Do the Long Summer Days of August Have a Surprise in Store?
The employment figures released on Friday were positive. Based on the Labor Department, 209 thousand new positions were produced in the U.S. in the month of July, surpassing the early forecast of 175 thousand. The unemployment rate, as expected, fell to 4.3%. The July employment report led to only limited positive movement in Friday’s trading, but these are the long days of summer and movement is slow. Wall Street ended mixed on the week, the Dow Jones notching gains of 1.2%, though the S&P 500 ended only negligibly up with gains of 0.2%, and the NASDAQ ended off 0.4%.
The earnings season usually prompts higher level volatility, but this time around – and despite the solid numbers we saw in most instances – few stocks succeeded in rallying higher on their good numbers. In effect, traders’ tendency over the last few weeks has been to “sell the news” the moment a company releases positive financial results, which leaves potential buyers with even the slightest glimmer of doubt on the sideline.
From a technical perspective, there’s support afoot that has succeeded in keeping indexes above key levels. The S&P 500 has not seen significant gains already for 13 days, likewise failing to fall substantially in the same timeframe. In effect, indexes are trapped in a narrow trading range, and are doing the minimum necessary to keep bears at arm’s length.
The concern about, though, is that we could see the very flat movement that we saw exactly a year ago in August 2016, when the market, for 3 weeks, traded sideways, with no substantial movement in either direction. It seems that the dynamics in the market support this type of movement. Computerized algorithms are buying every correction, even those most minimal, while selling in the face of every rally. Resultantly, the S&P 500 has ended changed by less than 0.2% in either direction on every trading day over the last few weeks.
Market players are now digesting the numbers from the earnings season and many stocks have traded fitfully after the release of their earnings numbers in an attempt to create a new base of support. Stock valuations in many instances have been problematic and value investors have been in no rush to jump on some of the abovementioned corrections.
The going wisdom is that movement of this ilk is the precursor for larger movement. We’ve heard about this many times in the past, but generally speaking, the surprise has been that the flat movement has continued for longer than players had originally thought logical. If index and future contract traders are down and out, traders in individual stocks have excelled, capitalizing on the many opportunities produced in limited windows of time ranging from a few days to even a few hours.
The earnings season has helped pushed indexes to new highs this summer. At present, 85% of S&P 500 companies have released their earnings reports, quarterly earnings growth now coming to some 12%.
The coming week on Wall Street will be dominated by media companies and retailers which will be reporting their earnings numbers alongside the market’s inflation figures; likewise, in the long August summer days, Fed speakers will keep investors on their toes.
The earnings reports that will be released this week include Disney (DIS), and News Corp (NWSA), along with large retail chains like Macy’s (M), Nordstrom (JWN), Kohl’s (KSS) and J.C. Penney (JCP). The two issues that have disappointed the market of late, SNAP and APRN, are expected to report on Thursday.
The Producer Price Index (PPI) and the Consumer Price Index (CPI) are expected to report towards the end of the week, but it’s the CPI that will be released on Friday which will receive most of the attention after July’s employment numbers indicated yet another month of moderate wage growth, with other inflation numbers not pasting muster. All of this leaves investors skeptical about the possibility that the Fed will hike rates in December. The lack of inflation raises the probability that the Fed will fall short of its annual inflation target come year’s end.
Have a great trading week!
|Tuesday||6:00||NFIB Small Business Optimism Index||103.2||Medium|
|Wednesday||10:00||Wholesale Trade||0.6 %||Medium|
|Thursday||8:30||Initial Claims||241 K||Medium|
|Friday||8:30||Consumer Price Index||0.2 %||High|
|FOLD||Amicus Therapeutics, Inc.||AM||Monday|
|FDC||First Data Corporation||AM||Monday|
|TSN||Tyson Foods, Inc.||AM||Monday|
|LBTYA||Liberty Global plc||PM||Monday|
|MAR||Marriott International, Inc.||PM||Monday|
|CAR||Avis Budget Group, Inc.||PM||Monday|
|LPI||Laredo Petroleum, Inc.||PM||Monday|
|AGIO||Agios Pharmaceuticals, Inc.||AM||Tuesday|
|ZBRA||Zebra Technologies Corporation||AM||Tuesday|
|VRX||Valeant Pharmaceuticals International, Inc.||AM||Tuesday|
|KORS||Michael Kors Holdings Limited||AM||Tuesday|
|RL||Ralph Lauren Corporation||AM||Tuesday|
|KITE||Kite Pharma, Inc.||AM||Tuesday|
|LAMR||Lamar Advertising Company||AM||Tuesday|
|CVS||CVS Health Corporation||AM||Tuesday|
|IONS||Ionis Pharmaceuticals, Inc.||AM||Tuesday|
|DISCA||Discovery Communications, Inc.||AM||Tuesday|
|EXPD||Expeditors International of Washington, Inc.||AM||Tuesday|
|NCLH||Norwegian Cruise Line Holdings Ltd.||AM||Tuesday|
|MNST||Monster Beverage Corporation||PM||Tuesday|
|CLR||Continental Resources, Inc.||PM||Tuesday|
|PCLN||The Priceline Group Inc.||PM||Tuesday|
|DIS||The Walt Disney Company||PM||Tuesday|
|Z||Zillow Group, Inc.||PM||Tuesday|
|NUAN||Nuance Communications, Inc.||PM||Tuesday|
|ACAD||ACADIA Pharmaceuticals Inc.||PM||Tuesday|
|LITE||Lumentum Holdings Inc.||AM||Wednesday|
|FOXA||Twenty-First Century Fox.||PM||Wednesday|
|PLNT||Planet Fitness, Inc.||PM||Wednesday|
|JACK||Jack in the Box Inc.||PM||Wednesday|
|PRGO||Perrigo Company plc||AM||Thursday|
|TTD||The Trade Desk, Inc.||PM||Thursday|
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