In last week’s recap we asked: “Has the Fed solved all the market’s problems in 1 speech?”
Thus far the market says yes! As Guns n Roses preached – all we need is a little “patience”. Four up days followed by a nominal down day Friday had the market following it’s normal pattern the past nearly 30 years – jumping whenever the Federal Reserve hints (or essentially says outright) it is here for the markets. And in case you missed it the prior Friday, Chairman Powell came back out Thursday to reiterate the news – so…so… so… patient!
Fed Chairman Jerome Powell reinforced that message Thursday during a discussion at the Economic Club of Washington where he said that the central bank will be “flexible” and “patient” on the monetary policy.
The minutes from the recent Federal Reserve meeting were likewise “dovish”:
The release of Fed minutes revealed that some central-bank officials hard reservations about an interest-rate increase last month due to market volatility, though policy makers voted unanimously in favor of the move. They also recommended the Fed should be “patient” and stressed that “a relatively limited amount of additional tightening” is appropriate.
“The backdrop for stocks is positive, with earnings growth still projected to be healthy, while the Fed looks like it is pausing,” Michael Arone, chief investment strategist for State Street Global Advisors, told MarketWatch.
“Stocks are loving that central bank policy appears to be in an ultra-dovish mode,” wrote Edward Moya, chief market strategist at Oanda, in a note. “Inflation is low and under control and the main catalyst for the Fed’s ability to be patient.”
In economic news ISM services slowed much like manufacturing did the prior week with a reading of 57.6 from 60.6 in November – that is still highly expansionary.
For the week the S&P 500 gained 2.5% and the NASDAQ 3.5%.
Here is the 5 day weekly “intraday” chart of the S&P 500 … via Jill Mislinski.
The week ahead…
Earnings season begins anew. While numbers should be hearty, investors will be looking very closely at guidance as signs of global slowdown are in the air. Retail sales would normally come out on Wednesday but the government shutdown likely will impact that release.
Short term: Some rotation here as the NASDAQ and Russell 2000 outpaced the S&P 500. The NASDAQ is already back to it’s 50 day moving average.
Finally a very good week for the Russell 2000 – that would certainly be a change if character if this index which has been lagging for over a year took the reigns.
Wow – that is the highest reading I can recall on the the NYSE McClellan Oscillator – over 100! Usually +70 is an extreme peak.
Long term: Still a lot of work to do but thus far the “V” shape bounce is back….
Charts of interest / Big Movers:
Monday, PG&E Corp (PCG) tumbled 22% on a Reuters report that the utility company was considering filing for bankruptcy protection.
Luxoft Holdings (LXFT) jumped 82% Monday after it was announced the company would be acquired by DXC Technology (DXC) for $2 billion.
Sears Holdings (SHLDQ) had an interesting Tuesday. By close the stock soared 27% after a Wall Street Journal report that the company could still avoid liquidation via a $4.4 billion buyout plan proposed by billionaire Eddie Lampert. The stock had been down as much as 50% on reports earlier Tuesday that the company will seek liquidation.
Wednesday, Constellation Brands (STZ) slumped 12% after the beer, wine and spirits company issued disappointing guidance for fiscal 2019.
Macy’s (M) tumbled 18% Thursday after the retailer downgraded annual sales and profit estimates for 2018.
Friday, General Motors (GM) rose 7.1% after the auto maker said it expects 2018 earnings and adjusted free cash flow to beat expectations and provided an upbeat 2019 outlook.
Just wanted to note “pot stock” Tilray (TLRY) held up better than almost every equity during the first portion of the wave of – it took nearly a month of market turmoil for it to begin falling hard. The stock had itself quite a day both Tuesday & Friday.
Have a great week and we’ll see you back here Sunday!