The upward move continues. In last week’s recap we mentioned a lot of things turned positive on the technicals and that was born out in the action of the week, starting with a “gap up” in Monday’s session!
The U.S. and Mexico reached an agreement to enter into a new trade deal as President Donald Trump announced that he wants to drop the name “North American Free Trade Agreement” from an existing deal that includes Canada.
“It looks like a revised Nafta agreement between the U.S., Mexico and Canada may be reached shortly. That is giving investors optimism that a U.S.-China trade deal can be worked out in the fall which would remove an obstacle for markets to move higher,” said Jeff Kravetz, a regional investment strategist at U.S. Bank Private Wealth Management.
Apple (AAPL) is up 8 sessions in a row – best month since 2009 with a 19.6% gain. That’s a giant move in itself but considering how large the company is, it is just a spectacle to behold.
Square (SQ) is up 12 sessions in a row.
Biotech has also been strong – remember all that “we are going to do something about these outrageous prices” talk?
For the week the S&P 500 gained 0.9% while the NASDAQ jumped 2.1%. In August the S&P 500 gained 3.0% while the NASDAQ surged 5.7% (that’s 68% annualized!).
While not a massive market moving stat it is worth noting on Tuesday the Conference Board said its index of consumer confidence climbed to 133.4 this month from 127.9 in July. That’s the strongest reading since October 2000 and topped the previous post recession peak of 130 in February. However, such bullish readings can prove a double edged sword, pointing to growing optimism but also suggesting that a measure of complacency may be gripping Wall Street.
Consumer spending climbed 0.4% in July, according to a government reading, matching the estimate of economist. Incomes rose 0.3%. And the 12 month increase in the PCE index, the Federal Reserve’s preferred inflation gauge, rose to 2.3% from 2.2%, marking the highest level since April 2012.
Here is the 5 day weekly “intraday” chart of the S&P 500 … via Jill Mislinski.
From Bespoke Investment blog:
As shown, the Technology sector has accounted for 52.4% of the S&P 500’s gain this year, which is twice as much as the next closest sector — Consumer Discretionary. Aside from Tech and Consumer Discretionary, the only other sector with a meaningful contribution has been Health Care at 18.4%. We should note, of course, that Consumer Discretionary includes Amazon; the e-commerce and web infrastructure (AWS) giant is over one quarter of that sectors’ market cap, and it’s up 70% YTD.
It’s worth keeping in mind that out-sized contribution to gains from a few sectors makes a fair bit of intuitive sense; some sectors are heavily weighted in the overall index! Tech, specifically, accounts for over one-quarter of the overall index. Health Care, Financials, and Consumer Discretionary are the only other sectors over a 10% weighting
The week ahead…
Markets are closed Monday for the holiday; from there it gets pretty action packed on the economic front; ISM Manufacturing and Services hit this week along with the employment data for August on Friday.
Another amazing stat:
Binky Chadha, chief strategist at Deutsche Bank, noted that the three month period running from a month ahead to two months after the mid term elections has produced a median 8% gain. And that includes only one decline, a 4% drop in 1978, over that period in the last 21 midterm years.
Short term: One would think the indexes are a bit extended short term…
This Russell 2000 was not quite as spirited as the other indexes but is moving slowly along.
The NYSE McClellan Oscillator remains in the black.
Long term: Still very positive for the “buy and never sell” crowd.
Charts of interest / Big Movers:
Tuesday, DSW (DSW) jumped 20% after it reported adjusted second-quarter earnings that exceeded expectations and revenue that was well above forecasts.
Also Tuesday, Affimed NV (AFMD) said it had entered into an agreement with Genentech to develop and commercialize immunotherapeutic treatments for multiple cancers. Shares of Affimed skyrocketed a cool 247% Tuesday alone.
Box (BOX) slumped 11% Wednesday after it gave an earnings and sales outlook that was below expectations late Tuesday.
The market loves new themes to speculate on – pot is the new cryptocurrency. Cannabis producer Tilray (TLRY) late Tuesday reported second-quarter sales that doubled from the prior year, thanks to the sale of more high-potency weed and extracts. The stock is up from $25 to $65 in under a month.
Ciena (CIEN) jumped 13% Thursday after it reported third-quarter results that beat expectations.
Lululemon (LULU) late Thursday reported second-quarter earnings that beat expectations. It also raised its full-year outlook. The stock closed up 13.1% Friday and has been a strong performer in 2018, up nearly 100% thus far this year.
American Outdoor Brands (AOBC), the parent company of Smith & Wesson, late Thursday reported results that topped analyst expectations. Shares surged by nearly 44%.
Have a great week and we’ll see you back here Sunday!