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%