Stocks Enjoy Quiet End to Wild Week

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U.S. equities finished mixed on Friday in relatively subdued trading — capping a week of volatility that featured a decline in large-cap stocks to levels not seen since March.

In the end, the Dow Jones Industrial Average gained 0.2%, the S&P 500 gained a fraction, the Nasdaq Composite gained a fraction, and the Russell 2000 lost 0.3%. Treasury bonds were mostly weaker, the dollar was stronger, gold lost 0.2%, and oil lost 0.2%. As I said, quiet trading. The weakness in T-bonds boosted the ProShares UltraShort Treasury Bond (NYSEARCA:TBT) recommended to Edge subscribers to a gain of 9.1% since recommended on August 16.

Financials led the way with a 0.5% gain while healthcare was the laggards, down 0.7%.
Salesforce.com Inc. (NYSE:CRM) gained 5.2% after its CEO told the Financial Times his company has walked away from a potential bid for Twitter Inc (NYSE:TWTR) saying the deal “wasn’t the right fit.” TWTR shares fell 5.1%.

djiAdvanced Micro Devices, Inc. (NASDAQ:AMD) gained 4% after announcing a cloud computing collaboration with Alibaba Group Holding Ltd (NYSE:BABA). HP Inc (NASDAQ:HPQ) fell 4.4% as investors came away from an analyst meeting negative on free cash flow projections and a weak PC demand forecast.

Turning to earnings, big bank results got off to a good start with JPMorgan Chase & Co (NYSE:JPM), Citigroup Inc (NYSE:C), and Wells Fargo & Co (NYSE:WFC) all beating expectations thanks to better fixed-income, commodities, and currency trading revenues. Average loans climbed 4% according to Credit Suisse, alleviating some concerns about credit demand.

But investors largely shrugged, suggesting more good news was expected: Shares of the three big banks were largely unchanged.

On the economic front, retail sales rose 0.6% in September in line with consensus estimates and recovering from a 0.2% decline in August. Auto sales and gasoline drove the result. Yet the data led the Atlanta Fed GDPNow estimate of Q3 growth to be cut to 1.9% — down from a high of 3.8% in August. A speech by Federal Reserve Board Chair Janet Yellen was largely a non-event, noting that policy may need to be even more accommodative in the future (surprise, surprise).

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The technical outlook is troublesome as the Dow threatens to break down out of a two-month pennant formation on worries about China (after weak trade data), Brexit, tepid GDP growth, and an ongoing corporate earnings recession.

Just look at the chart above, which shows that just over 30% of NYSE stocks are in uptrends, down from more than 80% in July. Yet stocks have barely budged. I think that will change soon, and continue to recommend a defensive positioning to my subscribers including the Oct $29.50 puts against General Electric Company (NYSE:GE) which are up more than 60% for Edge Pro subscribers.

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.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/10/stocks-enjoy-quiet-end-wild-week/.

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