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Weekly Market Recap Nov 05, 2017

Courtesy of Blain.

While there was some chop to this past week, the bulls remain in control as that chop right now would be seen as some form of consolidation after a round of market gains.  The weekly gain for the S&P 500 was 0.3% and for the NASDAQ 0.9%.   For the month of October the S&P 500 was up 2.2% and the NASDAQ 3.6%.

Monday was the only day of sustained selling and some attributed that to a report that the House of Representatives is considering phasing in a cut to corporate taxes rather than enacting them immediately.  The actual House plan was released Thursday to much fanfare.   Andrew Hunter, U.S. economist at Capital Economics, sees the Republican tax plan adding roughly $1.5 trillion to the deficit over the next 10 years.

The House is discussing a “gradual phase-in for the corporate tax-rate cut that President Donald Trump and Republican leaders want — a schedule that would have the rate reach 20 percent in 2022,” according to Bloomberg News, citing people familiar with the matter.

“Unveiling of the tax bill is a step one. Approving and passing the legislation is step two and it’s not at all clear in what form or shape this bill will be passed,” said Kim Caughey Forrest, senior analyst and portfolio manager at Fort Pitt Capital Group.

The Federal Reserve meeting – as expected – yielded nothing.

The Federal Reserve stood pat on interest rates but referred to the U.S. economy in positive terms.  The central bank, in its statement following a two-day meeting, said economic activity has been picking up at a “solid rate,” versus the “moderate” rate that it had referenced in September. The rosier view of the economy also suggests that it is on track to hike interest rates in December, as has been widely expected.

More important, the new Federal Reserve head was nominated by Trump: Jerome Powell.   Powell is viewed as a nominee who will be measured in his approach to raising borrowing costs and who also is favorable to scaling back Wall Street regulations.

“Under Powell expect a pragmatic path on monetary policy, along with an equally pragmatic path on industry regulation. In other words, continuity with a Republican tilt,” said Quincy Krosby, chief market strategist at Prudential Financial.

“Jerome Powell has taken a fairly centrist approach to monetary policy in his votes for rates and only recently has had a more dovish tone based on the Fed’s September meeting,” said Wade Balliet, chief investment strategist at Bank of the West, in a note. “Powell’s views may closely resemble those of Yellen and could continue monetary policy on its current path—a welcomed message for financial markets. Based on Powell’s track record, confidence in the Fed may remain high.”

In economic news it was reported Monday that consumer spending leapt 1% in September, the biggest gain since 2009. Personal income rose 0.4%, but the savings rate fell to 3.1%, the lowest level since December 2007. Wednesday, the ISM manufacturing index fell to 58.7, slightly below forecasts, but still indicating robust growth.  Friday, ISM nonmanufacturing rose more than expected to come in at 60.1, the strongest reading since August 2005.

Also Friday, the October payroll report showed 261,000 jobs added last month. While this was well below the 325,000 that had been expected, there was positive news in the unemployment rate dipping to 4.1% from 4.2% (but the decline stemmed in part from a 765,000 plunge in the number of people in the labor force), the September report getting revised from a loss to a gain, and the August payroll tally also getting lifted. The October report suggested that there are still lingering effects from Hurricanes Harvey and Irma, which had muddled September’s labor-market results.

Apple rallied Monday and then again Friday.  When Apple is up, it is difficult for the NASDAQ to fall back as it’s such a heavy component of the index.  On Monday the stock jumped 2.3% to an all-time record close as the iPhone maker was seen as drawing healthy demand for its latest mobile device, the iPhone X.    Friday, the stock jumped after it reported earnings that easily beat estimates.   The market cap is near $900 billion… amazingly the stock is up nearly 50% this year.

Here is the 5 day weekly “intraday” chart of the S&P 500 .. via Jill Mislinski.

The week ahead…

Whew not much ahead really – earnings will continue but the Federal Reserve (and nomination) is out of the way and last week saw the key economic reports posted.

Index charts:

Short term: Bulls continue to win.

The Russell 2000 lost some leadership to the senior indexes here of late.

The NYSE McClellan Oscillator continues to show weakness, so we remain cautious short term (i.e. raise cash) for those of the trading bent.  This despite the market still rising.

Long term: Unicorns and rainbows continue.

Charts of interest / Big Movers:

Oil had a nice rally this past week.

Tuesday, Under Armour (UA) slid 24% on weaker-than-expected revenue and a profit warning by the sport-apparel maker.

Wednesday, Envision Healthcare (EVHC) tumbled 34% after hospital company late Tuesday revealed weaker than expected earnings and said it would review strategic alternatives that could include a sale.

Thursday, Tesla (TSLA) slumped 6.8% after the electric car maker late Wednesday reported a wider-than-expected loss.

While Facebook (FB) didn’t make a dramatic move, it is a much followed stock so we’ll give it a mention as it fell 2.1% Thursday even after earnings beat forecasts.

Friday,  Pandora (P) slumped 25% after the music-streaming company late Thursday said its loss widened in the third quarter.

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

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