Stocks climb wall of worry to new highs
09/18/17

Is there an opposite of Murphy's Law? The famous adage states: "Anything that can go wrong, will go wrong." If there ever was a time that should be true, last week may have been it: A double whammy of hurricanes dragged on the economy, North Korean nuclear tensions continued, Chinese data slowed, and inflation began to rear its ugly head.

But instead of breaking down, the S&P 500 broke out to new highs. The index made higher lows before Labor Day, causing some chart watchers to wonder how they missed such a textbook "bullish ascending triangle." It pushed above its 50-day moving average in late August, and managed to hold after the holiday. Yep, we really should have seen that bounce coming.

By the time it was all said and done, the S&P 500 rose 1.6 percent between Friday, September 8, and Friday, September 15, to close at 2500 for the first time ever. It was also best week since January. You can't be serious, cried the skeptics! 

Naysayers searched for answers. Maybe they underestimated the White House's ability to work with Congressional Democrats.1 Maybe they overlooked the turnaround potential in industries like retail, energy, transports, and even autos. Maybe they were just plain too bearish, based on surveys showing the most negative investor sentiment in place since November.2 Maybe they forgot the saying that bull markets climb a wall of worry…

Financials and materials led the charge last week with gains of more than 3 percent. Hmm, those sectors tend to benefit from a stronger economy. On the flip side "safe havens" like utilities and real-estate investment were the only major buckets in the red. Traders have a phrase for that kind of price action: "risk on".

But wait, there's more, said the bean counters. Only four companies in the S&P 500 made new 52-week lows, while more than 100 pushed to new highs.

S&P 500, 3/22/17 - 9/15/17

Source: OptionsHouse by E*TRADE

The best performers on a single-name level were mostly beaten down energy stocks rebounding from long-term troughs. Range Resources (NYSE: RRC) rose 12 percent, and Helmerich & Payne (NYSE: HP) added 10 percent. Rock-star chip maker Nvidia (NASDAQ: NVDA) rose a similar amount.

Equifax (NYSE: EFX), on the other hand, remained at the bottom of the totem pole with a 25 percent drop following its massive data breach earlier in the month. Biotechs Regeneron Pharmaceuticals (NASDAQ: REGN) and Incyte (NASDAQ: INCY) followed with declines of 8 percent each.

This week's event calendar brings a Federal Reserve meeting, plus housing data and some earnings.

Today's only noteworthy item is NAHB's homebuilder index. Germany's Zew sentiment index is due early tomorrow, followed by U.S. housing starts and building permits. FedEx (NYSE: FDX) and Autozone (NYSE: AZO) issue quarterly results as well.

The central bank's policy announcement is due Wednesday, but the session also features existing-home sales, crude-oil inventories, and numbers from General Mills (NYSE: GIS).

Initial jobless claims are the main item Thursday. The week concludes with an OPEC meeting and Carmax (NYSE: KMX) earnings.

 

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1. Reuters: Trump says immigration deal with Democrats close, without border wall. 9/14/17.

2. CNBC: Investors most fearful of the market since before Trump's election. 9/13/17.