Stocks Keep Ripping as Good News Piles Up

Stocks Keep Ripping as Good News Piles Up

Stocks rallied for a fourth straight week amid good earnings, positive economic news and signs of progress in the trade war with China.

The S&P 500 rose 2.9 percent between Friday, January 11, and Friday, January 18. The index is in the midst of its longest weekly winning streak since August, and its best month since March 2016. Every major sector except safe-haven utilities rose.

Financials got earnings season off to a good start as stronger lending offset weak trading. Goldman Sachs (GS), Citigroup (C) and Bank of America (BAC) led the charge, along with regional banks like Comerica (CMA).

Economic news remained bullish despite the ongoing federal government shutdown. Initial jobless claims fell more than expected and industrial numbers from the Federal Reserve beat estimates. There were also positive signs in the housing market as mortgage applications spiked and homebuilder sentiment posted a surprise increase.

All those catalysts had the market rising through Thursday. Then it surged even higher on reports China may import more goods from the U.S. That could prevent a planned tariff hike in March and smooth tensions between the world’s two largest economies.

S&P 500, with 50-day moving average.

By the time all the buying was done, the major indexes were back to their highest levels since early December. They also closed above their 50-day moving averages.

Crude oil (@CL) also continued to rebound from a horrifically bad fourth quarter. OPEC confirmed it removed 751,000 barrels of supply last month, while domestic inventory and drilling data suggested the inventory glut is easing.

After banks and financials, Chinese technology stocks were the best performers last week. Industrials and energy names followed. There was also a wave of buying in smaller, high-growth software companies like Okta (OKTA), Coupa (COUP), Domo (DOMO), Nutanix (NTNX) and Attuity (ATTU).

On an individual-stock level, VF Corp. (VFC) was the S&P 500’s top gainer last week. The apparel company rallied 15 percent as strong demand for its Vans shoes lifted earnings and guidance above estimates. GS and First Republic Bank (FRC) followed with gains of 14 percent.

Gold producer Newmont Mining (NEM) led to the downside with a 9 percent drop after diluting shareholders to buy rival Goldcorp (GG). Edison International (EIX) was second worst, down 7 percent, after fellow California utility PG&E (PCG) flirted with bankruptcy.

This week only has four sessions because of Martin Luther King Jr. Day.

The big earnings reports this morning include Johnson & Johnson (JNJ) and Halliburton (HAL). Existing home sales are also due and International Business Machines (IBM) issues its numbers after the closing bell.

Tomorrow brings results from Procter & Gamble (PG), United Technologies (UTX) and Lam Research (LRCX).

Thursday features a European Central Bank meeting and jobless claims. Intel (INTC),  Western Digital (WDC), Starbucks (SBUX) and Union Pacific (UNP) are the main earnings reports.

Durable goods orders are scheduled for Friday, but may be delayed by the government shutdown.

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David Russell is VP of Market Intelligence at TradeStation Group. Drawing on two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them apprised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.