Friday’s advances capped the best week for stocks since the election, as buyers chose to invest in companies that benefit from a positive response to strong economic prospects and stimulus.
Banks shares did well as part of the financial sector, which was the best-performing sector of the week, up 4.8%. The bank stocks in the Dow Jones Industrial Average were the best performers, as well, with Goldman Sachs Group Inc (NYSE:GS) up 0.2% on Friday, but up over 8% for the week.
The Federal Reserve meets this week, and it is expected to raise short-term rates, a catalyst for higher bank earnings. That move by the Fed and the new administration’s stated policy of lower corporate taxes could result in an earnings boom for financial stocks.
The European Central Bank (ECB) prolonged its bond-buying program, but at a slower pace. This resulted in another down day for the euro, which closed at $1.054.
At the close the Dow Jones Industrial Average rose 142 points to 19,757, the S&P 500 gained 13 to close at 2,260, the Nasdaq gained 27 at 5,445, and the Russell 2000 closed at 1,388, up 2 points. The NYSE’s primary exchange traded 902 million shares with total volume of 3.9 billion shares, and the Nasdaq crossed 2 billion shares. On the Big Board decliners were slightly more than advancers, but on the Nasdaq advancers outpaced decliners by 1.4-to-1. On the NYSE blocks were slightly lower than on Thursday’s total of 5,393.
For the week: The DJIA gained 3.1%, the S&P 500 gained 3.1%, the Nasdaq rose 3.6% and the Russell 2000 jumped 5.6%.
Last week, to many, the most significant development was the leadership of the Dow by the financial group or the regaining of momentum by the small- and mid-cap stocks. However, I draw our readers’ attention to the Dow Jones Transportation Average’s fresh breakout on huge volume. Just five weeks ago the index was mired 250 lower in an ascending triangle with resistance at 8,150. Last week it broke its old high at about 8,200 (close) made in November 2014 and now has nothing but sky above it.
Conclusion: The bull market was confirmed with last week’s high-volume breakout by the Dow Jones Transportation Average. As noted before, the “Transports” are economic harbingers of future economic conditions, not only to technical analysts, but to economists as well.
The Dow transports have also been a predictor for the Federal Reserve, and so this week this indicator is telling us that higher interest rates are almost a sure move by the central bank. Investors like what they see, and what they see are higher earnings, led by the financial sector, along with higher future dividends by blue chips, and lower taxes and accelerating growth for all corporations.
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.
