Equity investors saw a brutal May for stocks followed by a choppy June for investments. But the stock market has kicked off July in style after a long holiday weekend. Stocks tallied their fourth straight gain in a row to give Wall Street its best weeklong performance in about a year as investors saw renewed optimism entering another earnings season.
Specifically, the Dow Jones Industrial Average added on +5.3% while the tech-heavy Nasdaq added +5.0% and the S&P 500 tacked on +5.4%. Commodity stocks led the charge, with the oil and gas sector surging and metals and mining companies posting strong gains. Among metals stocks, aluminum giant and earnings bellwether Alcoa (AA) tacked on 9.3% this week, while global mining leaders Rio Tinto (RTP) added 8.9% and BHP Billiton (BHP) added 8.1%. In the energy sector, notable gainers inclue Conoco Phillips (COP), up +7.1% and Chevron (CVX), up +6.7%. Battered oil giant BP plc (BP
) bounced back dramatically, tacking on +16.0% on the week.
Why the surge in commodity stocks? Well, one reason could be a report that Canada’s economy added over 93,000 jobs in June — almost five times better than forecasts! This resource-rich nation is seeing strong demand for its commodities, and investors took a cue from this growth. Crude oil prices were also up about 5.5% on the week.
So what’s next for the market, and where do we go from here? Well earnings are going to tell the story next week, and it could shape up to be another good run for stocks if all goes well. Year-over-year earnings growth should be about +27% for the market as a whole, according to Reuters experts. We’ll see what reality brings, however, when Alcoa (AA), JP Morgan Chase (JPM), Bank of America (BAC), Intel (INTC) and General Electric (GE) all report second-quarter numbers.
The market is just slightly above its 52-week range, with the Dow closing at 10,198 with a 52-week low of 8,087 exactly a year ago and the high of 11,258 set in April before the May meltdown. But as we erase comparisons with the market run-up of 2009 with each passing day, the trading range of the market could get awfully thin unless something notable happens. A look at the last 9 months gives us a bottom end of only around 9,700 for the Dow — a band of just 1,500 or so points.If that’s not a sideways market, what is.
A very strong earnings season could break the market out of the narrow range where it has traded for the past several months — or another disastrous jobs headline or debt fallout in the euro zone could send us back into a tailspin once more.
And in the absence of something great or something awful? Well, get set for more of the same — a choppy market that is fine for traders playing volatility, but not very friendly to longer term investors.
