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Markets Are Hitting an Extreme Not Seen in Years

U.S. equities finished mixed on Thursday as investors dealt with a flood of news catalysts.

The House GOP released details of their tax plan proposal (a 20% permanent tax rate, a doubling of the standard deduction, and repatriation incentives). President Donald Trump announced status quo, middle-of-the-road Federal Reserve governor Jerome Powell — a former investment banker and partner at the Carlyle Group — as his nominee to be the next chairman of the Fed.

And Apple Inc. (NASDAQ:AAPL) reported better-than-expected results after the close ahead of the release of the iPhone X on Friday.

In the end, the Dow Jones Industrial Average gained 0.4%, the S&P 500 gained a fraction, the Nasdaq Composite lost a fraction and the Russell 2000 gained 0.3%. Treasury bonds were stronger, the dollar declined, gold was little changed and oil gained 0.4%.

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Breadth was mixed and trading activity heavy, with NYSE volume at 123% of the 30-day average. REITs led the way, with a gain of 0.9%. Telecoms were the laggards, down 1%.

AutoNation (NYSE:AN) gained 14.8% after beating third-quarter earnings estimates and signing a multi-year service agreement with Alphabet’s (NASDAQ:GOOG) Waymo autonomous vehicle program.

Qualcomm (NASDAQ:QCOM) gained 2.6% after beating quarterly earnings estimates amid ongoing legal battles with Apple and others.

On the downside, Tesla Inc (NASDAQ:TSLA) lost 6.8% after reporting a wider-than-expected quarterly loss and an intensifying cash burn as Model 3 production continues to hit headwinds. Also hurting was word the GOP tax plan scraps the federal electric vehicle tax credit. Cheesecake Factory (NASDAQ:CAKE) lost 6.3% after missing third-quarter expectations on a 2.3% decline in comp-store sales on weaker margins.

After the close, Apple reported earnings of $2.07 per share beating estimates of $1.87 on better-than-expected iPhone shipments of 46.7 million (vs. 46 million expected) and strong forward guidance.

The iPhone X will go on sale today, furthering the hype.


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It’s hard keeping track of just how extreme the current situation is as sentiment is off the charts and breadth narrows badly. Just look at Boeing Co (NYSE:BA), which accounted for more than a third of the Dow’s gain today.

The market’s reliance on a few high-priced stocks to hold the major averages aloft has passed prior extremes in 1998 and 2006 according to SentimenTrader.

At the same time, professional money managers are quietly moving to the exit: Their exposure to stocks, which had been holding near 90% in September, is down to 60% now as amateur investors grow more and more bullish.

The last time this happened, to such an extent, was in 2014.

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.

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.

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