S&P 500 moves to new high as earnings flow
07/24/17

Sometimes nothing can be a real cool hand.

After all, traders had next to nothing last week. Surprises around earnings seemed to elicit little more than shrugs from the market. On the macro front, central bank reports revealed a sluggish domestic economy, and politicians in Washington further perfected the science of gridlock.1

But that didn't keep the S&P 500 from continuing its run into record territory. The index advanced 0.5 percent between Friday, July 14, and Friday, July 21. The Nasdaq also continued to rebound, and is now in the midst of its strongest month since January.

Despite all the anticipation of earnings, attention seemed more focused on currency swings as the U.S. dollar slid to a new 52-week low. That gave a boost to precious metals, with multiple strategists calling a bottom in gold.2 It also made Utilities – typically viewed as a safety play – the best major sector with a gain of more than 2 percent. Boring!

Economists contrasted mediocre economic data on the home front with mounting optimism in Europe and China. Even Japan raised its numbers at a time when U.S. forecasters have downgraded growth across the fruited plains.3 So what, retorted the bulls? A weak dollar is positive, they say, because it lifts the value of profits earned overseas.4

Getting back to companies, there were still some big movers. Vertex Pharmaceuticals (NASDAQ: VRTX) led the S&P 500 by surging 25 percent after drug-trial results on its fibrosis treatments proved just what the doctor ordered. Streaming-video colossus Netflix (NASDAQ: NFLX) was the No. 2 stock with a 17 percent gain, breaking out to new record highs on Wall Street-defying subscriber growth. Media company Scripps Networks (NASDAQ: SNI) was close behind, lifted 16 percent by merger talk.5

S&P 500, 3-month chart

Source: OptionsHouse by E*TRADE

Chipotle Mexican Grill (NYSE: CMG) found itself on the other end of the performance tables amid customer food poisoning and a viral rodent video. CMG cratered 13 percent on the week, probing its lowest levels in more than four years. Alliance Data Systems (NYSE: ADS), Northern Trust (NASDAQ: NTRS), and United Continental (NYSE: UAL) followed with drops of 10-11 percent on the heels of weak financials.6

This week has even more results, mostly focused on industrials and some major tech names, and some important economic events. Here's a rundown:

  • Today: Energy may be in focus on as major-oil producing countries meet to discuss output. Alphabet (NASDAQ: GOOGL) leads the earnings parade.
  • Tomorrow brings consumer confidence. Major companies to report include Caterpillar (NYSE: CAT), McDonald's (NYSE: MCD), 3M (NYSE: MMM), United Technologies (NYSE: UTX), General Motors (NYSE: GM), Juniper Networks (NASDAQ: JNPR), and Texas Instruments (NYSE: TXN).
  • Wednesday's a big day, with the Federal Reserve's interest rate decision, plus earnings from Facebook (NASDAQ: FB), Coca-Cola (NYSE: KO), and Ford Motor (NYSE: F).
  • Thursday features durable-goods orders and initial jobless claims. It's also crammed with results: Amazon.com (NASDAQ: AMZN), Intel (NASDAQ: INTC), Starbucks (NASDAQ: SBUX), and Western Digital (NASDAQ: WDC), to name a few.
  • The week concludes with the Commerce Department's initial reading of second-quarter gross domestic product on Friday morning. Exxon Mobil (NYSE: XOM), Chevron (NYSE: CVX), American Airlines (NASDAQ: AAL), and Merck (NYSE: MRK) also weigh in.

 

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1. RTT News: New York Manufacturing Index Falls More Than Expected. 7/17/17. Marketwatch: Philly Fed manufacturing report in July slows to lowest level of the year. 7/20/17. 

2. Reuters: PRECIOUS-Gold up, poised for more gains on soft U.S. rate outlook. 7/17/17. Marketwatch: Gold ends above key $1,230 level as investors weigh interest-rate outlook. 7/17/17.

3. Business Insider: The Bank of Japan upgraded its forecasts for growth. 7/20/17. RTT News: Forecasters Lift Eurozone GDP Outlook: ECB. 7/21/17.

4. Wall Street Journal: Why a Weaker Dollar Is a Source of Market Strength. 7/18/17.

5. CNBC: Vertex Pharma’s three-drug combinations improve breathing in some cystic fibrosis patients. 7/18/17. Wall Street Journal: Discovery Communications and Scripps Networks in Talks to Combine. 7/18/17. Reuters: Netflix beats subscriber targets, shares jump over 10 percent. 7/17/17.

6. Reuters: Chipotle shares fall on Norovirus, rodent incidents. 7/20/17.