The US stock market is kicking off what is usually a light trading period—the week leading up to Christmas—at or near all-time highs after setting more records last week. Tech stocks, after two weeks of relative underperformance, led the charge.
Most of the week’s selling was confined to Thursday—one day after the major US indexes hit their highest levels of the week after the Federal Reserve announced it was (as expected) hiking the Fed funds target rate range 0.25% to 1.25%-1.5%. It was the Fed’s third rate increase this year. (Check out more here if interested.) But on Friday, a strong rebound amid anticipation of an imminent resolution to the tax reform bill closed the week on a bullish note—and fresh record highs.
For the week, the S&P 500 (SPX) closed up 0.9%, the Nasdaq 100 (NDX) gained 1.9%, and the Dow Jones Industrial Average (DJIND) rallied 1.3%. For the second week in a row small-cap stocks were the most vulnerable area of the market, but the Russell 2000’s (RUT, +0.6%) relative strength on Friday saved them from a second-straight down week.
The top-performing S&P sectors for the week were Telecom Services (+3.8%), Information Technology (+1.6%), and Consumer Staples (+1.2%). For the second week in a row Utilities (-0.7%) were the weakest sector, followed by Materials (-0.02%) and Financials (-0.1%).
In the futures space, one of the more interesting moves last week may be the one that wasn’t: After a five-month rally, and despite pushing to contract highs on November 24, crude oil futures (CL) have now clearly been stuck in a congestion phase for more than month. Last week that range continued to tighten, setting up the possibility of a breakout move.
Trading volumes may be lighter than normal this week, but there’s a full slate of US economic releases, dominated by housing data. Here’s the breakdown: Housing Market Index (Monday); Housing Starts and Building Permits (Tuesday); Existing Home Sales (Wednesday); GDP (final), FHFA House Price Index and Leading Indicators (Thursday); Durable Goods Orders, Personal Income and Outlays, and New Home Sales (Friday).
All things considered, there are also quite a few earnings releases scheduled for this week: HEICO (HEI) on Monday; FedEx (FDX), Micron (MU), Red Hat (RHT), Calavo Growers (CVGW), Carnival (CCL), Darden Restaurants (DRI), FactSet (FDS), and Navistar (NAV) on Tuesday; AAR Corp (AIR), Bed Bath & Beyond (BBBY), Herman Miller (MLHR), RE/MAX Holdings RMAX General Mills (GIS), Winnebago (WGO) on Wednesday; Accenture (ACN), Apogee Enterprises (APOG), CarMax (KMX), ConAgra (CAG), Paychex (PAYX), CalAmp (CAMP), Cintas (CTAS), NIKE (NKE), SMART Global (SGH) on Thursday.
A final note: Volatility tends to be dampened a bit in the week before Christmas, but the S&P 500 has a fairly solid track record of tacking on gains during this period: Over the past 25 years, four of the five days had positive returns 60% or more of the time, with the second and third days before the holiday being the most bullish, with 68% and 70% higher closes, respectively. The fourth day before the holiday was the weakest day (but still bullish, on average).1
1 Supporting document available upon request