U.S. equities were in a daze on Monday amid the lowest volatility since 2005. The CBOE Volatility Index has posted 13 of its 23 lowest closes since May of this year. There is just no other way to say it: This is the most peaceful, complacent market in history. Nothing negative seems to matter. And literally everything that happens is spun in a positive light.
Fed tightening? A sign of a strong economy. Weak economic data? Means the Fed will hold off on rate hikes. Political gridlock? Less risk President Trump embarks on a trade war.
Even weaker-than-expected earnings from Netflix, Inc. (NASDAQ:NFLX) after the close — with earnings of 15 cents per share missing by a penny amid a deepening cash burn rate — was ignored as investors focused on solid user growth metrics and a 32% jump in revenue. No telling how long this dynamic it will last. Maybe forever.
In the end, the Dow Jones Industrial Average lost a fraction, the S&P 500 lost a touch, the Nasdaq Composite gained a touch for its eighth consecutive rise and the Russell 2000 gained 0.2%. Treasury bonds were stronger, the dollar held steady, gold gained another 0.5% and crude oil fell 1.1%.
Click to Enlarge Breadth was slightly positive, with 1.3 advancers for every decliner on the NYSE. Volume was again extremely light, with volume at just 73% of the NYSE’s 30-day average. Defensive utility stocks led the way with a 0.4% gain while healthcare was the laggard, down 0.3%.
Whirlpool Corporation (NYSE:WHR) gained 1.7% on positive coverage in Barron’s, noting the stock could increase 35% if management continues to execute. NFLX gained more than 10% in after-hours trading after reporting quarterly results.
On the downside, Blue Apron Holdings Inc (NYSE:APRN) lost 10.5% on reports Amazon.com, Inc. (NASDAQ:AMZN) could be preparing to enter the meal kit market after registering a trademark for a new service called “We do the prep. You be the chef.” Tesla Inc (NASDAQ:TSLA) fell 2.5% on reports of a sudden acceleration while in Autopilot mode caused a crash in Minnesota injuring five passengers.
Conclusion
Click to Enlarge Despite the ultra-low volume, narrow breadth, and widespread investor complacency, stocks remain in the driver’s seat as shown in the chart above, comparing high-beta stocks to Treasury bonds. Stocks have been on the move throughout July, ending seven months of listlessness for equities vs. bonds.
Earnings releases will accelerate in the weeks to come. But based on the reaction to Friday’s tepid big bank results, investors still have rose colored glasses on. Nothing will likely change until September, when the Fed is poised to start its “quantitative tightening” program.
Check out Serge Berger’s Trade of the Day for July 18.
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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Anthony Mirhaydari is founder of the Edge (ETFs) and Edge Pro (Options) investment advisory newsletters. Free two- and four-week trial offers have been extended to InvestorPlace readers.
