U.S. markets closed in record territory on Friday with the Dow and S&P 500 extending their weekly winning streak to 7-straight with the latter setting a fresh intraday all-time and closing high. The Nasdaq posted a strong session after rising 2.2% following better-than-expected earnings from a number of Tech companies after Thursday’s closing bell.
The move above the 6,700 level and new lifetime high could lead to a blowoff top towards Nasdaq 7,000 at some point. Meanwhile, the Russell also settle in the green and back above the 1,500 level but closed the week with a one-point loss.
The index has gone 16 sessions without taking out its all-time high north of 1,514 set at the beginning of the month. This remains a slightly bearish signal.
Sector strength for Friday included Technology and Consumer Discretionary with gains of 2.7% and 1.6%, respectively. For the week, the aforementioned sectors were up 2.4% and 1.1%. Laggards were led by Consumer Staples and Materials with declines of 0.9% and 0.5%.
Healthcare and Real Estate posted the largest weekly losses after falling 2% and 1%, respectively.
As of Thursday morning, Q3 results from 229 S&P 500 members that combined account for 48.1% of the index’s total market capitalization. Total earnings for these companies are up 7.7% from the same period last year on 5% higher revenues, with over 75% beating EPS estimates and 65% topping revenue estimates.
Looking at Q3 as a whole, combining the actual results from the 229 index members with estimates from the upcoming 271 companies, total Q3 earnings are expected to be up 4.1% from the same period last year on 5.2% higher revenues.
While the Q3 earnings growth pace is below what the index had seen in the first two quarters of the year, the overall level of total earnings for the S&P 500 is on track to reach a new quarterly record, surpassing the record reached in the preceding quarter.
Global Economy – European markets showed continued strength to close the week following better-than-expected economic news out of Germany. France’s CAC 40 added 0.7% while Germany’s DAX 30 and the Stoxx Europe 600 gained 0.6%. UK’s FTSE 100 was up 0.3% and the Belgium20 advanced 0.1%.
German September import prices rose 0.9% month-over-month and 3% year-over-year, stronger than expectations for a rise of 0.5% and 2.6%, respectively.
Asian markets were mostly higher with Japan’s Nikkei surging another 1.2% while closing above the 22,000 level after rising for the 18th time over the past 19 sessions. Hong Kong’s Hang Seng Index jumped 0.8% and South Korea’s Kospi was higher by 0.6%. China’s Shanghai index climbed 0.3% while Australia’s S&P/ASX 200 fell 0.2%.
China September industrial profits jumped 27.7% year-over-year, the highest in 5-3/4 years.
Bank of Russia cut its benchmark rate by 25 basis-points to 8.25% from 8.50%.
U.S. Gross Domestic Product posted a 3% growth rate in Q3 following the 3.1% pace in Q2 and Q1’s 1.2% clip. This represented the best back-to-back performance since Q2-Q3 2014. However, expectations were for GDP of 3.2%.
U.S. consumer sentiment rose 5.6 points to 100.7 in the final October print from the University of Michigan survey. Expectations were for a reading of 101 but still represented the highest level since January 2004.
Baker Hughes reported U.S. rig count fell 4 rigs from last week to 909.
Market Sentiment – President Trump, while still undecided, is now reportedly leaning towards Jay Powell as Fed Chair. All candidates remain in the running according to White House officials with a decision expected this upcoming week.
The iShares 20+ Year Treasury Bond ETF (TLT) traded higher throughout the session while pushing upper resistance at $123-$123.25 on the run to $123.32. Continued closes above the latter gets sets up a possible test towards $124-$124.25.
Fresh support is at $122.75-$122.50 with a close below $122.25-$122 and the 200-day moving average being a bearish signal. RSI is back in an uptrend after clearing 40 and faces near-term resistance at 50 on continued strength.
Market Analysis- The iShares Russell 3000 ETF (IWV) traded in a tight range between $151-$152 into mid-month following the breakout above $150 to start October. The recent all-time peak reached $152.91 last Monday and was matched on Friday’s intraday high.
Continued closes above resistance at $152.75-$153 would be bullish for a possible push towards $154.50-$155. Fresh support is at $152-$151.75 with a close below $151-$150.50 being a bearish development for a continued backtest towards $149-$148 and the 50-day moving average.
Last Wednesday’s intraday low hit $150.61. RSI held near-term support at 60 last week and is back in an uptrend with resistance at 80 on continued strength.
The Utilities Select Spider (XLU) held last Wednesday’s breach below the 50-day moving average following a low of $54.05. Current support is at $54.50-$54.25 with a close under the latter being a bearish signal. The intraday rebound to $55.24 on Thursday was followed by Friday close above lower resistance at $55-$55.25.
The recent all-time reached $55.90 and would be back in play on a close above the latter with additional hurdles at $56.25-$56.50. RSI has cleared 60 with continued closes above this level likely leading to a retest to resistance at 70 and a level that has been holding since mid-June.
The percentage of S&P 500 stocks trading above the 200-day moving average is currently at 68% after opening just below the 65% level on Friday. This area served as prior resistance throughout September with a close below this level leading to a pullback towards the 60% area.
Continued closes above 70% could lead to another run towards 75%-77% and the recent 6-month high. The one-year peak pushed 82% in early January.
The percentage of Nasdaq 100 stocks trading above the 50-day moving average is currently at 58%. Upper support from late September at the 50%-45% levels held on last Wednesday’s volatility and backtest to the former. Fresh resistance is at 60%-62.5% with a move above the latter signaling continued strength.
All the best,