GPRO) jumped 19.3% after the wearable video-camera maker’s quarterly results and outlook out late Thursday beat Wall Street estimates. Friday marked the biggest one-day percentage gain for the company since July 2014.
Weight Watchers (WTW) also beat forecasts with its late Thursday earnings, sending shares 25% higher. That was already an amazing rally since April… and then a wonderful twirl at the end of that chart!
Also Friday, Yelp (YELP) soared 28% after it agreed to sell its Eat24 food-delivery business to GrubHub.
Have a great week and we’ll see you back here Sunday!