Breakout Friday

11/18/19
  • S&P 500 closes above 3,100, Dow closes above 28,000
  • Sixth-straight up week for SPX, seventh for NDX
  • This week: Fed minutes, retail earnings, housing data

The US stock market will kick off the second half of November at record levels after the S&P 500 (SPX) wrapped up its first six-week winning streak in more than two years.

Last week’s mostly quiet trading—somewhat surprising, given the anticipation that had surrounded two days of congressional testimony from Fed chief Jerome Powell—was capped by an energetic rally on Friday that propelled the SPX to its first close above 3,100:

Chart 1: S&P 500 (SPX), 9/26/19–11/15/19. S&P 500 (SPX) price chart. Friday records.

Source: Power E*TRADE


In terms of market reaction, Powell’s testimony was uneventful, although many noted his observation that negative interest rates were inappropriate given strong labor and consumer markets, and favorable expectations for “sustained economic expansion.”1 Translation: The economy’s OK right now, and unless conditions change, don’t hold your breath waiting for more near-term rate cuts. The market barely budged.

But after closing Thursday just 3 points above where it ended the previous week, the SPX broke out of its doldrums on Friday amid comments from the White House that a US-China trade deal was near.2

The Dow Jones Industrial Average (DJIA) spent a second week as US index leader (and closed above 28,000, to boot), while the Russell 2000 (RUT) again brought up the rear:

US stock index performance table for week ending 11/15/19. S&P 500 (SPX), Nasdaq 100 (NDX), Russell 2000 (RUT), Dow Jones Industrial Average (DJIA).

Source: Power E*TRADE


Sector roundup: The strongest S&P 500 sectors last week were health care (+2.3%), real estate (+1.8%), and utilities (+1.4%). The weakest sectors were energy (-1.6%), financials (-0.4%), and consumer discretionary (-0.39%).

Power moves: On Tuesday, Reata Pharmaceuticals (RETA) fell -15% to $182.83, while Cardlytics (CDLX) jumped +43% to $56.94 on Wednesday.

And a special shout–out to two single-digit stocks that made the leap to double digits on the same day: On Tuesday Applied DNA Sciences (APDN) exploded +330% to $19 (successful application of new technology), while Craft Brew Alliance (BREW) soared +121% to $16.23 (Anheuser–Busch InBev buyout). BREW held on to its gains through Friday, but unfortunately for APDN, Wednesday ushered in a -73% return to reality that dropped the stock back to $5.18.

Futures action: Friday was December WTI crude oil’s (CLZ9) pushed to the top of a two-week trading range on Friday, closing around $57.90 (highest close since September 19), up 0.8% for the week.

After falling to its lowest point ($1,446.20/ounce) since early August, December gold (GCZ9) futures made an intraday pivot to the upside on Tuesday, closing Friday up around 0.5% for the week around $1,467.50.

Coming this week

Wednesday’s FOMC minutes release is sandwiched between the month’s first housing numbers:

Monday: Reserve Bank of Australia meeting minutes

Tuesday: Housing Starts, Quarterly Services Report, Housing Market Index, E-Commerce Retail Sales

Wednesday: FOMC Minutes

Thursday: Existing Home Sales, Leading Indicators

Friday: Consumer Sentiment

More high-profile retail earnings are on the way this week:

●Monday: BiliBili BILI (BILI), Campbell Soup (CPB), Copart (CPRT

●Tuesday: 58.com (WUBA), Aramark (ARMK), Kohls (KSS), JinkoSolar (JKS), TJX (TJX), Home Depot (HD), Urban Outfitters (URBN), Medtronic (MDT)

●Wednesday: Jack in the Box (JACK), L Brands (LB), Target Corp (TGT), Lowe's (LOW), NetEase (NTES), Pinduoduo (PDD), Sonos (SONO)

●Thursday: Baozun (BZUN), Shoe Carnival (SCVL), Gap (GPS), Intuit (INTU), Nordstrom (JWN), Macy's (M), Ross Stores (ROST)

●Friday: Buckle (BKE), JM Smucker (SJM), Foot Locker (FL)

Go to the E*TRADE market calendar (logon required) for an up-to-date earnings schedule and a complete list of splits, dividends, IPOs, and economic reports. The Active Trader Commentary also lists earnings announcements, IPOs and economic report times each morning.

Word on the Street

We’ve got an explosive combination of monetary and fiscal policy right now.

Investor Paul Tudor Jones commenting on the forces that could drive the market higher.3

Six weeks and counting. Think six straight higher SPX weekly closes is no big deal? Well, since November 1988—a period spanning more than 1,600 weeks—the index has had only 18 other runs as long or longer.

And while it may sound like a recipe for an “overbought” market, that hasn’t necessarily been the case. In fact, after an initial six-week winning streak the SPX closed higher the next week 61% of the time, and 67% of the time the week after that.4

 

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1 Reuters. Fed chief Powell pushes back on negative interest rates. 11/13/19.

2 MarketWatch.com. Asian markets gain after Kudlow says trade deal near. 11/14/19.

3 CNBC.com. Paul Tudor Jones sees an ‘explosive combination’ of forces driving the market higher. 11/13/19.

4 Supporting document available upon request. Reflects S&P 500 weekly closing prices from November 15 1988 through November 15, 2019.

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