A quiet week for the market, which is exactly what the bulls want – low volatility and little in the way of pullbacks as the indexes consolidate a few months of big gains. Monday thru Thursday saw very little movement, and the week ended with a moderate rally Friday. Powell testified to Congress and essentially whispered “patience” repeatedly and away we go – we’ve been in “Fed is on our side” mode for a few months now.
The housing market continues to slow:
The number of new homes under construction fell in December to an annual rate of 1.08 million, from 1.21 million rate in November, the Commerce Department said. That is the lowest level since 2016.
Pending home sales jumped 4.6% to a reading of 103.2 in January, the National Association of Realtors said. Sales were 2.3% lower than a year ago, making January the 13th straight month of year-over-year declines.
Looking back at GDP:
The Commerce Department’s estimate of fourth-quarter GDP growth showed the U.S. economy growing at a rate of 2.6%, well above consensus expectations of 1.9%, per a MarketWatch poll of economists. GDP grew at 2.9% during 2018, according to the preliminary estimates by the Commerce Department, representing the best growth in three years. However, market participants highlighted the economic reports highlight expansion that is tapering from heady levels of a 4.2% growth rate in the second quarter of 2018.
ISM Manufacturing fell to 54.2 vs expectations of 55.5. That is still expansionary as it is over 50.
For the week, the S&P 500 gained 0.4% and the NASDAQ added 0.9%.
I would say the trade deal with China is happening based on the front running happening in the Chinese market which was hurt much worse than the U.S. ever was.
Here is the 5 day weekly “intraday” chart of the S&P 500 … via Jill Mislinski.
The week ahead…
Fun info – since “patience” the S&P 500 has rallied >20% and the NASDAQ >25%.
Payroll date will be out Friday.
March could also be an inflection point for the Chinese economy, whose slowing economy in 2018 helped weigh down global growth and contributed to U.S. stock market’s precipitous fourth-quarter declines. China’s National People’s Congress, meanwhile, will meet next week, where the government is expected to announce its GDP growth targets for the year, while also providing more detail about its economic stimulus plans. The Chinese government hopes to ramp up its economy by boosting consumer spending through tax cuts, rather than driving up the country’s debtload.
Short term: Always fun when a stock or index adheres so strictly to a random line on a chart. Here on the S&P 500 we have a purple trendline we’ve had one for many months that connects major lows… once support is broken it turns into resistance. And that is where the market topped out this week. That said if everyone is drunk on the Kool Aid of patience forever I suppose eventually it won’t matter but still it was interesting to see.
The Russell 2000 is hanging out in the 200 day moving average range.
The NYSE McClellan Oscillator dipped red late in the week but a day or two does not yet make a trend.
Long term: The S&P is now over our very long term weekly trend line connecting major lows of the last 2 years.
Charts of interest / Big Movers:
Monday was a fun day in the biotech space. Spark Therapeutics (ONCE) rose a paltry 120% after Roche Holding (ROG) said it would buy the biotechnology company in an all-cash deal worth $5.8 billion. Roche will pay $114.50 per Spark share, a premium of 122% to its closing price on Feb. 22.
Meanwhile, Clementia Pharma (CMTA) added 74% after France’s Ispen said it would buy the Canada-based drug group in a deal valued at up to $1.31 billion.
Tuesday, Etsy (ETSY) jumped 15% after the online marketplace reported fourth-quarter earnings and revenue that beat Wall Street’s expectations.
Wednesday, Weight Watchers International (WTW) tumbled 35% after the company reported mixed fourth-quarter results and weak guidance, saying it had a “soft start” to 2019.
Mylan (MYL) sank 15% after the pharmaceutical company reported that 2019 earnings would be much lower than analysts expected.
Best Buy (BBY) surged 14% after the electronics retailer significantly beat earnings and sales forecasts for its most recent quarter. The company also raised its guidance for 2019, while increasing its dividend and announcing a $3 billion share buyback program. Not Amazon’d yet.
Thursday, J.C. Penney (JCP) soared 23% after the retailer beat Wall Street earnings and revenue estimates for the fourth quarter, while announcing the closure of 18 full-line stores and 9 ancillary home and furniture stores. This feels like Sears 3 years ago. Amazon!
Friday, Gap (GPS) jumped 16% after the giant clothing retailer said it was splitting into two publicly trade companies and closing some 200 stores. This feels like Sears 6 years ago. Amazon!
Immunogen (IMGN) sank 47% after the company said a phase 3 trial of its ovarian cancer treatment, mirvetuximab soravtansine, failed to meet its primary endpoint of progression free survival.
Have a great week and we’ll see you back here Sunday!