Yesterday was an astounding day in the markets. Stock gains erased the first half of the month jitters and all of the major indices ended higher for the typically difficult month of August. The upside move made things all the more pleasant for the bulls. The NASDAQ ended at a new all-time record high due to a combination of steady upward movement in AAPL, resurgence in the shares of the recently beaten-down “FANG” stocks…plus PCLN and TSLA, and ISRG closed over 1000 for the first time ever.
Better economic data both here and in other parts of the world had positive influences. The S&P 500 closed higher for the fifth day in a row. The various stock index futures received an early lift when it was reported that China’s factory growth purchasing managers’ index unexpectedly gained for the month of August. This is another example of better worldwide economic expansion. The July personal income figures were ahead by 0.4% and July personal spending was up by 0.3%…better than expected and may give a boost to the third-quarter G.D.P.
In addition, the July core P.C.E. (personal consumption index), which is the Fed’s favorite inflation indicator, rose by only 1.4% on a year over year basis. This is the fifth month that it has remained below the Fed’s 2% target. It calls into question whether or not they can do anything about raising rates in December. All of these developments provide a good background for stocks because we have non-inflationary economic growth and, in most cases, solid earnings reports.
Today, the major averages are doing what they have done all week…go higher. With 90 minutes left to the closing bell, the DOW is back over 22,000 for the first time in over two weeks with a gain of 65. The S&P 500 is up by 7 while the NASDAQ is lagging a bit with a gain of “only” 5 but still at a record at 6433.
With a reversal in bonds to higher yields, the financial stocks are doing well. The DOW is also being supported by BA, IBM, and CAT. The NASDAQ is being restrained by AAPL stalling out at new record highs. MSFT is selling off in addition to AMN after its recent recovery.
Breadth numbers are positive at an almost 2 to 1 upside ratio. The VIX is down to 10.08 for a decline of .51 from as high as14.34 on the early panic selling on Tuesday morning.
Now that August has ended higher for the first time since 2014, we have entered the treacherous month of September. Historically, this is the worst month of all for stocks.
Donald M. Selkin
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. The Daily Market Notes have been abbreviated and updated with permission from the author.