Weekly Market Update – 31 July 2017 BMO

Screen Shot 2017-06-28 at 3.00.52 PM

Dexes28July2017

ITS ALL ABOUT EARNINGS

Investors had a massive pile of earnings reports to work through this week. The results were generally positive, but equities still sold off in some instances as many companies rallied for several weeks in front of their reports, pricing in much of the good news beforehand. The S&P 500 finished the week just a tick below its flat line, the Nasdaq dropped 0.2%, and the Dow outperformed, climbing 1.2%.

The stock market began the week with a rather range-bound performance on Monday as small victories from the top-weighted technology and financials sectors roughly canceled out losses from the nine remaining groups. Alphabet (GOOGL) helped carry the tech space, muscling one more win ahead of its earnings report, which crossed the wires on Monday evening.

Alphabet reported better than expected earnings and revenues, but slid 2.9% on Tuesday nonetheless. In general, earnings continued to eclipse expectations on Tuesday with Caterpillar (CAT), McDonald’s (MCD), DuPont (DD), and United Technologies (UTX) all beating earnings per share estimates. The positive results helped push the S&P 500 and the Nasdaq to modest victories and new record highs.

The Dow joined the record-high club in the midweek session, outpacing its peers on the back of Boeing (BA). The airplane maker surged 9.9% after reporting better than expected earnings and raising its earnings guidance for the fiscal year. Wireless giant AT&T (T) also moved solidly higher, adding 5.0%, following its latest quarterly report, which showed above-consensus earnings.

Investors took a break, albeit a short one, from earnings season on Wednesday afternoon when the Fed released its latest policy directive. However, the release largely turned out to be a nonevent. The FOMC decided to keep the fed funds target range at 1.00%-1.25%, as expected, and noted that it expects to begin paring its balance sheet “relatively soon”, which was interpreted by many to mean September.

Earnings came back into focus on Thursday with Facebook (FB) headlining the lineup. The social media giant jumped to a new record high after reporting better than expected earnings and revenues, however, the company gave back a good portion of said advance as tech stocks began to sell off in the afternoon, pushing the technology sector to the bottom of the leaderboard.

Transports struggled mightily on Thursday, sending the Dow Jones Transportation Average lower by 3.1%. The DJTA’s weakness was broad, but UPS (UPS) and Southwest Airlines (LUV) exhibited particular weakness despite beating earnings estimates. However, on a positive note, Verizon (VZ) surged 7.7% on better than expected revenues. Equity indices settled mixed with the S&P 500 losing 0.1%.

Moving into Friday’s session, investor sentiment was down mildly after Amazon(AMZN) reported worse than expected earnings on Thursday evening. The e-commerce giant dropped 2.5%, but the broader market held up relatively well with the Dow settling at another record high, its third in a row. Also of note, the advance estimate of Q2 GDP came in slightly below expectations (2.6% actual vs 2.8% Briefing.com consensus).

Following this week’s policy directive, the fed funds futures market now points to the January FOMC meeting as the most likely time for the next rate-hike announcement with an implied probability of 50.8%. At this time last week, investors were anticipating the next rate hike to occur in December.

Equity indices finished Friday’s session mixed; the Dow (+0.2%) advanced to a new record high for the third day in a row while the S&P 500 (-0.1%) and the Nasdaq (-0.1%) settled a tick below their unchanged marks. All three major averages finished near their best marks of the day. For the week, the S&P 500 finished flat.

(Excerpts from Briefing.com)

Currencies: Dollar and Swissy Decline After Ugly Week

Bonds yields: The yield curve steepened for the week in spite of a disappointing US GDP report for the second quarter. The U.S. economy grew at a 2.6% seasonally adjusted annual rate in real terms during the second quarter, short of the consensus for a 2.8% SAAR.

Commodities: Crude gains $4, Metals gain for another week. Total U.S. rig count increased by 8 to 958 after a decline of 2 last week.

Agriculture: Grains closed lower after topping out last week.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

THE WEEK AHEAD

August begins … and with it usually come the bears.

Monday 31 July to Friday 04 August (Week 31)

On the Pattern Trader Seasonal Scanner, the thirty-first week of 2017 (wk31) has very low statistical reliability that generally implies that it can either be very flat or extremely volatile for the SPY and DIA.

DIAweek31 SPYweek31

Our daily models over 5, 10 and 15 year averages reveal similar statistics to the Stock Trader’s Almanac in that it is likely to be a volatile week that will rock and roll up and down with the statistics favouring the bears.

The 2017 Stock Trader’s Almanac’s averages for the benchmark indices (based on 21 years) for week 31;

Screen Shot 2017-07-30 at 11.55.29 PM

Earnings Calendar for the week of July 24th

Mon 31 July

Tue 01 August

Wed 02 August

Thu 03 August

Fri 04 August

Key Economic Dates

Mon 31 Jul

Tue 01 Aug

Wed 02 Aug

Thu 03 Aug

Fri 04 Aug

SUMMARY

Earnings Season heats up this week with a deluge of companies on earnings call especially mid-week. The volatility stakes will rise and expect more rock and rolls as earnings continue to test this market’s bullish persistence.

Happy Hunting!

Share

If you enjoyed this post, please consider to visit Pattern Trader Tools, leave a comment or subscribe to the feed and get future articles delivered to your feed reader.

Comments

No comments yet.

Sorry, the comment form is closed at this time.