Courtesy of Blain.
A rare down week in 2017; the first after six weeks of gains. The market needed one. That said – barely… the S&P 500 was down 0.4% and NASDAQ 0.2%. Monday and Tuesday were the first back to back down sessions since last January! Energy stocks and a drop in oil were one of the main culprits as was the healthcare industry after a vague tweet by President Trump about drug prices dropping in the future.
Oil futures sank by more than 5% Wednesday to post the lowest finish of the year after U.S. government data revealed a weekly jump in crude supplies that lifted total inventories to another record. The decline in oil prices accelerated Friday after active rig-count data showed an increase for the eighth week in a row.
One of our favorite indicators – the NYSE McClellan Oscillator – flashed a bit of a warning last week; and was very red this week as well so from a technical perspective when you have a divergence like this it calls for some caution.
In economic news, paycheck-processing firm ADP reported Wednesday the private sector added 298,000 jobs in February. That was followed up Friday by the government’s employment data that showed gains of 235,000 jobs in February, while the January number was revised to show payrolls rose 238,000 (vs 227,000 initially estimated), pushing the unemployment rate to 4.7%. Hourly pay increased 2.8% from February 2016 to February 2017, up from 2.6% in the prior month. . This should cement a Fed rate hike next week.
Thursday, the European Central Bank left interest rates unchanged as had been widely expected. In a statement, the bank repeated that it expects rates to remain “at present or lower levels for an extended period of time, and well past the horizon” of its bond-buying program, which is scheduled to run through at least December. So the central bank foot is still on the accelerator in Europe.
There was a lot of talk about the anniversary of the bull market bottom on March 9, 2009. The total return on the benchmark S&P 500 index has been 316%.
Over the past eight years, there hasn’t been a single year of losses and the average annual return was 14.9%.
Here are the best performing S&P 500 stocks since the bottom (click to enlarge).
And how all the components in the Dow Jones Industrial Average have fared:
(please note some companies were added to the Dow in that time — UnitedHealth Group jumped 752% since the beginning of the bull market and Visa skyrocketed 524%. Apple, the youngest member of the blue-chip family, has shot up nearly 1,000% since 2009, although it rose only 9.3% since it became a Dow component two years ago. )
No 5 day “intraday” chart of the S&P 500 this week!
Hedge fund maven David Tepper – who has had some famous calls during this past decade and is now one of the richest men on earth – is uber bullish.
Hedge-fund billionaire David Tepper says it is hard to bet against this recent rally in stocks that has been underpinned by President Donald Trump’s three-pronged campaign promises of deregulation, tax cuts, and increased infrastructure spending. “The day we had three Republican ‘houses’… that alone releases animal spirits,” Tepper said, referring to Republican Trump’s Oval Office victory over Democratic rival Hillary Clinton and both the House and Senate falling under GOP leadership. “It is hard to go short when you say…when the punch bowl’s still full,” he told CNBC during a Wednesday morning interview.
“I don’t think the market’s cheap by any stretch…but look at the backdrop around the world…with the sugar that is still being put on by the [European Central Bank], the Bank of Japan…you can’t be short in that kinda set up,” he said. Tepper is referring to quantitative-easing measures that are still in use in the eurozone and Japan.
Bottled water has passed soda for the first time over as the most purchased American beverage.
Very fun and interesting set of charts showing how Americans spend their time (by age); the solid lines are on weekdays – the dotted lines are on weekends. Click on the chart to enlarge it! If you enjoy eating and drinking now… just wait until you are older, you get to do it a lot more!
The week ahead…
Wednesday will bring most of the information as the one key economic report of the week is released (retail sales) and the Federal Reserve will announce their decision which they have telegraphed quite plainly to be a rate hike.
Short term: That steep uptrend in the S&P 500 finally was broken. There was a pullback in both indexes to the 20 day moving average which in a normal market is very healthy and typical. This market has been riding the 5 day moving average.
The Russell 2000 broke below the 50 day moving average; this has been a major laggard of 2017 after being the leader of the post election rally late in 2016.
Last week’s drop below zero on the NYSE McClellan Oscillator turned into a flood of bad readings. So this is a significant divergence and one to take note of, even if the market itself continues to levitate. Often it’s a good time to raise some cash and head to the sidelines for a bit, for those with a short term bent.
Long term: Here are 5 year charts on the major indexes; again nothing negative here other than things are extended… the NASDAQ continues to ride the upper end of this very long term channel.
Charts of interest:
Since Snap (SNAP) is on the minds of many momentum investors we will start with that chart, which showed a significant dip Monday and then quite a bit of volatility the rest of the week.
Here is that drop in oil prices.
Tuesday, Dick’s Sporting Goods (DKS) tumbled 8.6% as the retailer’s quarterly earnings forecast fell short of Wall Street’s consensus estimate. It really wouldn’t be a week in the market without a brick & mortar company reporting bad news, would it?
Wednesday, H&R Block (HR) jumped 15% after the tax-services company reported stronger revenue growth than anticipated, and a smaller-than-expected loss.
Thursday, Sears Holdings (SHLD) rose 7% after the department store reported fourth-quarter revenue that beat expectations. The retailer has been struggling of late, having lost more than half its value over the past 12 months. That was followed by a nice move Friday as this often heavily shorted stock probably had some shorts looking to cover on any short term momentum!
After touching the 200 day moving average from below; gold has fallen nearly 2 weeks in a row. Fed rate hikes are bad for precious metals.
Have a great week and we’ll see you back here Sunday!