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Weekly Market Recap Jul 30, 2017

Courtesy of Blain.

Another week like so many others in 2017.  Little volatility, little movement – even with a slew of big name earnings.  This certainly is a strange atmosphere just from the lack of volatility over many many months alone.   However companies seem to be doing well enough:

With slightly more than half of S&P 500 components having reported, 73% are turning in better-than-expected earnings and sales with companies reporting earnings that are 6.4% above Wall Street’s estimates and beating sales by 1.2%, according to John Butters, senior analyst at FactSet.

That said…

Data from Bespoke Investment Group show that stocks beating earnings expectations are trading mostly flat while stocks that miss are hit hard, an indication that investors are “buying the rumor and selling the news.”

Aside from earnings they key event of the week was the Federal Reserve meeting – although it was telegraphed no movement was happening.  Fed watchers were looking for a move of a comma or a semicolon to see if the Fed was “more dovish or hawkish!”

The Fed kept rates unchanged on Wednesday.  The Federal Reserve said it will start to reduce its massive $4.5 trillion pile of government and mortgage debt “relatively soon,” a long-expected move that reflects the central bank’s optimism in a steadily growing U.S. economy.  In May the Fed said it would begin to wind down its balance sheet later “this year.”

“The main message from the July FOMC statement was that the Committee is very likely to announce the starting date for running down its balance sheet at the September meeting, but it is worried about inflation,” Paul Mortimer-Lee, chief economist for North America at BNP Paribas, said in a note.  “This is a clear signal that the Fed will start unwinding its gargantuan balance sheet in September,” said Luke Hickmore, senior investment manager at Aberdeen Asset Management.

Eric Winograd, senior economist at AllianceBernstein, meanwhile, predicted the Fed could start tapering its balance sheet as early as September given its reference to “relatively soon” rather than “this year” in previous statements.

When all of Wall Street drinks from the Fed punch bowl, noting phrasing changes like “relatively soon” to “this year” is among the most important things they do…

On the economic front, Monday it was reported existing-home sales fell 1.8% in June.  Thursday, orders for durable or long-lasting U.S. goods soared 6.5% in June.  Friday, a second-quarter reading on gross domestic product rose 2.6%, below the 2.8% expected by economists.

While it didn’t move the stock much (a stock up nearly 50% already this year!!) Facebook (FB) reported better-than-expected results late Wednesday.

Also worth noting Amazon which fell a bit Friday after it reported a 77% plunge in second-quarter earnings.

Here is the 5 day weekly “intraday” chart of the S&P 500 .. via Jill Mislinski. (Friday is missing but the S&P 500 slid a bit on the day)

Oil had a good week on “production cut talk” but we’ve heard that before… often.

Keep an eye on transports – they had been a precursor of the recent move up, but took a serious dip this past week.

The week ahead…

Apple! (Tuesday) ’nuff said.

Tesla reports Wednesday.

Overall, 133 S&P 500 companies, including two Dow components, are on tap to release quarterly results.

Friday will bring employment data with expectations of 180,000 jobs added in July, while the unemployment rate is expected to fall to 4.3%.  ISM manufacturing and non manufacturing also are reported this week.  The market has shrugged off almost all economic data this year but still fun to keep track of.

Index charts:

Short term: The breakouts in the 2 major indexes held steady. Last week we said “Some catching up of the moving averages are probably in order…”  That happened this past week.

The Russell 2000 remained above the “Big Yellow Range ™”.  It did pull back to its 20 day moving average after the “outside reversal day” from a week ago Friday.

The NYSE McClellan Oscillator – after a few weeks solidly in black – is back at the borderline.

Long term: Here are 5 year charts on the major indexes; for “non trader types” this is all gravy.

Charts of interest / Big Movers:

It was a busy Monday:

WebMD (WBMD) soared 20% on news that KKR & Co. will take the health-care information provider private in a deal valued at $2.8 billion, or $66.50 a share in cash, a 20.5% premium to the prior Friday’s closing price of $55.19.

Hasbro (HAS) shares tumbled 9.4% after the toy maker posted revenue that fell short of forecasts.

Stop me if you’ve heard this one before.  “It was a week on Wall Street.  Therefore a retailer had to be crushed.”  Hibbett Sports (HIBB) shares plunged 34% after the sports retailer warned that it expects second-quarter same-store sales to fall.   So a disaster chart turned into even more disaster.

Scientific Games Corp (SGMS) soared 27% after the company reported better-than-expected second-quarter revenue.

Tons of other big moves – mostly earnings related:

Tuesday, Caterpillar (CAT) finished up 5.9% after its earnings surged past expectations and it also raised its outlook.

Freeport McMoran (FCX) added 15% Tuesday after it swung to a second-quarter profit.

Thursday, Twitter (TWTR) tumbled 14%, its biggest one-day drop since October, after the microblogging platform reported lackluster user growth.

AstraZeneca (AZN) sank 15% Thursday after the drug heavyweight reported a negative result in a Phase 3 clinical trial of its lung-cancer treatment Mystic.

Friday, Altria (MO) cracked 9.5%, after the Food and Drug Administration announced a plan to reduce nicotine levels in cigarettes.

Starbucks (SBUX) fell 9.2%, despite the face the company posted earnings above expectations and rising global sales. The coffee giant said it would close all of its Teavana retail stores over the coming year.

Have a great week and we’ll see you back here Sunday!

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