The week that was…
The never ending rally continued at pace this last week, with solid gains Mon thru Wed, followed by some quiet consolidation the final 2 days of the week. This action simply is a grind for any remaining bears to have to deal with as there is no relent. As happened late in the prior week (“phenomenal” was the word), indexes rallied Wednesday as President Donald Trump said a “massive” tax plan would be coming in the “not-too-distant future.” Yellen testified and Donald showed restraint in not tweeting about her.
“Even though we have social unrest and building geopolitical tensions, the market refuses to fall in any meaningful fashion, which means there remains a very strong underlying bid in the market,” said Adam Sarhan, chief executive officer of 50 Park Investments. “This is due to a confluence of a few factors, including the earnings recession being over, a very strong bull market, and the hope for future prosperity under the pro-growth policies of the new administration.”
One thing to note is that while the senior indexes full of large caps continued to levitate, the Russell 2000 (smaller cap, U.S. oriented stocks) stalled again. So bulls will call that a healthy rotation, while bears will say a warning sign.
During Congressional testimony mid week, Federal Reserve Chairwoman Janet Yellen signaled that the central bank could gradually raise interest rates sooner rather than later. Some market participants read Yellen’s reference to the Fed raising rates at “upcoming meetings” as indicating that an increase of benchmark rates at the Fed’s March meeting, which Wall Street has been pricing in as unlikely, is still on the table. Fed member forecasts for rates suggest that the central bank will raise rates three times in 2017, but the market isn’t expecting an increase before the Federal Open Market Committee’s June meeting.
A quiet week of economic news but the Producer Price Index for January jumped by 0.6%, the largest rise since 2012, suggesting inflation may be heating up. Wednesday, retail sales were reported to have gained 0.4% in January vs expectations of 0.2%
We mentioned last week that it had been 80 days without a loss of 1% or more. So obviously that means zero down days of 1%+ thus far in 2017. Here is how that compares to other years.Continue reading
Before we get to the results, here’s a quick summary of what’s happened here at StockTrader.com over the past year.
For StockTrader.com, we launched a new ETFs directory and made a big transition last year from providing free nightly market recaps to weekly market recaps. While the nightly recaps were great, readership had stagnated. With our new weekly market recaps, writer Mark Hanna is able to take a much deeper dive and cover the macro picture in more detail.
The results have exceeded our expectations. Email subscribers currently stands at a record of 18,724 and the number of opens each week has increased by ~50%. Needless to say, quality over quantity is a winning formula. (Not signed up yet? Fill in your email using the form on the sidebar!)Continue reading
The quite long in the tooth rally continues as we had 3 days of minor loses to begin the week; ending with 2 days of moderate gains. We are in a bit of a quiet zone as most S&P 500 companies have now reported earnings, the Federal Reserve is not a “worry” for about a month and a half, and the major economic news of the month hit the prior week. So the gnashing of teeth (or not) about government policy seems to be the main driver right now- late in the week it was announced some major new tax initiatives would be coming down the pike soon which the market liked.
President Donald Trump said Thursday that an announcement concerning taxes is on tap for the coming weeks, which his press secretary later said would involve an outline of a comprehensive tax plan. “Over the next two or three weeks,” Trump said during a meeting with airline executives, there will be an announcement that would be “phenomenal in terms of tax.”
“The market [is] trying to come to terms with whether the new administration and Congress will be able to work together effectively or not,” said Brad McMillan, chief investment officer for Commonwealth Financial Network. “Most of the positive expectations were based on the assumption that we were at the end of the gridlock era, and that the Trump administration and Republican Congress would work together.” Events of the recent week have called that notion into question and the possible repeal of Dodd-Frank is looking less likely, he added.
For the bears: The latest weekly survey of U.S. advisors by Investors Intelligence showed that the number of bulls rose to 62.7% last week, the highest level since December 2004. Investor Intelligence considers a number above 55% a danger zone, as it is a strong, contrarian warning of a potential market top.Continue reading
The week that was…
Three very quiet days were bookend-ed by moderate moves on Monday (down) and Friday (up). This despite a lot of generally market moving events such as a Federal Reserve meeting and the monthly employment data. Major NASDAQ names ala Apple, Amazon, Facebook took the stage midweek and Trump’s comments about rolling back Dodd-Frank reforms Friday helped boost the financial sector.
Trump signed an executive order directing the Treasury secretary to review Dodd-Frank legislation, implemented in the aftermath of the 2008-09 financial crisis. The president signed a separate order that will delay the implementation of the “fiduciary rule,” which requires that the financial advisers and brokers who handle individual retirement and 401(k) accounts act in the best interest of their clients. Deregulation, proponents say, could improve the sector’s profitability, especially in an environment with rising interest rates, which is typically good for banks.
On the economic front, the first week of the month brings a big haul of interesting data but Friday’s employment data is always front and center.
The U.S. generated 227,000 new jobs in January, the biggest gain in four months, comfortably topping the 197,000 that had been expected. However, the unemployment rate rose to 4.8%, and wage growth was an anemic 0.1%. Combined employment gains for December and November, meanwhile, were 39,000 lower than previously reported.
The week that was…
After being non stop bullish since mid November, we turned cautious last week for a number of reasons: the length of this rally, the small cap index (Russell 2000) which had led this market had weakened significantly, the NYSE McClellan Oscillator went negative, and the DJIA looked like perhaps it had formed a double top. Welp, that was not the correct view as rallies on Tuesday and Wednesday served to make any bearish view wrong yet again. Even Friday’s advanced reading of 4th quarter GDP – which was poor – didn’t dent the market. So we’ll reassess some of the data below.
Finally Dow 20K – certainly not with the fanfare I remember about Dow 10K.
Since the Dow first crossed 19,000 on Nov. 22, the biggest contributors to the blue-chip average’s quick 1,000-point rise were Goldman Sachs Group Inc. (154.6 points), International Business Machines Corp. (90.6 points), Boeing (75.5 points), Walt Disney Co. (69.8 points), and UnitedHealth Group Inc. and Apple Inc. tied at 56 points a piece, according to Dow Jones data.
A slew of major companies such as Microsoft, Google, Starbucks, Intel, Boeing, Ford, etc hit this week – we’ll highlight some larger movers later in the recap.
New home sales fell to a 10 month low. Still, the trend in new-home sales is up: the Commerce Dept. estimates 563,000 new homes were sold in 2016, 12.2% higher than in 2015, making 2016 the best year since 2007.
As mentioned above, on Friday a reading of U.S. gross domestic product showed that economic growth slowed in the fourth quarter and annual growth failed to reach 3% for the 11th straight year. Meanwhile, durable-goods orders also fell in December for the second month in a row.
Gross domestic product, the official score card for the economy, expanded at a 1.9% annual clip from October to December, the Commerce Department said. That’s a marked drop from a 3.5% growth rate in the third quarter and below the 2.2% consensus. For the full year, the U.S. grew just 1.6%, compared with its 2.6% clip in 2015. It was the weakest performance since 2011.
Data: Of the 120 S&P 500 companies that have released quarterly results so far, 78% are beating earnings estimates by a median of 5% while 57% are beating revenue forecasts by an average of 3%