Courtesy of Blain.
Merry Christmas! Hope you get a chance to read our special holiday edition recap!
The second to last week of the year was a lot like so many others – positive for bulls. Almost all the gains happened in the opening moments of Monday on anticipation of the tax reform passing; the rest of the week was the typical little volatility. The S&P 500 and NASDAQ both gained 0.3% on the week.
Lots of records are being broken i.e. on Monday the NYSE closed at a record for the 70th time this year which is the highest number of record closes in a single calendar year.
The sheer number of Dow records is a sign of how unceasing the market’s move higher has been this year. On a total-return basis, the S&P has risen for 13 straight months through November, an unprecedented streak.
2017 was also a notable year for how lacking in volatility it was. According to the WSJ Market Data Group, the average absolute daily percentage change for the Dow was 0.31% in 2017. It was 0.3% for the S&P, and in both instances, that represents the smallest absolute daily percentage change since 1964.
It’s becoming a running joke now but the only question for each week is will the market go up… or up a lot? With tax reform complete and corporations now handed tons of money for stock buybacks job creation, S&P 500 earnings should jump up nicely, which justifies some of this run.
“While it’s debatable who the real beneficiaries of the bill will be, stock markets have clearly benefited in anticipation of it, with major corporations being among the big winners of the bill,” said Craig Erlam, senior market analyst at Oanda in a note.
The last time there was an one-time tax on the foreign profits of U.S. companies—following the Homeland Investment Act of 2004, which created a repatriation “tax holiday” with an effective rate of 5.25%, as opposed to 35%—buyback activity surged, jumping 84% in 2004 and 58% in 2005, according to Goldman data.
The crazy run that is cryptocurrency did take a breather with Bitcoin falling mid to late week – now back down around $14K. (but as low as $11K Friday!!) Still up from where it was a few weeks ago but down from the peak near $20K. This thing is a wild bronco.
Economically there were 2 key reports Friday but I’m not many people were around to hear them ahead of the holiday!
Orders for durable goods rose 1.3% in November. While this represented an improvement after a 0.4% drop in the prior month, it was below the 2% growth that analysts had been expecting. Separately, consumer spending rose 0.6% in November, while personal income was up 0.3%.
Here is the 5 day weekly “intraday” chart of the S&P 500 …not via Jill Mislinski.
The week ahead…
One doubts the last week of the year will be much different than the prior 51! Only difference is it will be 4 days instead of 5.
Index charts:
Short term: Again, some extreme stuff – the S&P 500 has only closed below it’s 20 day moving average once in nearly 5 months, and only TOUCHED it a handful of times.
The Russell 2000 got back into the swing of things after daring to touch the 50 day moving average the prior week.
The NYSE McClellan Oscillator continues to not be great but certainly not any extreme red readings either.
Long term: Unicorns and rainbows continue.
Charts of interest / Big Movers:
Blast from the past from the late 1990s, as Akamai Technologies (AKAM) jumped 14% Monday after activist hedge fund Elliott Management on Friday reported a 6.5% stake in the internet technology company.
Wednesday, Stitch Fix (SFIX) plunged 10% after the online clothing retailer late Tuesday reported earnings that topped forecasts, but the result did’t reflect the “blowout quarter” bulls were hoping for. Much of that was recovered by Friday however. An interesting company that is trying to use narrow personalization to make it as a retailer.
Blackberry (BB) is somehow still around and jumped 12% Wednesday after it reported revenue and profit that topped expectations.
Aeterna Zentaris (AEZS) soared 35% Thursday after the biotech firm late Wednesday said the U.S. Food and Drug Administration had approved the company’s Macrilen product for diagnosis of adult growth hormone deficiency.
This is the type of stuff you saw in the late 90s NASDAQ bubble. A company changes its “focus” to the hot trend out there – without any real business venture… just a new idea. And “investors” bid it up to the moon. On Thursday, some company named Long Island Iced Tea (no seriously) said it would change its name to Long Blockchain Corp. Shares soared 183% on extremely heavy volume; nearly 15 million shares exchanged hands, compared with its 30-day average of less than 275,000. Long Island Iced Tea’s most recent investor presentation, released on Oct. 5, made no mention of blockchain or any upcoming change in focus.
Friday Ignyta (RXDX) jumped 73% on heavy volume after the biotechnology company disclosed that it agreed to a merger with Roche Holdings.
Have a great week and we’ll see you back here Sunday!
