The S&P 500 broke out of its very long trading range and hit a fresh record high on Monday. Overnight, Japan’s ruling party won their election by a large margin and announced more stimulus. That sparked a huge rally in Japan’s stock market (up almost 4%) and that lead to more gains across the globe. Current U.K. Prime Minister David Cameron said that he will stand down from his position on Wednesday. Interior minister Theresa May will replace him and she will be the first woman to hold that post since Margaret Thatcher.
Stocks raced higher as earnings season officially began and investors embraced more stimulus from global central banks. The Bank of England and the Bank of Canada are set to meet this week. Japan already said more easy money will be coming and that helped stocks break out of range and hit new record highs.
After Monday’s close, Alcoa (AA) kicked off earnings season and the stock rallied 5% after reporting their Q2 results. Stocks were quiet Wednesday as the market paused to digest the recent and strong ~8% post Brexit rally. Economic data was relatively light, U.S. import prices rose +0.2% last month and missed estimates. Meanwhile, export prices rose +0.8%. The Fed’s Beige Book showed the economy continued to moderately grow.
Elsewhere, oil prices fell after the International Energy Agency (IEA) warned that the supply glut will adversely affect prices and U.S. crude and product supplies hit a record.
Thursday & Friday’s Action:
Stocks rallied on Thursday as investors digested the latest round of economic data. JP Morgan (JPM) rallied after the company easily beat estimates. Shares of BlackRock (BLK) slid after the asset manager reported results that matched estimates. Overseas, the Bank of England decided to keep rates steady and suggested they may cut rates in August which means the easy money is here to stay.
Several Fed heads came out and said the Fed should remain patient in normalizing rates because of Brexit and other economic concerns. Stocks were relatively quiet on Friday as the market paused to digest the very strong post brexit rally. After the close, Turkey’s military attempted a coup. The situation is still fluid (as of this writing) but futures fell after the close. If it is a swift exchange of power then we do not expect the market to react that much. Instead, if it gets ugly and drawn out (or it happens in other counties) then that could adversely affect the market.
Market Outlook: Stocks Are Strong
The market finally broke out of its very long trading range and the key now is to see if this rally can continue. Economic and earnings data remain less than stellar which could mean more easy money from global central banks. As always, keep your losses small and never argue with the tape.