The Bulls are in Charge of the Market

Advertisement

Stocks rallied following Friday’s better-than-expected jobs report, but so did bonds. The yield on the benchmark 10-year Treasury note fell to its lowest level ever, closing at 1.37%.

U.S. employers added a seasonally adjusted 287,000 jobs in June, which was a welcome relief from the sour May report that showed just 11,000 jobs added. While the labor-force participation rate rose slightly to 62.7%, the unemployment rate increased to 4.9% from 4.7%.

The Wall Street Journal reported that about one-third of all government bonds globally have negative yields, coupled with very low economic growth. The dividend yield for the S&P 500 is 2.1%, according to FactSet, compared to virtually nothing for bonds.

Earnings are expected to fall for the fifth consecutive quarter. FactSet expects profits for S&P 500 companies to fall 5.3% year over year in Q2. Earnings season kicks off with Alcoa Inc (NYSE:AA) reporting today.

Crude oil fell slightly on Friday to $45.12a barrel, and gold rose 0.4% to $1,367.40 an ounce.

At Friday’s close, the Dow Jones Industrial Average rose 251 points to 18,147, the S&P 500 gained 32 points at 2,130, the Nasdaq was up 80 points at 4,957, and the Russell 2000 added 28 points at 1,177.

The NYSE Composite’s primary exchange traded 929 million shares with total volume of 3.6 billion shares, and the Nasdaq crossed 1.9 billion. On the Big Board, advancers overpowered decliners by 7.3-to-1, and on the Nasdaq, advancers led by 4.9-to-1. Block trades on the NYSE rose to 5,087 versus 4,962 on Thursday. More importantly, advancing volume on the NYSE led by a ratio of over 15-to-1.

For the week, the Dow rose 1.1%, the S&P 500 gained 1.3%, the Nasdaq was up 1.9%, and the Russell 2000 advanced 1.8%.

S&P 500 Chart
Click to Enlarge

Chart Key

Friday’s close in the S&P 500 at 2,129.90 exceeded the June high at 2,120.55. The bulls will be encouraged by the numbers and now look forward to an attack on the all-time high at 2,134.72 and the closing high at 2,130.82.

Dow Jones Industrial Average Chart
Click to Enlarge

Although the Dow’s close was shy of the April top at 18,167.63, it ended the day just 20 points off its high. Momentum, as measured by MACD, is overbought, but not by a significant amount.

Conclusion

Technically the bulls are in charge. With advancing volume on the NYSE at 15-to-1 and block trades on up days increasing, there is a bullish undercurrent. However, total volume is still very low compared to other pre-breakout scenarios.

I recommend caution. Only buy stocks selling at discount levels, like my Trade of the Day. Our focus for the week will turn to the upcoming Q2 earnings seasons and managements’ expectations for the full year.

Today’s Trading Landscape

To see a list of the companies reporting earnings today, click here.

For a list of this week’s economic reports due out, click here.


Article printed from InvestorPlace Media, https://investorplace.com/2016/07/daily-market-outlook-bulls-charge-market/.

©2024 InvestorPlace Media, LLC