Stocks Approach Record Highs Before Super Busy Week of News

Stocks Approach Record Highs Before Super Busy Week of News

Stocks are pushing record levels as investors wait for one of the busiest weeks this year.

The S&P 500 rose 1.2 percent between Friday, October 18, and Friday, October 25, its third straight positive week. The index also nudged within less than a point of its all-time high from July.

The market will now digest a packed lineup of earnings reports and major economic events including a Federal Reserve meeting. It comes at a time of waning volatility as investors worry less about tariffs and focus on quarterly results.

It was a “risk-on” week in terms of sector performance. Energy led with a 4.4 percent gain after a surprise draw in crude-oil inventories spread hope that the worst of the glut may have passed. There was also talk of OPEC widening production cuts in December.

Technology followed, breaking out to new territory after Microsoft (MSFT) and Intel (INTC) beat quarterly estimates. Apple (AAPL) continued its drift to new highs two days before its report.

Financials, retailers and transports also outperformed. All three of those fall under the cyclical “value” category that’s recently gotten attention. Brazilian stocks rallied more than 5 percent as well. The cause was optimism that a new law will fix the biggest problem in Latin America’s biggest economy: endless budget deficits.

Safe havens like real-estate investment trusts, utilities and consumer staples lagged.

S&P 500 with potential triangle and 8-day exponential moving average.
S&P 500 with potential triangle and 8-day exponential moving average.

Here Comes the Fed

Most of last week’s economic news missed estimates: durable-goods orders, existing home sales and new-home sales.

But is it bad enough to justify interest rates down at current levels? That’s the bigger question with the Fed widely expected to cut rates on Wednesday. Will money keep trickling out of bonds as investors “sell the news?” Remember, banks have been viewed as beneficiaries if that happens.

Another potential positive occurred on Friday when U.S. officials made progress on President Trump’s trade agreement with China. Resolution to that issue could do a lot to boost sentiment.

Unlike previous weeks, last week had several interesting company stories. Tesla (TSLA) was most noteworthy. The electric-car maker surged 20 percent on signs of overcoming factory problems that were eating its profits.

Biogen (BIIB) rallied 31 almost as much after announcing it would revive its application for a potentially massive Alzheimer’s drug.

Twitter’s Major Malfunction

There were also some big losers — especially Twitter (TWTR). The social-media stock crashed 22 percent after platform bugs prevented ads from showing. Earnings, revenue and guidance all missed. That made it the biggest decliner in the S&P 500.

Hasbro (HAS) was the second-worst in the index, crashing 21 percent after earnings lagged estimates. The toymaker tried to blame tariffs, but that doesn’t explain its revenue miss.

Crude oil futures (@CL) with 50- and 200-day moving averages and key items marked.
Crude oil futures (@CL) with 50- and 200-day moving averages and key items marked.

Anheuser Busch Inbev (BUD) also took a beating. The brewer fell 12 percent after earnings and guidance missed. Once a major U.S. company, BUD is no longer in the S&P 500 because it’s now technically Belgian.

Are You Ready for a Busy Week?

The next five days aren’t just the busiest week of earnings season, with at least 151 members of the S&P reporting. It also has three major economic events: the Fed, gross domestic product (GDP) and non-farm payrolls.

AT&T (T), Walgreens Boots Alliance (WBA) and Spotify (SPOT) begin the stream of quarterly results this morning. Alphabet (GOOGL) and Beyond Meat (BYND) follow in the afternoon.

Tomorrow brings consumer confidence and pending home sales. MasterCard (MA), Merck (MRK), General Motors (GM) and Pfizer (PFE) are big names in the premarket. Advanced Micro (AMD) and Amgen (AMGN) follow after the close.

Wednesday’s the Big Kahuna. The preliminary reading of third-quarter GDP and ADP’s private-sector payrolls report are in the morning. Crude-oil inventories come an hour after the opening bell. Then at 2 p.m. ET, the Fed’s expected to cut interest rates. Half an hour later, Chairman Jerome Powell holds a press conference.

There’s even more. AAPL — the world’s most valuable company — and Facebook (FB) — its biggest social-media platform — report earnings after the close. You also have coffee giant Starbucks (SBUX), ride-sharing firm Lyft (LYFT) and data-storage company Western Digital (WDC).

Thursday features initial jobless claims and personal incomes. Bristol-Myers Squibb (BMY), Celgene (CELG) and Pinterest (PINS) issue results.

The week concludes Friday morning with two big economic numbers: non-farm payrolls and the Institute for Supply Management’s manufacturing index. Alibaba (BABA), Exxon Mobil (XOM) and Chevron (CVX) also report.

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David Russell is VP of Market Intelligence at TradeStation Group. Drawing on nearly 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 appraised 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.