After reporting on the stock market the past few weeks, I am beginning to get a sense of how our local meteorologist growing up must have felt, having to report the weather in a coastal town in south central California where the local temperature never seemed to change by more than a few degrees. With 310 companies that make up the Standard & Poor’s 500 having reported earnings so far, according to FactSet, earnings are now expected to grow by 5.2 percent year over year, which is well above the 3.2 percent rate that analysts had expected at the end of 2016.
However, even with the recent news of above average earnings, the stock market still appears to be a policy driven market. This means that investors are currently content to take their cues primarily from Washington. This might explain why the stock market appears to be going nowhere lately. Just as the recent tug of war going on between the Trump administration and Washington D.C. lawmakers has had the effect of slowing much of what the new Trump administration has tried to move forward, the stock market appears unable to move forward (upward) as well.
On Tuesday, the S&P 500 eked out a gain of 0.02 percent while the Nasdaq Composite rose 0.19 percent. Though the stock market appears to be in a trance lately, one of the bright spots on Tuesday was the technology sector with the Dow Jones U.S. Technology index up 0.49 percent on the day. However, one concern has been the recent underperformance of small companies. The broad stock market performs best when small companies are in the lead, but that hasn’t been the case lately, with Russell 2000 declining 0.44 percent on Tuesday. When small companies under perform, it typically signifies that there is less money sloshing around in the stock market, and an indication that investors are holding on to their dollars a little tighter.
This week’s top performing sectors are led by the Dow Jones U.S. Technology index up 2.35 percent over the past five trading days, followed by the Dow Jones U.S. Healthcare index higher by 1.44 percent over the same period.