New Highs for Stocks as Confidence Rises and Volatility Falls

New Highs for Stocks as Confidence Rises and Volatility Falls

Stocks hit new highs again last week, riding a wave of economic confidence, low interest rates and mild volatility.

The S&P 500 rose 1.6 percent between Friday, February 7, and Friday, February 14. Three-quarters of its members advanced, along with every major sector. The Nasdaq-100, Dow Jones Industrial Average and Russell 2000 climbed more than 1 percent as well.

“The U.S. economy in a very good place, performing well,” Federal Reserve Chairman Jerome Powell told lawmakers in Congressional testimony. “Low unemployment, rising wages, high job creation. There’s no reason why it can’t go on.”

Those comments let investors look past the spread of coronavirus in China. If anything, the outbreak may have a benign effect by forcing interest rates lower and encouraging central bank liquidity injections.

The U.S. also had a positive telecom-related story last week. T-Mobile US’s (TMUS) acquisition of Sprint (S) shot to new multiyear highs after a judge ruled in favor of their merger. It lays groundwork for the next big wave of 5G networking with three big competitors fighting it out: AT&T (T), Verizon Communications (VZ) and the combined TMUS/S.

S&P 500 chart, with 50- and 200-day moving averages.
S&P 500 chart, with 50- and 200-day moving averages.

But there’s more. Regardless of which carrier comes out on top, investors view wireless tower stocks as beneficiaries. That club includes American Tower (AMT), Crown Castle (CCI) and SBA Communications (SBAC).

REITs Lead the Market Higher

Thanks to the breakout in wireless towers, real-estate investment trusts led the market by a wide margin. Did you know the SPDR Real Estate ETF (XLRE) had its biggest weekly gain — up 4.9 percent — since its creation in 2015?

Low interest rates didn’t hurt either because REITs are often viewed as income plays. The U.S. government also managed to issue 30-year Treasury bonds at the lowest yield in history. Now let’s keep an eye on homebuilders with some key housing data this week. (See below for more.)

Solar energy stocks had another big week, surging an additional 8 percent. They’re leading the market by a wide margin in 2020 as investors focus on a post-carbon economy. Tesla (TSLA) might be the biggest name in the movement, but it isn’t the only one. Environmental, social, governance (ESG) investing has only just begun.

Nvidia (NVDA) had the biggest gain in the S&P 500 last week. The heavily traded chip stock rallied 15 percent on better-than-expected quarterly results. Even more important, management issued strong guidance thanks to data-center demand and artificial intelligence.

SPDR Real Estate ETF (XLRE), weekly chart, showing percentage changes.
SPDR Real Estate ETF (XLRE), weekly chart, showing percentage changes.

SBAC and TMUS followed in the rankings, up 14 percent and 13 percent, respectively.

Under Armour (UAA) led to the downside, tanking 15 percent on weak results. Years of rapid growth are slowing for the athletic-apparel firm as competition from Nike (NKE) and Lululemon (LULU) increase.

Bitcoin Breaks Out

Cryptocurrencies like Bitcoin (BTCUSD) and Ethereum (ETHUSD) rallied last week. BTCUSD pushed above $10,000 for the first time since October. ETHUSD hit its highest level since July. Powell’s comments, along with some big upcoming events, have drawn buyers back to the market.

This week, shortened by President’s Day, features some important housing numbers and quarterly results.

Wal-Mart Stores (WMT), Medtronic (MDT) and General Mills (GIS) get the ball rolling in the premarket. NAHB’s housing market index follows shortly after the opening bell.

Tomorrow brings housing starts and building permits. Minutes from the last Fed meeting are due in the afternoon. Dish Network (DISH), Analog Devices (ADI) and Mosaic (MOS) report earnings.

Initial jobless claims are due Thursday. Deere (DE) results and existing home sales wrap things up Friday morning.

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