U.S. equities mostly moved higher on Monday following in the wake of the S&P 500’s fifth consecutive weekly rise. No major catalysts were in play, yet again, as the slow-motion meltup of the past year shows no signs of abating. Every day feels the same now. It’s like there are simply no sellers left. And no worries to encourage any doubt that prices will move inexorably higher for all time.
In the end, the Dow Jones Industrial Average gained 0.4%, the S&P 500 gained 0.2%, the Nasdaq Composite gained 0.3% and the Russell 2000 was unchanged. Treasury bonds weakened (with more yield curve flattening, a possible early recession signal), the dollar strengthened, gold lost 0.1% and crude oil gained 0.8%.
Click to Enlarge Breadth was mixed and volume relatively light, despite a relatively intense headline flow, as investors hold back ahead of an increase in third-quarter earnings later this week with volume at just 83% of the NYSE’s 30-day average. Defensive telecom stocks led the way with a 0.8% gain while REITs underperformed, down 0.5%.
Ruby Tuesday (NYSE:RT) gained 18.6% after agreeing to be acquired by NRD Capital for a 21% premium to its prior close. Apple Inc. (NASDAQ:AAPL) gained 1.8% after being upgraded to overweight by KeyBank analysts on hopes of a more aggressive market segmentation strategy that is likely to drive margins higher.
On the downside, Sears Holding Corp (NASDAQ:SHLD) lost 11.5% after losing a board member and Nordstrom (NYSE:JWN) fell 5.3% after the Nordstrom family suspended an exploration of a going-private transaction.
On the economic front, the focus was on over-the-weekend comments from Federal Reserve chairman Janet Yellen’s that soft inflation readings were likely to persist — despite an uptick in producer price inflation. Odds of a December rate hike increased, however, showing the market is feeling a little schizophrenic about its catalyst these days.
Separately, there were reports the very hawkish Stanford economist John B. Taylor met with President Trump last week and impressed him. Taylor has long been critical of the Fed’s post-crisis response and is in favor of replacing its current discretionary policy setting with a rules-based approach.
Conclusion
Click to Enlarge The pullback in the Russell 2000 small-cap index from its intra-day high was notable, since the index — which led the way out of the mid-August low — has gone exactly nowhere all month in a sign that the three-month blitz higher could be ending.
Market breadth is rolling over as well, with the percentage of S&P 500 stocks in uptrends is rolling over after setting a lower than vs. its July levels — a negative signal that stock bulls are focusing on fewer and fewer issues as the major averages push to new record highs. While bad breadth numbers haven’t mattered to date, it’s definitely a worsening headwind.
Check out Serge Berger’s Trade of the Day for Oct. 17.
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 the 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.
