Stocks Have Best Week Since August as Bullish Sentiment Widens

Stocks Have Best Week Since August as Bullish Sentiment Widens

Stocks just had their biggest weekly gain since August as fears melted away and earnings season began.

The S&P 500 rose 2 percent between Friday, January 10, and Friday, January 17. The index has risen in 13 of the last 15 weeks, and made new record highs in 10 of the last 12. While technology has mostly led the breakout, other sectors are starting to outperform as risk appetite spreads.

It’s happening against a favorable backdrop for equities, with stable economic growth, low interest rates and few geopolitical risks. Tensions with Iran have cooled, inflation is mild and the White House signed a trade deal with China. That’s letting investors focus on earnings season and company fundamentals.

S&P 500, weekly chart, showing new highs and percentage gains.
S&P 500, weekly chart, showing new highs and percentage gains.

Numbers from major financials like JPMorgan Chase (JPM) and Morgan Stanley (MS) beat estimates. This week is relatively quiet, followed by flood of big names like Apple (AAPL), Microsoft (MSFT) and (AMZN) next week.

Bulls Look to New Areas

A big trend recently has been an embrace of smaller companies, many of them new. Last week, for example, social-media company Pinterest (PINS) ripped higher after gaining market share. China’s Nio (NIO) also leaped after Tesla’s (TSLA) monster rally drew attention to electric vehicles.

Lagging sectors like transports and small caps outperformed. Utilities had their biggest weekly gain in almost three years. Housing stocks broke out to new highs and solar energy showed no sign of slowing its advance.

Traditional energy stocks, however, returned to the loss column as oil resumed its slide. The market remains awash in oversupply of crude and refined products.

Nio (NIO), daily chart, with select moving averages.
Nio (NIO), daily chart, with select moving averages.

Numbers for the History Book

Last week also had some historic numbers:

  • Alphabet (GOOGL) became the third U.S. company behind Apple (AAPL) and Microsoft (MSFT) to reach $1 trillion of market capitalization.
  • Housing starts rose to a 1.61 million annualized pace in December, the highest reading in 14 years.
  • Mortgage applications rose 30 percent. Refinancing activity more than doubled, and borrowing for home purchases rose at the quickest pace since 2009.

President Trump also signed “phase one” of his trade deal with China. The Asian country will buy an additional $200 billion of U.S. exports and open its financial markets. Officials will discuss rolling back tariffs in “phase two.”

Other numbers were mixed: Retail sales, consumer sentiment and industrial production missed estimates. Jobless claims and regional surveys from the New York and Philadelphia branches of the Federal Reserve beat estimates.

Bitcoin Tests $9,000

Another trend last week was continued strength in cryptocurrencies. Bitcoin (BTCUSD) rose above $9,000 for the first time in more than two months after its price formed some potentially bullish patterns.

So-called “altcoins” including Ethereum (ETHUSD), Bitcoin cash (BCHUSD) and Litecoin (LTCUSD) rose even more. That kind of positive breadth in cryptos hasn’t occurred since the market crashed two years ago.

At the individual-company level, Perrigo (PRGO) had the biggest gain in the S&P 500. The maker of over the counter-drugs spiked 19 percent last week after strong guidance suggested its business was turning around.

Albemarle (ALB) followed, up 12 percent, as the rallies in TSLA and NIO spurred hopes about lithium batteries for electric vehicles. MS rounded out the top three, ripping 10 percent on strong quarterly results.

Bank of New York Mellon (BK) and Wells Fargo (WFC), however, had weak quarters. That pushed them to the bottom of the rankings, down 9 percent and 6 percent, respectively.

Target (TGT) also fell 6 percent after holiday sales barely grew.

Target (TGT), daily chart, with select moving averages.
Target (TGT), daily chart, with select moving averages.

Quiet Holiday Week

This week is relatively quiet, with only four sessions because markets were closed for Martin Luther King Jr. Day.

Today’s big items are earnings from Netflix (NFLX), United Continental (UAL) and International Business Machines (IBM) after the closing bell.

Johnson & Johnson (JNJ) reports tomorrow morning. Existing home sales follow during the session and Texas Instrument (TXN) is scheduled for the afternoon.

Thursday’s the busiest day. Procter & Gamble (PG), Comcast (CMCSA), American Airlines (AAL) and Southwest Airlines (LUV) report before the open. There’s also a European Central Bank meeting, U.S. jobless claims and crude-oil inventories.

Intel (INTC) reports Thursday afternoon. American Express (AXP) wraps things up Friday morning.

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