Stocks ended mixed to mostly lower last week as investors digested the latest round of economic, political, and earnings data. The big takeaway last week for the market was a slew of retail stocks gapped down after reporting earnings. On a positive note, the Nasdaq and Nasdaq 100 continue to outperform while the small-cap Russell 2000 continues to lag. The Dow & S&P 500 are acting relatively well as they continue tracing out bullish 3-week “handle” patterns just below record highs.
The next important near-term level of support to watch is the 50-day moving average line for the major indices. After the 50 DMA line, the next important levels of support to watch are: Russel 2000: 1335, then 1308, Dow Industrials: 20,379, then 20.1k, S&P 500: 2322.25, then 2300, Nasdaq Composite: 5769.39, then 5669. Until those levels are breached on a closing basis, the bulls remain in control.
We are often asked about why the market is holding up so well with everything that is happening in the political arena. The answer is simple: investors only care about what policies come out of D.C. that directly impact Main Street or Wall Street. So far, the policies have been bullish for the economy. As investors look forward there appear to be more economic-friendly policies in the pipeline. The other, more important, reason is that we are in a very strong bull market, and we pay much more attention to how the market reacts to the news. So far, the market action is bullish.
A Closer Look at What Happened Last Week…
Mon-Wed Action:
Stocks were quiet on Monday after Emmanuel Macron won the French election. In other news, Sinclair Broadcast agreed to acquire Tribune Media for $3.9 billion, or $43.50 per share. Separately, Coach agreed to buy Kate Spade for $2.4 billion, or $18.50 per share, in an effort to resonate more with younger consumers and revive its brand. Additionally, the CBOE Volatility Index (VIX), fell below 10, for the first time in over decade. The last time that happened was 2007 and we all know what happened in 2008.
Stocks fell on Tuesday after North Korea’s ambassador said the country will proceed with a nuclear test. After the close, President Trump fired FBI director James Comey which surprised many pundits but barely moved the market. Stocks ended mixed to lower on Wednesday after Disney and Boeing dragged the Dow lower.
Thur & Fri Action:
Stocks fell on Thursday after Macy’s ($M) gapped down 17% after reporting earnings. The new over hyped IPO, Snap, was also clobbered after reporting earnings. In economic news, the producer price index grew by +0.5% in April, beating estimates of +0.2%. Initial jobless claims, came in at 236,000, just below the Street’s estimate for 245,000.
Stocks were quiet to mostly lower on Friday after JC Penney plunged 10% after reporting earnings. JC Penney reported mixed quarterly results, with earnings beating expectations but same-stores sales missed estimates. The environment for retail stocks has been lousy in recent years and investors have very little to be bullish about in this beaten up sector.
Market Outlook: Stocks Are Strong
The market is very strong. As always, keep your losses small and never argue with the tape.
