Stock Market Summary
Monday, August 17, 2015
Stock Market Summary:
- The major indices chopped up and down last week, but they managed to finish the week with a gain. Tuesday’s trading was impacted by selling across the board. After an early bout of selling on Wednesday, the indices managed to reverse and finish the day higher. That reversal seemed to take the energy out of the sellers and give the market the short term support it needed.
- After last week’s trading the S&P 500, the Nasdaq Composite and the Russell 2000 are all higher year to date with only the Dow Jones Industrial Average in negative territory.
- Earnings season is winding down with many retailers and software companies left to report.
- The debate continues as to when the Federal Reserve will end their nine year hiatus from raising interest rates. Whenever it occurs it will not be awful news for the stock market. The stock market reaction will turn negative when we get to the point of a possible excess in the tightening cycle. That would be a long way off since we are waiting for the first rate increase to occur.
- The extreme weakness in the commodity markets are holding down inflation and showing no signs of strengthening. Oil prices are at six year lows, grain prices and the metals look like they have fallen off a cliff. These weaknesses and a very mixed economic picture have made it quite difficult to gauge what the Federal Reserve will do not just with interest rates, but with the general monetary policy that they have established.
- The broad market is in a sideways corrective phase, but so far the selling pressure hasn’t been able to amount to anything more than that. The S&P 500 found support for the fourth time in the last 30 trading days at the 200 day moving average.
- The home builder group hit new highs last week and remains one of the strongest industry groups in the market right now. The large declines in commodity prices have given strength to the bond market. This helped Real Estate Investment Trusts (REITs) and Utilities to a strong week.
- The S&P 500 has been trading in a tight trading range since early February. Currently, the range, which had narrowed to 2070 – 2130 is back to the longer term range of 2040 – 2135. The index closed above 2091 on Friday. This sideways corrective behavior is one of the longest in a number of years, yet the S&P 500 is down just a bit over 2.0% from its all-time high.
- The resilience of the stock market has been and remains impressive, while investor sentiment is quite bearish, a contrarian indicator. The intermediate market bias is positive for the stock market.
Sources: bankrate.com, bloomberg.com, briefing.com, Dow Jones News, Financial Times, finviz.com, Investor's Business Daily, marketwatch.com, seekingalpha.com, Thomson Reuters/First Call, U.S. Dept of Treasury, yahoo.com and individual company web sites and press releases.
Leonetti & Associates, LLC views or opinions are as of a certain date and subject to change without notice. The material contained herein is for informational purposes only and obtained from sources we consider reliable. We make no guarantee as to its accuracy or completeness. References to specific securities and industries/sectors should not be considered recommendations to buy or sell any security or advisory service. Past performance is not a guarantee of future results.