After the first lower week in the last four, the market decided to right the ship yesterday as the new week began. In the process both the S&P and Nasdaq closed at new record highs, as the former was finally able to break above the 2400 nice round number at which it had failed several times lately. The S&P ended with an 11 point closing advance to 2402.
The Nasdaq made its 33rd record high this year with a gain of 28 to 6149. The leadership was a little different this time as the former heroes AAPL, AMZN and NFLX all began the day at nominal new all-time high prices but then actually ended lower . They passed the baton to others who led this index to new heights: GOOG, ISRG and NVDA, all of whom made or came close to their best ever levels. In addition to the three who slipped a bit, TSLA got blasted to the downside on a brokerage house downgrade after its recent record run. Helping were the cybersecurity issues on that worldwide cyber-attack on computer systems in various countries: PANW and FEYE did nicely.
The Dow was led by gains in CSCO ahead of its report this week, JNJ with a very large advance, the financials for a change and the energy issues on a rise in crude oil prices. This was the Dow’s first rise in five sessions and it ended with a gain of 85 up to 20,982.
Economic reports showed that the May NY State Empire Manufacturing Survey declined to -1 from 5.2, its first drop since the election. On the other hand, the May NAHB Homebuilder Sentiment Index rose to its second highest level since 2008.
Experts attributed the gains to the rise in crude oil prices. I don’t understand why this is bullish since it raises costs to businesses that use energy and also to consumers. In any event, crude oil rose up to $48.92 a barrel on the attempts by OPEC and the Russians to extend production cuts.
Bond yields edged up a small bit to 2.34% for the 10-year Note after their sharp decline on Friday due to the weak C.P.I. and retail sales reports for April. The dollar continued to weaken with the Euro up to 1.098 and the Japanese yen down to 113.5 to the greenback. As a result of this, gold pushed a little higher at $1,231 an ounce, still stuck in a fairly narrow range.
Breadth numbers were strong at a better than 2 to 1 upside ratio. The VIX acted strangely once again as it started out higher even through the indices were never lower, as perhaps it tried to compensate the other way for being lower on Friday’s down day. It went as high as 10.88 for a strange gain of .48 before easing back down to 10.38 for a very small decline of .02.
With 465 companies having reported their first-quarter earnings, the gain so far for the first-quarter has been 14.5%. Of these companies reporting, 75% of them have beaten the estimates. In addition, 57% have topped revenue projections.
In another statistic that shows how calm things have been lately, this was now the 15th straight day where the S&P was down by less than 0.5%, the longest such streak since 1995. Of course, this is one of the main reasons that the VIX has remained so low. Another interesting stat: the Dow this year has had only four days with a greater than one percent move in either direction, which is the fewest since back in 1965!
Earnings are starting to wind down and this week the lineup is as follows with retailers becoming more prominent as the reporting period finishes: today – Dow component HD at a new high on a good report, TJX and DKS lower and what else is new?, SPLS, URBN and RRGB; Wednesday – LB, TGT, AEO and Dow component CSCO; Thursday – ROST, GPS, RL, HIBB, PLCE, MCK, BKE, AMAT, Dow component WMT, plus CRM; Friday – FL, CPB and DE.
Today, the market started higher with the Dow up by 50, the S&P up to a new record at 2405 and the Nasdaq stronger, too. Then around 10:30am, things took a dive as the Dow fell by 100 points to a 50 point loss, the S&P was down by 6 and the Nasdaq came back to almost unchanged. But from there things have steadied and as this is being written, the Dow is higher by a few points, courtesy of HD and a good gain in MSFT for a change and how about the real revenge of the nerds as IBM has the nerve to be higher for the second day in a row. The S&P is doing nothing while the Nasdaq tries for its 34th record high this year with AMZN at its best ever level along with PCLN making a strong recovery from last week’s selloff and BIDU is continuing its recent string of gains.
Breadth numbers are negative at a 12/18 downside ratio and the VIX is doing nothing at 10.38.
Economic reports were mixed with April housing starts lower for the second straight month with a 2.6% decline while April industrial production rose by 1%…its largest gain in more than three years. This was due to a recovery in factories, mines and utilities.
The dollar is weaker once again to a six-month low for the general dollar index with the Euro…now up to 1.10. The Japanese yen is down to 113.15 to the dollar. Gold is a little higher at $1,236 an ounce while crude oil is unchanged around $48.83 a barrel. The 10-year Treasury Note is flat at 2.33%.
Donald M. Selkin
These are excerpts from Don Selkin’s Daily Market Notes, abbreviated and updated with permission from the author. Don Selkin is the Chief Market Strategist at Newbridge Securities Corporation, member FINRA/SIPC and provides the Fair Value analysis for CNBC each morning. The commentary provided in this Market Letter is intended to provide timely market analysis and should not be considered a research report. This Market Letter may contain, and is limited to: Discussions of broad based indices; Commentaries on economic, political or market conditions; Technical analyses concerning the demand and supply for a sector, index or industry based in trading volume and price; Statistical summaries of multiple companies’ financial data, including listings of current ratings; and, Recommendations regarding increasing or decreasing holdings in particular industries or securities. This Market Letter does not make a financial or investment recommendation or otherwise promotes a product or service of the firm. This Market Letter contains only news, facts, and commentary on information previously reported from a news source believed to be accurate and reliable by the author. These news sources include the following: Bloomberg Financial, Reuters, and the Associated Press.