New records as Q4 heats up

11/04/19
  • New records for S&P 500, Nasdaq 100
  • Facebook and Apple beat their numbers
  • This week: 1,400+ earnings reports on tap

A week that featured a friendly Fed move, stronger-than-expected economic growth, and a not-too-shabby jobs report didn’t disappoint bulls, as the S&P 500 (SPX) punched out its first all-time highs since July and kicked off November on an up note.

The SPX got its new records out of the way early, surging last Monday amid reports that the US and China were poised to sign off on “phase one” of a trade agreement sooner than expected:1

Chart 1: S&P 500 (SPX), 9/25/19–11/1/19. S&P 500 (SPX) price chart. Back on top.

Source: Power E*TRADE


On Wednesday, the double feature of an estimate-topping GDP number and a quarter-point Fed rate cut was followed by the SPX’s third-consecutive intraday high and second record close of the week—even though Fed Chairman Jerome Powell prepared markets for the possibility that the Fed may not cut rates again for a while.2

The week’s only real dose of cold water came in the form of reports early Thursday that Chinese officials had doubts about working out a long-term trade deal with China.3 But even though the SPX closed with a modest loss, big post-earnings rallies from Facebook (FB) and Apple (AAPL) helped the Nasdaq 100 (NDX) end the day fractionally in the green.

Friday’s jobs report—128,000 new jobs vs. less than 100,000 expected—helped close out the week with fresh records for the SPX and the NDX, with the latter pumping its YTD gain to almost 29%:

US stock index performance table for week ending 11/1/19. 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 (+3.1%), industrials (+1.9%), and information technology (+1.85%). The weakest sectors were real estate (-0.9%), energy (-0.5%), and utilities (-0.2%).

Power moves: Tiffany (TIF) jumped +32% to $129.72 on Monday on reports fellow luxury goods company Louis Vuitton (LVMHF) was interested in scooping it up. Grubhub (GRUB) tumbled -43% to $33.11 after delivering an earnings miss.

Futures action: After a four-day pullback, December WTI crude oil (CLZ9) rallied more than 3% on Friday to close above $56/barrel, down less than 1% for the week. Thanks mostly to a surge on Thursday, December gold (GCZ9) posted a small ($8) gain last week, closing Friday around $1,515/ounce.

Coming this week

More manufacturing data, service-industry readings, and international trade figures anchor this week’s economic calendar:

Monday: Factory Orders

Tuesday: International Trade, PMI Services Index, ISM Non-Manufacturing Index, JOLTS

Wednesday: Productivity and Costs

Thursday: Consumer Credit

Friday: Consumer Sentiment, Wholesale Trade

Here’s a sample of this week’s 1,400-plus scheduled earnings announcements:

●Monday: Under Armour (UAA), Aqua America (WTR), Neurocrine Biosciences (NBIX), Booking Holdings (BKNG), Sysco (SYY), Occidental Petroleum (OXY), Freshpet (FRPT), Shake Shack (SHAK), RingCentral (RNG), Marriott International (MAR), Uber Technologies (UBER)

●Tuesday: Allergan (AGN), Amarin (AMRN), BioTelemetry (BEAT), Devon Energy (DVN), Twenty-First Century Fox (FOXA), US Foods (USFD), Newmont Goldcorp (NEM), Match Group (MTCH), LGI Homes (LGIH), Microchip Technology (MCHP), Regeneron Pharmaceuticals (REGN), Nektar Therapeutics (NKTR)

●Wednesday: Elanco Animal Health (ELAN), AES (AES), Albemarle (ALB), Baidu (BIDU), CVS Health (CVS), Vulcan Materials (VMC), New York Times (NYT), Marathon Oil (MRO), Wendy’s (WEN), Discovery (DISCA), GoDaddy (GDDY), Royal Gold (RGLD), Qualcomm (QCOM), Square (SQ)

●Thursday: Activision Blizzard (ATVI), Booking Holdings (BKNG), Ralph Lauren (RL), Progressive (PGR), Walt Disney (DIS), Scientific Games (SGMS), Keurig Dr Pepper (KDP), Dropbox (DBX), Fastly (FSLY), Revolve Group (RVLV), Yelp (YELP), Take-Two Interactive Software (TTWO), Ubiquiti (UI), Shockwave Medical (SWAV)

●Friday: US Concrete (USCR)

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

The market has consistently underestimated the strength of the domestic part of the economy. We have historically strong labor markets.

Catherine Mann, Citi global chief economist.

Can bulls carry November (again)? After the SPX closed out October with its eighth-biggest YTD gain since 1950 (check out the potential implications for the rest of the year), traders are heading into the meat of what is traditionally one of the strongest portions of the market calendar.

While some naysayers may argue November is due for a setback—it’s been an up month seven years running, the longest current winning streak of any month of the year—that outlook would nonetheless be fighting longer-term history. Since 1990, November is the month with the highest median SPX return (2.5%) and the second-highest winning percentage, closing up 72.5% of the time.

Even during last year’s terrible Q4, November managed to burnish its bullish reputation: The SPX gained 1.8%, despite being sandwiched between a -6.9% October and -9.2% December.

Friday’s rally was also in keeping with November’s tendency to start hot. Since 1950, the SPX’s average return for first five days of the month is 0.7%—more than four times its overall five-day average return of 0.2%.

 

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1 Reuters. Trade optimism, Fed rate-cut expectation sends S&P 500 to record. 10/29/19.

2 CNBC.com. Powell aces tricky Fed transition to ending interest rate cuts, doing ’100% the right things’. 10/30.19.

3 Associated Press. US Stocks Close Broadly Lower on New US-China Trade Jitters. 10/31/19.

4 MarketWatch. Fed’s Powell to markets: Don’t bank on more interest-rate cuts. 10/31/19.

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