On Friday, buyers of stocks paused following the best week for the indices since early in December. On Wednesday the Dow closed above 20,000 for the first time followed by another closing high on Thursday.
The Dow Jones Industrial Average fell 0.04% on Friday but still closed over 20,000, the S&P 500 lost 0.1%, the Nasdaq gained 0.1% and the Russell 2000 fell 0.4%. Overall the market was flat at the end of the week with the five highest-weighted sectors changing no more than 0.1% since Wednesday. Those sectors are technology, financials, health-care, consumer discretionary and industrials. Consumer staples and energy fluctuated more than others because of factors specific to their industries.
The technology sector led all others because of an unexpected quarterly earnings gain by Microsoft Corporation (NYSE:MSFT) due to gains in its cloud-computing business. The stock jumped 2.4%, up $1.51 to $65.78.
The energy sector was weak on Friday due to a drop in the price of WTI crude oil to $53.18 per barrel, off 1.1%, and an earning miss by Chevron Corporation (NYSE:CVX).
According to FactSet, almost 34% of the S&P 500’s stocks had reported earnings, at a blended growth rate of 4% compared to expectations of 5.2%
At the close, the Dow Jones Industrial Average fell 7 points at 20,094, the S&P 500 lost 2 at 2,295, the Nasdaq gained 6 points, closing at 5,661, and the Russell 2000 closed at 1,371 for a loss of 5 points. The NYSE primary exchange traded 751 million shares with total volume of 3.2 billion. The Nasdaq crossed 1.7 billion shares. On the Big Board, decliners outpaced advancers by 1.3-to-1, and on the Nasdaq, decliners led by 1.1-to-1. Blocks on the NYSE declined to 5,797 from 6.068 on Thursday.
For the week: The Dow Jones Industrial Average gained1.3%, the S&P 500 rose 1%, the Nasdaq jumped 1.9% and the Russell 2000 rose 1.4%.
The highlight of last week was Wednesday’s break over 20,000 following an extended flag formation that began with a break above 19,000 early in December. The new breakout was accompanied by solid on-balance-volume and a new MACD buy signal.
A new high at 9,467 (close) on Thursday from the Transportation Average was confirmation under The Dow Theory that the bull market was still in force. Heavy buying in the Transports was supported by a positive follow from the MACD indicator.
The VIX “Fear Index” shows no fear, and generally that signals that a consolidation or correction is about to occur. But the VIX’s record of pending corrections during periods of new highs and solid group rotation is poor.
Conclusion: As long as volume continues to support the new highs, and group rotation by institutions continues to “pick off” lagging groups, the bull will head to higher ground. Note the power of the November low as it reversed off of the 200-day moving average on high volume.
It appears that with minor adjustments, the bull will be with us through 2017.
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.
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