Though the major market averages briefly closed at new all-time highs during the month of January, those rallies ended almost as quickly as they began, leaving the market averages with little upward progress. However, all of this waiting and hoping for the stock market to continue higher may be causing some investors to grow impatient. As of Monday’s close, the Standard and Poor’s 500 hadn’t exceeded a daily range of over 1.0 percent for 35 consecutive days, making this the longest run of low volatility, of this type, going back to 1974, according to Thompson Reuters data.
Some believe that stocks can go through both price corrections and time corrections. A price correction is when stocks move for a period of time in the opposite direction of the primary trend. In other words, if the price has been moving higher for a period of time, it typically declines for a short spell, before resuming its trend and moving higher once again. On the other hand, if price have moved too quickly in one direction, price can appear to stall out, as it trades horizontally for a time, before once again resuming its primary trend.
With the major market averages so far stubbornly holding on to their gains, the stock market appears to be in a time correction. The major averages were little changed on Monday with the Standard and Poor’s 500 down 0.21 percent on the day.
As we begin the new month, earnings season continues. As of Monday, earrings season is a little over half way completed with 279 of the companies that make up the S&P 500 having reported their fourth quarter earnings.
Laif E. Meidell, CMT
We hope you have a great week,
Pat Meidell, Laif Meidell and Heidi Foster
Weekly Economic Update
POSITIVES & NEGATIVES IN JANUARY’S JOB DATA
The Department of Labor’s latest jobs report showed 227,000 net new hires last month. Unfortunately, wages grew just 0.1% in January as the headline jobless rate rose slightly to 4.8%. The U-6 rate, counting the underemployed, rose 0.2% to 9.4%.1
STRONG CONSUMER CONFIDENCE & SPENDING
While the Conference Board’s monthly consumer confidence index declined 1.5 points in January, it remained at a high level with a 111.8 reading. Personal spending improved 0.5% in December, with personal incomes up 0.3%.2
ISM INDICES SHOW FURTHER SECTOR EXPANSION
The Institute for Supply Management’s purchasing manager indices were at high levels in January. ISM’s factory index gained 1.5 points to 56.0. Its service sector gauge ticked down 0.1 points to 56.5, but that still signaled solid growth.3
DODD-FRANK ACT FACES A REVIEW
Through an executive order issued Friday, President Donald Trump authorized a review of this law aimed at regulating activities of big banks. According to the New York Times, the directive also calls for major sections of Dodd-Frank to be revised.4
MINOR PROGRESS FOR THE S&P 500
The Federal Reserve stood pat on interest rates, bank shares rose on the Dodd-Frank news, and January hiring totals exceeded forecasts. These developments helped stocks make small weekly gains. In five days, the S&P 500 rose 0.12% to 2,297.42, and the Nasdaq 0.11%, to 5,666.77. The Dow lost 0.11% to settle at 20,071.46 Friday.5
CNA Financial, Hasbro, Loews Corp., Sysco, Tesoro, 21st Century Fox, and Tyson Foods announce earnings Monday. Tuesday’s earnings roll call features results from Akamai, Aramark, Archer Daniels Midland, Buffalo Wild Wings, Container Store, General Motors, Genworth Financial, Gilead Sciences, Lennox, Michael Kors, Mosaic, NETGEAR, O’Reilly, Panera Bread, Penske, Spirit Airlines, Take-Two Interactive, Vulcan Materials, and Walt Disney Co. Wednesday, earnings emerge from Alaska Air, Allergan, Exelon, GlaxoSmithKline, Goodyear, Humana, Prudential Financial, Time Warner, W.R. Grace, and Whole Foods. New initial claims numbers arrive Thursday, plus earnings from Activision Blizzard, Advance Auto Parts, Beazer, Coca-Cola, Cummins, CVS Health, Dunkin’ Brands, Expedia, Gannett, Kellogg, Kemper, NCR, Nvidia, Occidental Petroleum, Pandora, Skechers, Twitter, Viacom, Western Union, Yelp, Yum! Brands, and Zynga. Friday, the University of Michigan’s latest household sentiment index appears, plus Q4 results from CBRE Group.