Daily Market Commentary

Week In Review: Strong Week On Wall Street

15 May

Stocks Positively Reverse For The Week

For the week, the bulls emerged victorious as the major indices positively reversed (opened lower and closed higher) which is a subtle and bullish sign. On the downside, the economy was the big loser after the latest round of “data” showed the economy remains weak. That means the “data-dependent” Fed will likely not raise rates anytime soon (which, for now, is bullish for stocks). History shows us that some of the market’s strongest performers occur from big gaps up on earnings and some of the weakest stocks gap down after reporting numbers.The big winners (so far) from earnings season include: Amazon.com ($AMZN), Netflix ($NFLX), Hasbro ($HAS), Domino’s Pizza ($DPZ), Skechers ($SKX), Dunkin (Donuts) Brands Group ($DNKN), Microsoft Corp ($MSFT), O’Reilly Automotive ($ORLY), and YUM Brands ($YUM), Skywest ($SKYW), Web.com ($WWWW), Equinix ($EQIX), Styngenta ($SYT), Nutri System ($NTRI), Brink’s Co ($BCO), Teradyne Inc ($TER), Skyworks Solutions ($SWKS), GoPro ($GPRO), Estee Lauder ($EL), Abiomed Inc ($ABMD), Golar LNG ($GLNR), Energizer Holdings ($ENR), RetailMeNot, Inc ($SALE), Herbalife ($HLF), BlueBird Bio ($BLUE), HubSpot Inc ($HUBS), Alibaba Group ($BABA), Qorvo Inc ($QRVO), Visteon Copr ($VC), Norwegian Cruise Line Holdings ($NCLH)
On the downside: Whole Foods Market ($WFM), Keurig Green Mountain ($GMCR), Kate Spade ($KATE), Lannett Co ($LCI), Nu Skin ($NUS), Terra Nitrogen ($TNH), Tumi Holdings ($TUMI), Noodles & Company ($NDLS), Qualys ($QLYS), Groupon Inc ($GRPN), News Corporation ($NWSA), Vitamin Shoppe Inc, ($VSI), Fossil Inc ($FOSL), Frontier Communication ($FTR), TriNet Group ($TNET), Zulily Inc ($ZU), Weight Watchers ($WTW), Walter Energy Inc. ($WLT), Skullcandy ($SKUL) Twitter ($TWTR), Yelp ($YELP), LinkedIn ($LNKD), Constant Contact (CTCT), Accuray ($ARAY), Cooper Tire & Rubber ($CTB), Abaxis ($ABAX), Texas Instruments ($TXN), Buffalo Wild Wings ($BWLD), Baidu Inc. ($BIDU), Stratasys ($SSYS), Harman ($HAR), Nokia ($NOK), Travelers ($TRV), 3M ($MMM), Chipotle ($CMG), Pulte Group ($PHM), Biogen Inc ($BIIB), Generac Holdings ($GNRC), First Solar ($FSLR), and American Express ($AXP), just to name a few. 

Monday-Wednesday’s Action: Economy Data Fails To Impress

Stocks opened higher on Monday but closed lower as the market paused to digest the big post-jobs rally. San Francisco Fed President John Williams, a voting member of the FOMC, said he believes Q1 economic weakness was an anomaly and that he is looking forward to a stronger pick up in the economy in the second half of the year. Williams is one of the more Centrist Fed officials, with a slight dovish (more easy money) slant. In other news, drama continued regarding the bailout for Greece but nothing substantial happened as they keep kicking the can down the road. 

Stocks fell on Tuesday as more selling hit European equity and bond markets. Before the open, Verizon ($VZ) announced plans to acquire AOL Inc ($AOL) for $4.4B in a strong move to control more content. Stocks ended mixed on Wednesday as investors digested the latest round of economic data.  Retail sales for April was unchanged, missing estimates for a gain of 0.2%. Auto manufacturers said sales slid in April and missed estimates. The number of units sold fell to 16.5 million SAAR from 17.1 million SAAR. Separately, import and export prices signaled that the economy remains in trouble. Year-on-year import prices fell a very steep 10.7% with export prices down 6.3%. The small business optimism index rose nicely to 96.9 in April, beating estimates for 96.0. Technically, the S&P 500 found support and bounced nicely off its 50 DMA line on Tuesday and closed near its highs for the day (which was a slightly bullish sign). In other news, gold and silver rallied nicely on Wednesday and look like they want to rally from here. 

Thursday-Friday’s Action: Stocks Rally In Latter Half of The Week

Stocks rallied nicely on Thursday as the US Dollar continued to fall and the Euro rallied. Before Thursday’s open, weekly jobless claims slid to 264k, beating estimates for 276k. Jobless claims slid to a 14 year low which bodes well for the jobs market. The producer price index (PPI) fell -0.4% in April missing estimates for a gain of 0.2%. This suggests deflation remains more of a threat than inflation. The weaker than expected economic data we have seen in recent weeks supports the dovish Fed view and suggests the data-dependent Fed will not raise rates anytime soon. Stocks were quiet on Friday as the latest round of weaker than expected economic data was announced. The Empire State Manufacturing survey came in at 3.09, missing estimates for 5.0. Industrial output fell for a 5th straight month and consumer sentiment experienced its largest decline in 2 years, falling to 88.6, missing estimates for 95.8.

Market Outlook: The Central Bank Put Is Alive And Well

Remember, in bull markets surprises happen to the upside. This has been our primary thesis since the end of 2012. We would be remiss not to note that this very strong bull market is aging (celebrated its 6th anniversary in March 2015) and the last two major bull markets ended shortly after their 5th anniversary; 1994-2000 & 2002-Oct 2007). To be clear, the central bank put is very strong and until material damage occurs, the stock market deserves the longer-term bullish benefit of the doubt. As always, keep your losses small and never argue with the tape. 

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Older Reuters Quote: Dollar slips, stocks up slightly after soft U.S. data

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17 Jul
Daily Market Commentary

Week In Review: Strong Week On Wall Street

Stocks Rally On Greek Deal

Stocks rallied nicely last week helping the tech-heavy Nasdaq 100 breakout of its year-long range and hit a fresh 15-year high. The market was able to breathe a collective sigh of relief when the two big threats (Greece and China) were temporarily resolved. Stocks rallied after it became clear that Greece would not leave the euro zone. Separately, the panic selling in China eased a bit after the Chinese government literally shut down a big chunk of their stock market, printed money to buy stocks, banned and arrested short sellers in an attempt to curb the selling. The real kicker is that neither situation has been permanently resolved. That’s why it is important to note that in bull markets (present market included), stocks rally regardless of the news. From where we sit, the reaction to the news, matters a lot more than the news itself. For now, we are still in a very strong (but aging) bull market which, by definition, means the path of least resistance remains higher (until any material technical damage emerges).

Monday-Wednesday’s Action: Stocks Rally On Greek Deal

Stocks soared on Monday after lengthy negotiations between Greek officials and euro zone creditors produced a framework for the third bailout package for the tiny nation-state in the past few years. The latest agreement includes EUR 25 billion in bank recapitalization funds to help keep Greece in the eurozone (for now). The deal requires Greece to streamline value-added taxes, broaden its tax base to increase revenue, curb pension costs, and privatize public assets worth as much as 50 billion euros into a separate trust. Economic data was light, the Treasury Budget statement for June showed a surplus of $51.80 billion, beating the consensus for a $51 billion surplus.
Stocks rallied for a fourth straight day on Tuesday after a US-led coalition of 5 other nations inked a deal with Iran regarding their nuclear program. In the US, economic data did not impress. Retail sales fell -0.3%, missing estimates for a gain of +0.3%. The NFIB small business optimism index was 94.1, missing estimates for 97.5. JPMorgan Chase ($JPM) and Wells Fargo ($WFC) both rallied after reporting Q2 results.  On Wednesday, stocks opened higher but closed lower after Greek protests turned violent in Athens before the Greek parliament passed their latest bailout package. In earnings news, Bank of America ($BAC), PNC ($PNC) and U.S. Bancorp ($USB) all rallied after releasing their Q2 results. Celgene  ($CELG) raised guidance and said they are buying  Receptos (RCPT) for $232/share in cash, causing both biotech stocks to gap higher. The Biotech ETF ($IBB) broke out and continues to be a very strong group for this 6.5 year bull market. Elsewhere, Janet Yellen told the House Financial Services Committee that she expects a rate hike later this year if economic conditions hold up. Economic data was mixed. Producer prices rose +0.4% in June, beating estimates for a gain of +0.3%.  The Empire Manufacturing Survey for July came in at 3.86, beating the forecast for 3.5. Industrial production rose 0.3% in June, beating estimates for a 0.2% gain. The Atlanta Fed Business Inflation expectation came in at 2%, slightly higher than the 1.9% estimate. The Fed’s beige book showed economic activity is still not humming.

Thursday-Friday’s Action: Financials, Netflix, Ebay, Google Among Big Earnings Winners So Far

The Nasdaq 100 broke out of its year-long trading range and hit a new 15-year high on Thursday as investors digested a slew of economic and earnings data. Overseas, the ECB held rates steady, said Greece’s place in the Euro is not doubted, and raised emergency funding.  Netflix ($NFLX), Citigroup ($C) and Ebay ($EBAY) rallied after reporting their latest quarterly results. Jobless claims came in at 281k, beating estimates for 282k. The Philly Fed index slowed considerably to 5.7, missing estimates for 12.0. The housing market index was unchanged at 60, beating estimates for 59. Ms. Yellen testified to the Senate and reiterated her recent stance. Stocks were relatively quiet on Friday as the market paused to digest the latest rally. Economic data was mixed, the consumer price index rose 3% which matched estimates. Housing starts jumped to 1.174M, beating estimates for 1.125M. Consumer sentiment came in at 93.3, missing estimates for 96.0.

Market Outlook: The Central Bank Put Is Alive And Well

Remember, in bull markets surprises happen to the upside. This has been our primary thesis since the end of 2012. We would be remiss not to note that this very strong bull market is aging (celebrated its 6th anniversary in March 2015) and the last two major bull markets ended shortly after their 5th anniversary; 1994-2000 & 2002-Oct 2007). To be clear, the central bank put is very strong and until material damage occurs, the stock market deserves the longer-term bullish benefit of the doubt. As always, keep your losses small and never argue with the tape. If you want exact entry and exit points in leading stocks, or access more of Adam’s commentary/thoughts on the market. Consider joining SarhanCapital.com.

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