Here’s the news of the week – and how we see it here at McAlvany Wealth Management:
Earnings Short of Wildest Expectations
Despite several rally attempts during the week, stocks both here and abroad finished the week mixed in a “buy the rumor sell the news” type of trade action. Said a different way, I believe traders bought stocks ahead of such things as earnings (especially those of the FANGs), the FOMC policy meeting, a repeal of Obamacare, and/or after Saudi Arabia’s pledge to reduce oil production (again). But once the details of these events were digested, traders began taking profits as the news didn’t seem to live up to (overblown) expectations. In any case, the Dow added about a percent to a new high, while the NASDAQ and S&P struggled under the weight of a few earnings disappointments, specifically from Google and Amazon. Their shares have respectively shed 4.5% and 5.4% off of their highs, though neither suffered any real technical damage as dip buyers continued to offer support just above the moving averages.
Away from stocks, Treasuries and EGBs were weaker through midweek ahead of an expected “dovish” FOMC communiqué. But those losses were largely shored up by week’s end on a few earnings surprises and US political setbacks. Gold tacked on about 1.2% and silver 1.4%. Crude oil jumped 8.7% on the concerted and near-sighted hype that inventory stockpiles were lower, rig counts were falling, and OPEC would once again cut production. Of course, I am sure a weaker dollar has had something to do with the advance in commodities (the CRB index was up 3.2%/wk.). The dollar fell again this week, and is now 10.2% off of its high set in January this year – any lower from here and the dollar risks entering an entirely new range, technically speaking.
Next week we’ll hear from Apple, Berkshire Hathaway, the Bank of England, and the BLS on US jobs. If there’s any bad news from any of them, we’ll get to see if the market treats it as such in the form of lower stock prices. I would have to say that Apple is more likely to deliver such news; the confluence of higher inventories and stagnating end-demand have been hounding the company for quite some time.
VP Investment Management