It was a week of “fixing things” technically. Tuesday some geopolitical tension surfaced after North Korea launched a missile over Japan and indexes opened down but buyers dove in and the indexes essentially rallied 3 days straight at a 45 degree angle! Wednesday was a key day in so many ways on so many index charts – it wasn’t necessarily a big up day but it broke downtrends on key charts. (tax reform talk! yeah!) Just when you thought you could go bearish…. not so much! 5 straight days of gains! The S&P 500 added 1.4% for the week, while the NASDAQ raced ahead 2.7% on the back of biotechs.
In economic news, Wednesday a revision of 2nd quarter GDP (not really market moving) showed the U.S. economy expanded at a 3% pace, a faster pace than had originally been reported, and the fastest rate in more than two years. Thursday, it was reported consumer spending rose 0.3% last month, helped by higher incomes and low inflation.
We got a “Goldilocks” jobs report – below expectations, modest, nothing to fret about in terms of the Federal Reserve taking away the punch bowl – you’ve hear dit before!
“This report just kind of pushed back every expectation about a rate hike,” said Mike Antonelli, equity sales trader at Robert W. Baird & Co. He said the expectation that the Fed might be more hesitant to lift borrowing costs further is supportive to equity markets.
“Fed funds futures point to less than a 30% chance of a policy rate increase by the end of 2017,” Capital Economics economist Oliver Jones said in a note.
Friday the government reported the U.S. economy added 156,000 jobs in August, compared with the 170,000 expected according to economists. The unemployment rate stood at 4.4% in August, undercutting expectations of 4.3% and rising by 0.1% from July. Average hourly wages increased by 0.1% in August versus 0.2% expected and a 0.3% increase in the previous month. Meanwhile, hiring in July and June was a bit less robust than originally reported. The government cut its estimate of new jobs created in July to 189,000 from 209,000. June’s gain was trimmed to 210,000 from 231,000.
The ISM Manufacturing # was also very strong at 58.5.
The week prior we had mentioned the transports had fallen below their 200 day moving average for the first time since summer 2016. Well that reversed this week.
Here are those biotechs!
Apple (AAPL) barely even scraped below it’s 20 day moving average during the “selloff” – pretty difficult to get any sort of sustained selling without the largest company in the indexes suffering in any significant manner.
We did mention emerging markets on fire the prior week – that continued this last week!
Here is the 5 day weekly “intraday” chart of the S&P 500 .. not via Jill Mislinski.
The world’s 50th most valuable sports teams via Visual Capitalist. (click to enlarge)
The week ahead…
With the Labor Day holiday we have just a 4 day trading week. North Korea is back in the news so we’ll see if anything comes of it. Congress returns Tuesday. So we’ll see anything comes of it as they’ve done a great job of doing nearly nothing this year. Some theatrics around the debt ceiling will surely be in our future before they do what THEY ALWAYS DO – raise the debt ceiling. ISM non manufacturing will be out Wednesday with an expected reading of 55.2.
Short term: These 2 charts show how Wednesday’s rally reversed downtrends.
The Russell 2000 started the week below the 200 day moving average… and ended the week over the 50 day moving average. Still in the “Great Yellow Range” ™ that it really only escaped temporarily in July for any sustained period but that’s quite the reversal.
The NYSE McClellan Oscillator went positive a week ago Friday but we asked for more evidence before buying in. Well it stayed positive all week and now is approaching overbought if anything. Bulls are back in party mode.
Long term: We had brought out the 2.5 year charts last week to show the breakout since election night – both indexes showed a break below a major trendline this time last week — but of course reversed back up the prior few days!
Charts of interest / Big Movers:
Monday, the Wall Street Journal reported that Gilead Sciences (GILD) will buy Kite Pharma. And with that goes one of the easier to remember stock symbols on the NASDAQ!
Tuesday, Acora Therapeutics (ACOR) plunged 46% after the U.S. Food and Drug Administration rejected the company’s application for a drug to treat the symptoms of Parkinson’s disease.
Something about a brick & mortar retailer here…yada yada yada. Tuesday Finish Line (FINL) tumbled by 18.4% after the athletics-wear company late Monday issued a profit warning and approved a plan aimed at blocking any individual stockholder from owning more than 12.5% of the shares outstanding.
See above…brick & mortar…yada yada… Best Buy (BBY) sank 12% despite reporting earnings that beat forecasts.
People still go to malls to buy yoga pants it appears – Lululemon (LULU) rallied Friday to end roughly 7% higher after the athletic-apparel maker on Thursday raised its guidance following a strong performance in the latest quarter.
Have a great week and we’ll see you back here Sunday!