Saturday, 18 February 2017

US stocks resume rally, Dow 30,000 next?

Markets were mixed on Friday.

The S&P 500 rose 0.2 percent, the STOXX Europe 600 was little-changed and the Nikkei 225 fell 0.6 percent.

With the S&P 500 finishing up 1.5 percent for the week, analysts continue to be optimistic on stocks.

Richard Hastings, a macro strategist at Seaport Global Securities LLC, said that “the bias higher seems intact”.

“I still remain optimistic on the market going forward,” said Gary Anetsberger, chief executive officer at Millennium Trust Co.

“The broader uptrend is intact thanks to renewed optimism about the global growth outlook and supportive bottom-up corporate earnings,” Ian Williams, a Peel Hunt strategist, wrote in a note.

Indeed, while the Dow Jones Industrial Average closed little-changed at 20,624.05 on Friday, Nigam Arora at MarketWatch wrote that the “fundamental case for Dow 30,000 during Donald Trump's first term has strengthened”.

“The biggest single factor in the long-term direction of stocks is earnings growth,” Arora wrote.

While the current consensus for S&P 500 operating earnings is $133 per share, Arora said that tax cuts could add about $13 while deregulation could add another $7.

“If gross domestic product growth were to accelerate to 4%, S&P 500 earnings could reach as high as $190 by the end of Trump's first term,” he said.

Friday, 17 February 2017

Stocks fall but gold preparing for “healthy rally”

Stocks mostly fell on Thursday.

The S&P 500 fell 0.1 percent, ending its record-breaking run. However, the Dow Jones Industrial Average rose less than 0.1 percent to close at another record high.

The STOXX Europe 600 fell 0.4 percent, ending its seven-day winning streak.

Asian stocks were mixed. The Nikkei 225 fell 0.5 percent but the Shanghai Composite and Hang Seng indices rose 0.5 percent.

Some analysts are unperturned by the end of the S&P 500's record-breaking streak.

“We’ve had a big run in the near term, so some weakness is normal especially if you want the bull run to continue,” said Ryan Detrick, senior market strategist for LPL Financial.

Others are less sanguine.

“This rally may come to a quick end if expectations for a March rate hike begin increasing,” warned ADS Securities researcher Konstantinos Anthis in a note on Thursday.

While stocks fell on Thursday, oil rose 0.5 percent and gold rose 0.7 percent to its highest finish in more than three months.

“The dollar is weaker, Treasury yields are down and stocks are lower,” said Michael Armbruster, principal and co-founder at Altavest. “That is a nice trifecta for gold.”

Ned Schmidt, editor of The Value View Gold Report, said that the “odds still favor gold and silver beating the U.S. equity market in 2017”.

And in an article at ValueWalk, Jeffrey Nichols, Senior Economic Advisor to Rosland Capital, thinks that gold is “preparing for a healthy rally into higher territory”.

Thursday, 16 February 2017

US stocks at record high again, becoming extremely overbought but no sell signals

Stock markets rose on Wednesday.

The S&P 500 rose 0.5 percent to close at a record high for the fifth consecutive day.

The STOXX Europe 600 rose 0.3 percent to close at its highest since December 2015.

The Nikkei 225 rose 1.0 percent, reversing Tuesday afternoon's sell-off.

Lawrence McMillan at MarketWatch wrote that the US stock market “is becoming extremely overbought, but no sell signals have appeared yet”.

Indeed, Jeff Cox at CNBC concluded that despite all the uncertainties associated with President Donald Trump and his administration, “Wall Street believes one thing above all — that the Trump administration will survive and the U.S. economy will thrive”.

Wednesday, 15 February 2017

S&P 500 at another record high but Treasuries stuck in trading range

Markets were mixed on Tuesday.

The S&P 500 rose 0.4 percent to a record high for a fourth consecutive day.

However, the STOXX Europe 600 rose less than 0.1 percent and the Nikkei 225 fell 1.1 percent.

US Treasuries also fell after Federal Reserve Chair Janet Yellen said waiting too long to raise interest rates “would be unwise”. Yields across the curve rose by 3-5 basis points, with the 10-year settling around 2.47 percent.

Still, a Bloomberg article points out that the 10-year Treasury yield “have been stuck in a 25-basis-point range this year”.

“It’s possible we get to a 3.5 percent 10-year yield,” Rick Rieder, chief investment officer of global fixed-income at BlackRock Inc., was quoted as saying. “But it’s hard to envision it getting much higher than that, particularly with the aging population, demographics and the potential for growth in the rest of the developed world.”

Indeed, Rieder warned that “if there is disappointment on the fiscal front and a view that we’re not going to get progress on fiscal initiatives, there’s no doubt we can trend to lower yields, even approaching 2 percent”.

Tuesday, 14 February 2017

Stocks rise, time for bears to throw in the towel?

Stocks rose on Monday.

The S&P 500 rose 0.5 percent to close at a record high for the third consecutive day.

The STOXX Europe 600 rose 0.8 percent, rising for a fifth day and hitting its highest close since 7 December 2015.

Asian stocks also rose. The Nikkei 225 rose 0.6 percent while the Shanghai Composite Index rose 0.4 percent.

“The combination of proposed regulatory and tax reform, stronger than expected earnings amplified by growing consumer sentiment that President Trump will accomplish a large portion of his agenda has permitted stock to rise to valuations not experienced since 2004,” said Kent Engelke, chief economic strategist at Capitol Securities Management Inc.

Indeed, Mark DeCambre at MarketWatch said: “It may be high time for stock-market bears to throw in the towel.”

DeCambre noted that despite “suspiciously low fear gauge” and “heady stock valuations”, global stocks have been rallying.

DeCambre quoted Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, as saying: “Usually you have some pull back. We really didn’t have that pull back, we held those gains, which is major.”

Oil did not join the rally on Monday though. West Texas Intermediate crude fell 1.7 percent while Brent fell 2 percent.

Monday, 13 February 2017

S&P 500 rally may have further to go

The S&P 500 rose 0.8 percent to a new record high last week. It was its third consecutive weekly gain.

Some analysts think that the rally will continue.

Sue Chang at MarketWatch wrote: “The juggernaut of optimism unleashed by President Donald Trump’s presidency will continue to steamroll its way through the market, paving the way for stocks to carve out new highs and keep hungry bears at bay.”

“The case for U.S. equities is strong,” Binky Chadha, chief strategist at Deutsche Bank, wote in a report. “A V-shaped recovery in gross domestic product and earnings growth, unfolding for a year now, has further to go.”

Dubravko Lakos-Bujas, head of US equity strategy at JP Morgan Chase & Co., expects corporate tax cuts to boost S&P 500’s earnings per share by $8 while David Kostin, chief US strategist at Goldman Sachs, projected adjusted earnings per share among S&P 500 companies will rise 5 percent.

However, Jeffrey Saut, chief investment strategist at Raymond James, thinks stocks will not be able to rise further without a near-term correction.

Indeed, NorthmanTrader.com founder Sven Henrich told CNBC that fewer and fewer stocks are moving above their 50-day moving averages. “So, that shows underlying weakness as we are stretching to go to higher prices.”