Weekly Market Update – 24 July 2017 BMO

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RECORD HIGHS

Equities kept chugging along this week, underpinned by a generally solid batch of earnings reports and the notion that monetary policy will remain accommodative for the foreseeable future. The S&P 500 ended the week higher for the third-consecutive time, adding 0.5%, but the real star was the Nasdaq, which climbed 1.2% and settled at a new record high for three sessions in a row. The Dow lagged this week, finishing with a small loss of 0.3%.

The stock market kicked off the week with a rather uneventful performance on Monday that left the major averages little changed. However, activity picked up on Tuesday as the Nasdaq climbed to a new record high for the first time since June 8. Netflix (NFLX) headlined the earnings front, surging 13.5%, after adding a surprisingly-large number of new subscribers in the second quarter.

Buyers were in the driver’s seat during the midweek session, pushing the Nasdaq, the S&P 500, the Dow, and the small-cap Russell 2000 to new all-time highs. Each of the S&P 500’s 11 sectors finished in the green with the energy group setting the pace following an upbeat EIA crude inventory report. Conversely, financials and transports struggled once again, shrugging off some relatively upbeat earnings reports.

However, it’s important to note that the S&P 500’s financial sector and the Dow Jones Transportation Average both had bullish, multi-week runs ahead of earnings season, making it difficult for their components to advance on upbeat results alone.

On Thursday, monetary policy was the focal point as investors digested the latest policy decisions from the European Central Bank and the Bank of Japan. Both central banks decided to leave interest rates unchanged and sounded dovish about future accommodation. However, the euro rallied against the U.S. dollar nonetheless as ECB President Mario Draghi failed to dispel the notion that the ECB might soon announce a tapering of its asset purchase program.

The Nasdaq eked out another record close, extending its winning streak to ten sessions in a row, while the S&P 500 and the Dow finished just shy of their unchanged marks. The telecom services sector was the top-performing group–which has been a rarity this year–following an upbeat earnings report from T-Mobile US (TMUS). However, ironically, TMUS shares finished solidly lower.

Equity indices ended the week with small losses on Friday. General Electric (GE) weighed on the industrial sector, dropping 2.9%, after reporting disappointing organic revenue growth for its industrial segment. Microsoft (MSFT) also faced selling pressure as its better than expected earnings and revenues failed to fully justify its preceding ten-day rally. Energy was the worst-performing sector following news of increased OPEC production, which sent crude oil on a 2.7% plunge.

The fed funds futures market still points to the December FOMC meeting as the most likely time for the next rate-hike announcement with an implied probability of 52.0%, up slightly from last week’s 50.6%. The Fed will release its latest policy statement on Wednesday afternoon at 14:00 ET.

(Excerpts from Briefing.com)

Currencies: Euro strengthens ahead of next week’s PMI reports

Bonds yields: The yield curve fell further following last week’s losses to flatten considerable. Spreads across the yields have now tightened to 57bps on the 10/30, 43bps on the 5/10 and 46bps on the 2/5.

Commodities: Crude loses, Metals gain. The Baker Hughes total rig count decreased by 2 to 950 after no change last week

Agriculture: Grains closed mixed after a week of gains.

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wk30THE WEEK AHEAD

More volatility ahead as earnings season goes into its peak. No less than 13 DOW components are on the line this week

Monday 24 July to Friday 28 July (Week 30)

The thirtieth week of 2017 (wk30) looks flat and uneventful with less than 50% reliability on the DIA and an average of 50% on the SPY. However, expect a lot of volatility within the week as the daily gyrations are expected to whipsaw the market.

Our daily models over 5, 10 and 15 year averages show the DIA as bearish all weekSPY is expected to be bearish on Monday and Tuesday, bullish on Wednesday and Thursday and unpredictable on Friday.

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The 2017 Stock Trader’s Almanac’s averages for the benchmark indices (based on 21 years) for week 30;

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Earnings Calendar for the week of July 24th

Mon 24 July

Tue 25 July

Wed 26 July

Thu 27 July

Fri 28 July

Key Economic Dates

Mon 24 July

Tue 25 July

Wed 26 July

Thu 27 July

Fri 28 July

SUMMARY

So the doubters continued to get shamed by this market that doesn’t want to come down. Well, August and September are just around the corner and they may get their wish … eventually. But until then, there’s so stopping this bull run. Unless of course, the GDP number come out with a stunningly negative surprise along with a surprise move by the Fed on Wednesday.

Happy Hunting!

LAST REMINDER:

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The Pattern Trader™ Tutorial will be having its second Preview for the August Batch on 27 July. Don’t miss out on this educational three-hour session by registering here: July 27, 2017 Preview Session

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