“Trump Rally” Likely to Take Stocks to New Highs

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By: Shlomo Cooper, Senior Analyst at Tradenet

Stocks on Wall Street rallied back to an all-time high on Friday, enjoying their strongest trading day since 2017. The catalyst for the positive movement came from Trump’s move to start scaling back the Dodd-Frank Wall Street Reform and Consumer Protection Act, imposed on banks in 2008 on the heels of the latest financial crisis. Likewise, investors drew encouragement from Friday’s employment report which showed just the right balance between the strength of new hires in January and moderate wage growth, making for the optimal combination of strong employment growth that didn’t translate into an uptick in inflation, a fact likely to neutralize the threat of a March rate hike.

The S&P 500 succeeded in ending last week lightly up. Stocks are likely to press on the gas this coming week and seek out new highs, as long as we don’t see a White House twit that like a stray bullet misses its mark.

Wall Street investors can at least put one concern at bay in regards to the upcoming earnings season: the strength of the dollar. The greenback, which rallied sharply after the November 8th elections, has seen a sharp reversal year-to-date. A brief glance at the dollar index (UUP) on January 31st 2017 would highlight the worst performance for the first month of the year in 3 decades. The greenback fell 2.6% in January, after having rallied 7.1% over the last quarter of 2016.

A strong dollar represents a concern for stock market investors, seeing that it lowers the revenues of American-based multinational companies which make most of their sales overseas, denting their top line revenue after foreign currencies are converted back into dollars. Almost half of the sales of S&P 500 firms come from international operations, many U.S. CEOs noting the strong dollar as having a negative effect on Q4 earnings results. Among them, Apple (AAPL), in its earnings report just a week ago, noted that its tepid forecast for the current quarter can be attributed primarily to the strength of the dollar.

“For a company like ours where we do about two-thirds of our business outside the United States, the strong dollar presents a headwind of more than 2 percent growth,” Apple Chief Financial Officer (CFO), Luca Maestri, commented.

Q4 2016 results, even with the strong dollar, have succeeded in trouncing analysts’ earnings, providing some measure of security in the face of the uncertainty investors are facing, including the new president’s policies, geopolitical and otherwise.

With over half of the S&P 500 companies already reporting, the year-over-year forecast for earnings growth now stands at 8%, a rise from the 6.1% growth forecast at the beginning of January. As of now, Q4 2016 stands to be the strongest quarter since Q3 2014. Analysts expect Q1 2017 earnings to grow by 11.5%.

This coming week, 75 of the companies on the S&P 500 are expected to report. Along with their numbers, be primed for this week’s economic releases, including international trade figures and the Consumer Confidence Index this Friday.

SPY Technical Perspective:

Friday’s movement was positive, paving the way for further gains and new highs on the indexes this coming week. Financial stocks, very important in their own right in regard to the trend’s lasting power, led the positive movement and are likely – this time around – to keep the Dow Jones above the 20,000 point level. The “Trump rally” is likely to continue to fire on all cylinders, injecting the market with renewed energies.


Weekly Summary: We saw mixed movement on the indexes, the Dow Jones recording light losses of 0.12%, losing ground and falling beneath the 20 thousand point level. The S&P 500 tacked on 0.16%, the NASDAQ ending marginally off by 0.1%.

Have a great trading week!


Economic Calendar


DAYTIME (EST)EventForecastImpact
Tuesday8:30Trade Balance-$45.0BMedium
Tuesday10:00JOLTS – Job OpeningsMedium
Wednesday10:30Crude InventoriesLow
Thursday8:30Initial Claims250KHigh
Thursday10:00Wholesale Inventories1.0%Low
Friday8:30Export Prices ex-ag.High
Friday10:00Mich Sentiment – Prelim97.9High
Friday14:00Treasury BudgetLow


Earning Calendar


HASHasbro, Inc.AMMonday
TSNTyson Foods, Inc.AMMonday
CTSHCognizant Technology Solutions CorporationAMMonday
NOVNational Oilwell Varco, Inc.PMMonday
FOXATwenty-First Century Fox, Inc.PMMonday
SNESony CorporationAMTuesday
VMCVulcan Materials CompanyAMTuesday
MOSThe Mosaic CompanyAMTuesday
GRFSGrifols, S.A.AMTuesday
CAHCardinal Health, Inc.AMTuesday
OMCOmnicom Group Inc.AMTuesday
ORLYO’Reilly Automotive, Inc.PMTuesday
AKAMAkamai Technologies, Inc.PMTuesday
MCHPMicrochip Technology IncorporatedPMTuesday
GILDGilead Sciences Inc.PMTuesday
DISThe Walt Disney CompanyPMTuesday
PXDPioneer Natural Resources CompanyPMTuesday
SOThe Southern CompanyAMWednesday
TWXTime Warner Inc.AMWednesday
ALKAlaska Air Group, Inc.AMWednesday
CAJCanon Inc.AMWednesday
HUMHumana Inc.AMWednesday
YUMYum! Brands, Inc.PMWednesday
MYLMylan N.V.PMWednesday
LVLTLevel 3 Communications, Inc.PMWednesday
FISVFiserv, Inc.PMWednesday
TSLATesla Motors, Inc.PMWednesday
PRUPrudential Financial, Inc.PMWednesday
OXYOccidental Petroleum CorporationAMThursday
CVSCVS Health CorporationAMThursday
RAIReynolds American Inc.AMThursday
KOThe Coca-Cola CompanyAMThursday
QQuintiles IMS Holdings, Inc.AMThursday
COTYCoty Inc.AMThursday
CMICummins Inc.AMThursday
KKellogg CompanyAMThursday
TWTRTwitter, Inc.AMThursday
VIABViacom, Inc.AMThursday
CCECoca-Cola European Partners PlcAMThursday
DTEDTE Energy CompanyAMThursday
CERNCerner CorporationPMThursday
EXPEExpedia, Inc.PMThursday
DVADaVita Inc.PMThursday
AAPAdvance Auto Parts, Inc.PMThursday
ATVIActivision Blizzard, Inc.PMThursday
AGUAgrium Inc.PMThursday
NVDANVIDIA CorporationPMThursday
VTRVentas, Inc.AMFriday



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