Daily Market Commentary

Week-In-Review: Stocks Rally On First Week Of 2017

Nice Start To 2017

The bulls are resilient. The market had every chance in the world to fall and didn’t last week. Instead, it edged higher and ended the week in the black. The strong areas of the market continue acting well as they pause to consolidate a very strong post-election rally. The Financials edged higher last week and closed in the middle of the range as we enter earnings season. Materials, Steel, and Transportation stocks, other strong areas since the election, snapped three-week losing streaks and bounced off their respective 10-week moving average lines (roughly equal to its 50 DMA). Small caps remain the strongest since the election and the Russell 2000 (IWM) is building a bullish 5-week base. The bulls want to see the major indices breakout and hit new highs. Looking forward, the next big catalyst will be earnings season. Remember, the key is to see how the market, and your stocks, react to the numbers. Until we see any heavy selling show up, weakness should be bought.

Mon-Wed Action:

Stocks were closed on Monday in observance of the New Year Holiday. On Tuesday, stocks rallied on the first trading day of 2017 but closed off their highs after energy prices plunged. Natural Gas plunged 10% mid day on ample supply and a seasonally warm January and February. Oil prices U.S. opened higher but closed lower and hit a two-week low as the US dollar rallied. Economic data was mostly positive which helped the greenback rally. The ISM manufacturing index jumped to 54.7, a two-year high and easily beating estimates for 53.8. Elsewhere, construction spending jumped to a 10-year high and also beat estimates. The stronger than expected economic data strengthens the case for the Fed to raise rates later this year, hence the stronger dollar. Stocks rallied on Wednesday after the Fed minutes showed they are concerned about a stronger dollar. Mortgage applications fell by 12% last week, from two weeks earlier as rising interest rates hurt. Separately, Fiat Chrysler, Ford Motor and General Motors all reported better-than-expected auto sales for December, which helped their stocks rally. U.S. auto sales for December came in at 18.4 million, versus an estimate of 17.7 million.

Thur & Fri Action:

On Thursday, stocks ended mixed to lower as investors digested the latest round of economic data.The ADP, the country’s largest private payrolls company, said private employers added 153,000 jobs last month, missing estimates for 170,000. Separately, weekly jobless claims came in at 235,000, below the Street’s estimate of 260,000. The December IHS Markit services PMI, came in at 53.99, which missed November’s reading of 54.6. The ISM service index came in at 57.2, beating estimates of 56.6. Elsewhere, brick and mortar stocks fell hard after Macy’s (M) said it was closing stores and would cut 10,000 jobs. Stocks were quiet on Friday after the government said U.S. employers added 156k new jobs in December, missing estimates for 175k. Meanwhile, the unemployment rate came in at 4.7%, which matched estimates. Separately, factory orders fell -2.4%, which was slightly higher than the Street’s estimate for -2.5%.

Market Outlook: Strong Action Continues

Once again, central banks came to the rescue and sent stocks racing higher. The ECB extended QE in December and will print another 2.4T to stimulate markets and the global economy. The U.S. Fed only raised rates once in 2016, by a quarter point to 0.50%, which, historically,  is still very low. As always, keep your losses small and never argue with the tape.  Schedule a complimentary appointment today –  if you want Adam to manage your portfolio or talk about your investment needs. Visit: 50Park.com