Stocks finished higher on Friday in a relatively quiet options-expiration session. There was some attention paid to the terrorist attack in Mali, as well as New York Federal Reserve President Dudley’s comments on the data dependence of the December “hike/no hike” policy decision. But overall, it feels like Wall Street hit happy hour a little early.
In the end, the Dow Jones Industrial Average gained 0.5%, the S&P 500 gained 0.4%, the Nasdaq Composite gained 0.6% and the Russell 2000 gained 0.7%. Treasury bonds were slightly weaker, the dollar strengthened, gold was little changed and crude oil was little changed.
Consumer discretionary stocks led the way with a 1.2% gain followed by tech, up 0.9%. Energy stocks were the laggards, down 1%. Retail earnings continued to roll out as investors prepare for the start of the critical holiday shopping season.
Shares of Abercrombie & Fitch Co. (NYSE:ANF) gained 25% after better-than-expected earnings and revenue on strong comp-store sales growth. Gap Inc (NYSE:GPS) gained 7.5% on third-quarter results in line with its pre-announcement. Foot Locker, Inc. (NYSE:FL) gained 5.7% on an earnings per share beat. Ross Stores, Inc. (NASDAQ:ROST) gained 10% on solid earnings, profit margins, and comp-store sales growth. And Nike Inc (NYSE:NKE) gained 5.5% after announcing a $12 billion share repurchase program representing 11% of outstanding shares, increased its quarterly dividend 14% and a 2-for-1 stock split.
Chipotle Mexican Grill, Inc. (NYSE:CMG) fell 12.3% after the CDC said 45 people have been infected by E.coli in six states with evidence fingering CMG as the source of the outbreak. Nothing like bad Mexican food to ruin your day. The hit to the company’s image will be hard to shake.
Looking ahead to the holiday-shortened schedule next week, with markets closed on Thursday, the economic calendar is full. Things kick off of with existing home sales on Monday, which are expected to have risen 8.8% year-over-year in line with recent solid but unspectacular growth. Tuesday will bring international trade data expected to show a widening of the trade deficit.
Wednesday will bring the durable goods report. Deutsche Bank economists are looking for a 3% increase thanks to a pickup in aircraft orders. Other data to be released include data on personal consumption expenditures and inflation as well as new home sales and consumer sentiment.
I continue to see signs of a turnaround in precious metals as well as gold and silver stocks on evidence inflation is set to increase in early 2016 — thanks largely to labor market tightening and the fading effect of energy price weakness (with current prices first hit back in January). As year-over-year comparisons in crude oil get easier, inflation measures are set to rise much more quickly than commonly expected.
After suffering a wipeout on Tuesday, gold stocks enjoyed a nice bounce on Wednesday and Thursday (although they gave some of that back on Friday). According to SentimenTrader, the NYSE Arca Gold Bugs Index has posted such a rebound four other times since its inception in 1996. In three cases, gold stocks continued to rally in the months that followed — not violating its low for at least six months for an average maximum gain of 49%.
I have recommended a group of stocks and call options in the space to Edge and Edge Pro subscribers including First Majestic Silver Corp (NYSE:AG)
Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters. A two-week and four-week free trial offer has been extended to InvestorPlace readers.
