Run-of-the Mill Script Sends Wall Street to New Highs!
It was the familiar script for Wall Street yesterday, seen time and time again over the last few years. “Specific weakness!” What could be a better justification for getting you to buy up stocks, setting the market gains back on course?! Stocks rallied on Monday, the S&P 500 and the Dow succeeded in vanquishing new highs against the backdrop of strength in growth-oriented sectors like tech-stocks (XLK) which hooked investors yet again, the latter seemingly regaining their confidence in the economy after a number of encouraging comments from senior Fed bankers.
The biotech sector (IBB) rallied 2.5%, recording its strongest winning day since February; its biggest winners were Biogen (BIIB) and Clovis (CLVS). BIIB rallied 3.5% after being upgraded by UBS from “Sell” to “Hold.” CLVS soared 46.5% after releasing data from an advanced stage clinical trial for its ovarian cancer drug.
The tech sector (XLK) soared 1.7% yesterday after recording two consecutive weeks of losses, the latter in its own right having piqued concern about tech stocks’ high valuations. With that said, the tech sector is the main driver behind the 10% gains on the S&P 500 year-to-date. One of the sector’s powerhouses, Apple (AAPL), soared 2.9%, fueling the gains yesterday on the large indexes.
In Summary for the Day: The Dow Jones rose 0.68%, the S&P 500 rallying 0.83%, and the NASDAQ leaping 1.42%.
The financial sector (XLF) was also one of the best-performing sectors yesterday, ending up 0.98% after N.Y. Fed President, William Dudley, stated that despite inflation being low, now, it is expected to rise in keeping with wages, enabling the bank to continue its gradual monetary tightening.
It seems that investors interpreted Dudley’s words as an expression of confidence in the undercurrent of strength in the market, one is yet to find expression in the numbers being released. The Fed’s central claim is that despite the inflow of weak economic figures we’re now seeing, the numbers are expected to improve, furthering the growth cycle.
On the S&P 500, 49 stocks rose to new 52-week highs, 10 dipping to new yearly lows; on the NASDAQ, 99 stocks recorded new 52-week highs, 87 falling to new yearly lows.
About 6.3 billion shares changed hands on U.S. exchanges, on pace more or less with the 6.8 billion average over the last 20 trading days.
Tuesday: Traders today will look to see whether tech stocks have really regained their footing after Monday’s impressive bounce, which had sent the S&P 500 to new historic highs.
The burning question is whether the tech sector selloff is behind us. Usually, when we see a large selloff absent of any catalyst for the losses, we usually subsequently see a correction with the losses receding over time; the opposite is the case if there’s a significant catalyst driving the losses. The latest selloff in the tech sector seems to conform to this pattern. Optimism surrounding tech stocks is still high, their respective fundamentals strong. Amazon’s deal at the end of last week served as a catalyst to buy other sector names. We’re at the threshold of a new era, one that’s rattling traditional retailers!
With that said, despite Monday’s comeback, we can’t yet announce that we’re in the free and clear. Stock are fully priced – valuations high – meaning that they’re more vulnerable to fall prey to a price correction of between 5%-10%; there’s no knowing when that could happen. It’s important to recall that the tech stock rally that kicked off on November 7th – U.S. Election Day – is yet to see a substantial price correction.
Today’s economic figures will include the U.S. current account balance at 8:30 N.Y. time. A number of senior Fed bankers are expected to speak throughout the day.
There will be a number of earnings reports today: LEN, ADBO, FDX, and LZB.
Tuesday’s Hot Stocks: TSLA, LEN
Have a great trading day!
|Tuesday||8:30||Current Account Balance||-$123.4B||Medium|
|Wednesday||10:00||Existing Home Sales||5.52M||Medium|
|Wednesday||10:30||Crude Oil Inventories||–||Low|
|Thursday||9:00||FHFA Housing Price Index||–||Medium|
|Friday||10:00||New Home Sales||599K||Medium|
|RHT||Red Hat, Inc.||PM||Tuesday|
|ADBE||Adobe Systems Incorporated||PM||Tuesday|
|CACI||CACI International Inc||PM||Wednesday|
|HAIN||The Hain Celestial Group, Inc.||AM||Thursday|
|CMC||Commercial Metals Company||PM||Thursday|
|BBBY||Bed Bath & Beyond Inc.||PM||Thursday|
Today’s Picks – Day Trading!
New York Strategy Swing