Economic and social uncertainty over Tuesday’s presidential election was reflected in the U.S. stock markets last week, which fell for the second consecutive week.
The uncertainty was heightened a week ago when the FBI said that it was again investigating Hillary Clinton following the discovery of a batch of new emails. The polls tightened and stocks declined. But yesterday, FBI Director James Comey said that all emails had been reviewed and that there is no reason to change the original decision, thus they would not go ahead with the investigation. “We haven’t changed our original conclusions,” he said.
On Friday, the S&P 500 reversed from what appeared to be a strong rally following the release of the Employment Situation report for October that showed mixed results. Nonfarm payrolls increased by a number that was below the consensus by 14,000; however, hourly earnings increased at a faster-than-expected rate.
At the close, the Dow Jones Industrial Average fell 42 points to close at 17,888; the S&P 500 fell 3 at 2,085; the Nasdaq closed at 5,046, off 12 points; and the Russell 2000 rose 7 points, closing at 1,163. The NYSE’s primary exchange traded 917 million shares with a total of 3.8 billion shares traded. The Nasdaq crossed over 2 billion shares. Advancers slightly outnumbered decliners on both major exchanges. Blocks on the NYSE fell to 5,249 from 5,398 on Thursday.
For the week: The DJIA fell 1.5%, the S&P 500 lost 1.9%, the Nasdaq plunged 2.8% and the Russell 2000 fell 2.0%.
On Friday, the S&P 500 held its ground at the 200-day moving average at 2,083.18. The intraday low almost nicked the line but missed it by 0.61, and at the close, the index jumped two full points over it.
Monday’s Market Analysis
Despite last week’s dismal performance, I’m inclined to agree with Jeffrey Saut of Raymond James that in 2017 defensive stocks — characterized by higher-than-normal price-to-earnings ratios and higher relative dividend rates — will no longer be a focus of buyers.
We are transitioning from an interest-rate-driven market to an earnings-driven market. That could be good news or bad, but stock performance in 2017 will be more attuned to earnings than other outside influences.
Technically, the fact that the S&P 500 held above the “pivot line” at its 200-day moving average is positive, but election news has confused investors (me among them). What is interpreted as good news one hour is countered by bad news the following hour. In other words, both fundamental and technical analysis, to a lesser extent, have less impact when emotions rule.
Thus, a fall of 3% below 2,083 is a good place for both investors and traders to accumulate stocks. To be more specific, an emotional thrust to 2,025 to 2,020 should be irresistible to buyers.
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.
