foxex: Mood Music

The Market Sum | Insight after the bell

By Caleb Silver, Editor in Chief

Friday's Headlines

1. U.S. Markets Higher as Dow Hits New Record High
2. The Federal Reserve Points to Potential Risks Despite Stability
3. The Stock Market's Quiet Climb to New Heights

4. What to Expect Next Week

Markets Closed

Dow
28,004.89 +0.80%

S&P
3,120.46 +0.77%

Nasdaq
8,540.83 +0.73%

VIX
12.05 -7.66%

Bitcoin
$8,490.30 -2.55%

US 10-Yr Yield
1.834 +1.05%

Year-to-Date

Dow
28,004.89 +20.05%

S&P
3,120.46 +24.48%

Nasdaq
8,540.83 +28.72%

Russell 2000
1,596.45 +18.38%

Crude Oil
57.82 +18.27%

US 10-Yr Yield
1.8340 -31.72%

Image: Getty Images

Markets Today

U.S. markets charged higher to end the week following positive comments on the U.S.-China trade talks from Larry Kudlow, the Director of the United States National Economic Council. Kudlow said phone conversations with the Chinese trade delegation have been positive all week, and, "... the mood music is pretty good." That's not an economic term that we are familiar with, but we'll take the metaphor and move on. The DJIA tacked on 0.8% today, as did the S&P 500, while the Nasdaq rose 0.7%. The yield on the 10-year U.S. Treasury inched up to 1.83%, continuing to trudge higher as equity markets rise. It was the fourth consecutive week of gains for U.S. markets.

Headlines

The Federal Reserve listed high asset prices and rising levels of business debt as potential vulnerabilities facing the U.S. financial system, according to the latest copy of the central bank's financial stability report. The Fed cited the $1.1 trillion in leveraged loans as one key area of concern. Although the Fed said the core of the financial system appears resilient, vigilance is required given the long term prospects for low interest rates, which will stimulate more borrowing.
T-Mobile CEO John Legere is reportedly not considering taking WeWork's CEO position, according to CNBC. Legere has been trying to consummate the merger between T-Mobile and Sprint from which he stands to earn a heavy bonus once complete. WeWork recently reported a $1.25 billion quarterly loss. Tough call.
Twitter (TWTR) announced it will no longer allow certain types of geographic or keyword targeting for advertisers that promote any type of cause, as part of rules aimed at blocking most politics-related ads on its platform. It is Twitter's latest move to eliminate political advertising on the platform, which was applauded by users, but not necessarily liked by investors. Shares are down nearly 2.4% since Twitter announced the move on October 31st.
Retail sales rose 0.3% in October from a month earlier according to the Commerce Department. That was slightly better than forecast, although the gains were largely driven by automobile sales and gasoline purchases. Sales of more discretionary items like furniture-store and clothing-store sales posted outright declines. Still, the general trend for retail sales and consumer confidence has remained relatively robust despite concerns about increased tariffs, fears of a recession, and the trade war.

chart courtesyBofAResearch

Relentless Buying

We write a lot about investor sentiment and momentum in this newsletter and throughout Investopedia. After all, they are two of the most important forces that move markets. They are often influenced by economic developments, company news, and other factors. However, when you strip away the noise of the news and simply look at the price as technical analysts like James do, clarity often emerges.

JC Parets, another technical analyst and friend of the site is religious about just focusing on price and the elements that impact it. In a recent note to his clients, he identifies two periods in recent history where the DJIA was essentially flat due to too much overhead supply of stocks. Supply without demand can cause prices to stall, or fall.

As JC sees it, we've just come through a period of excess supply, which is why the market has been climbing higher of late. This also happened from 2014-16. The DJIA made a lot of noise, but basically went nowhere in two years. Similarly, we've seen the DJIA make a lot of noise in the past two years, but recently break out to new highs. In fact, when the DJIA did fall in the past two weeks, it fell 0.07%, its smallest percentage decline in history. On every other day in November, the Dow has basically closed at new all-time highs. Higher highs and lower lows equals bullish momentum.

chart courtesy allstarcharts

Churning Higher, But Peacefully

Not only have the DJIA and S&P 500 been making new highs for the past several weeks, they have done so rather peacefully. Volatility has ebbed as the market churned higher. According to Ryan Detrick, strategist at LPL Financial, we've gone 24 straight days (as of this morning) when the S&P 500 did not break out of a 1% range in either direction. It just keeps churning higher, a little bit at a time.

Volatility will return... you can bet on it. But, for now, enjoy these peaceful days of record highs as we are just a few weeks into the seasonally best performing period for U.S. markets.

The Week Ahead

With earnings season largely over, no news on trade talks, and the next major event in the Brexit Saga not happening until mid-December, things have been pretty quiet with regards to market-changing news. In the meantime, here is a rundown of the annualized returns of each asset class year-to-date.

Here's a brief look at the week ahead.

Monday:

National Association of Home Builders Housing Market Index (Nov.)

Tuesday:

U.S. Housing Starts (Oct.)
People's Bank of China Interest Rates

Wednesday:

Federal Open Markets Committee Meeting Minutes

Thursday:

Philadelphia Fed Manufacturing Index (Nov.)
Philadelphia Fed Business Conditions (Nov.)
U.S. Existing Home Sales (Oct.)
E.U. Consumer Confidence (Nov.)
Japan National Core Consumer Price Index (Oct.)

Friday:

E.U. Services Purchasing Manager's Index (Nov.)
E.U. Manufacturing Purchasing Manager's Index (Nov.)
German Gross Domestic Product (Q3)
U.S. Manufacturing Purchasing Manager's Index (Nov.)
U.S. Services Purchasing Manager's Index (Nov.)
Consumer Sentiment Index (Nov.)

Tensions Ratchet Up In Hong Kong
The continual clashes and protests in Hong Kong have been intensifying as many Hong Kong universities ended their fall terms early this week. Students have begun fortifying universities in preparation for future struggles with the police. Alibaba Group Holdings (BABA) will likely announce the final price for its secondary listing on the Hong Kong Exchange next week, with shares to begin trading on the 26th. It's unclear how the continual civil unrest will effect this enormous listing.

Money (That's What He Wants)
Next Wednesday the meeting minutes for the Federal Open Markets Committee are released. After three rate cuts this year the Fed has given a decent amount of monetary juice as inflation has remained low despite a tight labor market. President Trump railed against the Fed in his speech at the Economic Club of New York last week for their unwillingness to lower rates further. Referencing negative interest rates he requested the Fed, "Give me some of that money." However, the Fed has been increasingly divided on the subject of rate cuts, so be on the look out to see if the President's eloquent request for different monetary policy wins any converts.

More News:

Top Utility Stocks for November 2019

Why Bank Stocks are Racing Past S&P 500 as Rates Plunge

Top Real Estate Stocks for November 2019

(chart courtesy YCHARTS)

Semiconductor firm Applied Materials jumped 8.9% today after beating earnings expectations and delivering higher-than-expected guidance. Health insurance firms Anthem, Humana, and UnitedHealth Group rose 5.7%, 5.5%, and 5.3% respectively after the Trump administration announced new rules to increase hospital pricing transparency. Managed care company Centene also rose 5.3% on the news.

CenterPoint Energy fell 4.5% after its stock was downgraded by Bank of America Merrill Lynch, Credit Suisse, Guggenheim, and SunTrust down to "neutral" from "buy."

Word of the Day

Momentum
Momentum is the rate of acceleration of a security's price or volume – that is, the speed at which the price is changing. Simply put, it refers to the rate of change on price movements for a particular asset and is usually defined as a rate. In technical analysis, momentum is considered an oscillator and is used to help identify trends.

Today in History

November 15, 1867
On this day in 1867, Edward A. Calahan unveiled an invention that would revolutionize the finance industry. Using telegraph technology, Calahan invented the world's first stock ticker, capable of printing up-to-the-minute information. Callahan's invention was popularized by Thomas Edison's Universal Stock Printer in 1871. Suddenly, investors anywhere in the country could have information seconds after it happened, as opposed to waiting for the mail.

Source: https://www.history.com/this-day-in-history/first-stock-ticker-debuts