Eight out of nine ain’t bad
01/16/18

This holiday shortened week begins with the US stock market coming off its second straight up week of the year, with the S&P 500 (SPX) closing higher eight of nine days so far in 2018. All major US indexes hit new record highs last week.

A minor down day (-0.1%) on Wednesday snapped the SPX’s record-tying streak of six consecutive record-high closes to start a year (a feat it last accomplished in 1964), but the index bounced back strongly on Thursday and Friday to close at consecutive new highs. The SPX has had back-to-back down days only three times over the past month, and none since December 26.

S&P 500 (SPX), 11/9/17 – 1/15/18

Source: OptionsHouse


Another notable development: The small-cap Russell 2000 (RUT) broke out of its relative funk with a big rally on Thursday that helped it win last week’s horse race. For the week:

●The S&P 500 (SPX) closed up 1.6%.

●The Russell 2000 (RUT) rallied 2.1%.

●The Nasdaq 100 (NDX) gained 1.6%.

●The Dow Jones Industrial Average (DJIA) gained 2%.

The top-performing S&P 500 sector last week was Energy (+3.19%), followed closely by Industrials (+3.18%, thanks in part to high-flying airline stocks) and Consumer Discretionary (+3.14%).

If the worst-performing sectors look familiar, it’s because they were repeats from the previous week: Real Estate (-3.4%), Utilities (-2.12%), and Telecom Services (-1.96%).

In the futures arena, Treasury prices slumped last week amid rumors China may lighten or end its purchases of U.S. debt,1 leading some observers to proclaim an end to the bond bull.2 Crude oil (CL) hit a three-year high (boosting energy stocks; European Brent crude hit $70), and gold (GC) poked its head above its recent consolidation on Friday. The Euro FX futures (EC) pushed to their highest level in three years as the European Central Bank (ECB) hinted it may start preparing markets for the end of its huge monetary stimulus program.3

The remainder of this holiday-shortened week is light on economic releases, but it does include the first trickle of housing data:

Wednesday: Industrial Production, Housing Market Index, Beige Book.

Thursday: Housing Starts, EIA Natural Gas Report, EIA Petroleum Status Report.

Friday: Consumer Sentiment.

Earnings season gets underway in earnest this week, heavy on financials. Here are a few highlights:

Monday: Progress Software (PRGS).

Tuesday: Citigroup (C), Comerica (CMA), UnitedHealth (UNH), CSX (CSX), Pinnacle Financial (PNFP).

Wednesday: Bank of America (BAC), Goldman Sachs (GS), Morgan Stanley (MS), U.S. Bancorp (USB), Alcoa (AA).

Thursday: BNY Mellon (BK), M&T Bank (MTB), PPG Industries (PPG), Taiwan Semi (TSM), American Express (AXP), Atlassian (TEAM), Canadian Pacific (CP), IBM (IBM), Wintrust (WTFC).

Friday: Citizens Financial Group (CFG), Regions Financial (RF), Rockwell Collins (COL), Schlumberger (SLB).

You can find a complete list of earnings and other market events on the E*TRADE market calendar (login required).

 

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1 Bloomberg.com. China Weighs Slowing or Halting Purchases of U.S. Treasuries. 1/10/18.

2 Bond guru Bill Gross signals a new era for Treasury markets. 1/10/18.

3 Reuters. ECB may start tweaking policy message in early 2018: minutes. 1/11/18.