U.S. equities bounced between gains and losses on Monday, consolidating the impressive gains seen on Friday. The same catalysts remain in play: Hopes of more cheap money stimulus (after the Bank of Japan cut rates into negative territory last week) and rumors of a possible OPEC/Russia oil production cut.
New comments from Federal Reserve vice-chair Stanley Fischer were considered dovish after he talked up the risks of recent market volatility to the U.S. economy.
Dallas Fed President Robert Kaplan said that it was “significant” the Fed no longer views the risks to the economy as “balanced” as they await fresh data to “understand what is going on,” and that the Fed is no longer committed to three or four rate hikes this year.
In the end, the Dow Jones Industrial Average lost 0.1%, the S&P 500 dropped a fraction, the Nasdaq Composite saw a 0.1% gain and the Russell 2000 lost 0.3% to end the day. Treasury bonds were weaker, the dollar lost 0.6%, gold gained 1.2% and crude oil fell 6.7% to close at $31.38 a barrel.
Defensive utility stocks led the way with a 1% gain. Twitter Inc (NYSE:TWTR) jumped 6.6% on reports of a possible private equity purchase. Chipotle Mexican Grill, Inc. (NYSE:CMG) gained 4.3% after the CDC declared the end of the company’s E.coli outbreak.
Strength in precious metals stocks lifted the ProShares Ultra Gold (NYSEARCA:UGL) position to a 13.3% gain for Edge subscribers so far this year. Ongoing strength in athletics apparel titan Nike Inc (NYSE:NKE), which gained another 1.8% today, lifted the Feb $60 calls recommended to Edge Pro subscribers to a 185% gain since recommended on Jan. 19.
Energy stocks were the laggards, losing 1.9%. GoPro Inc (NYSE:GPRO) lost 3.4% on cautious comments from analysts at both Citigroup and Piper.
On the economic front, personal spending was flat in December despite an increase in income. Personal income gained 0.3% while spending was unchanged. The savings rate increased to 5.5% from 5.3% previously as U.S. consumers continue to view the windfall from lower gasoline prices as a temporary boost.
An update on global manufacturing activity was largely as expected as China remains in contraction, Europe manages modest growth and U.S. factories enjoy a surge of new orders and production, but weak employment.
After the close, Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) reported very strong quarterly results, sending shares up an impressive 6.5% in after-hours trading. Earnings came in at $8.67 per share (vs. $8.17 expected) while revenues totaled $17.3 billion (vs. $16.9 billion expected). Paid click revenue increased 31% over last year, but the aggregate cost per click dropped 13%. Net operating cash flow totaled $6.4 billion.
Revenue for the Google operating segment totaled $21.2 billion vs. $18 billion last year. On the earnings call, management noted the increased use of mobile search was the single largest driver of the quarter.
Looking ahead, Exxon Mobil Corporation (NYSE:XOM) will report results before the bell on Tuesday. And all eyes are on the January non-farm payroll report due Friday for clues concerning the state of the job market during the recent market/economic turmoil and whether the Fed will stick to its four-quarter-point rate hike forecast for 2016. Analysts are looking for 188,000 jobs vs. the 292,000 added in December.
The unemployment rate is expected to remain at 5%.
Technically, stocks look good for a run at resistance near the 17,000 level as the severe oversold condition of two weeks ago is worked off. Breadth continues to widen, with the percentage of S&P 500 stocks in uptrends jumped to 36.2% from a recent low of 23.4%.
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.
