New Market Highs after Election Resolution!

The story from this past week was solely related to the election and the broader market’s reaction in the aftermath.In the weeks and months leading up to the election, virtually every resource available suggested that the race was within a razor-thin margin and this high level of uncertainty translated over to equity markets as we saw momentum all but peter out during October in anticipation. This was largely due to the expectation that we would not have a quick and decisive result but rather that it may take a week or more to know the final result, one way or another. This fear of uncertainty kept the market’s momentum muted until the lid over the market was removed on election night once it became clear that a quick and decisive result would be known late in the evening. This was evidenced by the pre-market futures jumping nearly 2% across the board, late Tuesday night, once this was clear. Once the uncertainty was resolved, momentum reignited and stocks experienced a broad rally sending each of the major averages on to make new All-Time Highs, including the S&P 500 trading above 6,000 for the first time ever intra-day on Friday. After a week where each of the major averages rose by 4.5% or more, it is safe to say that the state of the current bull market and its outlook is strong. With that said, we should still take a brief look at the market internals to assess where things stand. At Friday’s close, nearly 74% of S&P 500 stocks finished the week trading above their 200-Day moving average which is a strong sign of sustained health of this bull market. Looking at the NYSE Advance Decline index, it rebounded off the low it made in late October and while the index did not make a new high this past week, it is within an earshot of doing so. These technical measures combined with the fact that Q3 earnings for S&P 500 stocks have come in nicely so far with 75% of reporting companies posting EPS beats, this depicts a strong backdrop for this market. Now that the uncertainty of the election is in the rear-view mirror, the market and investors can regain focus on things like technicals, earnings growth, and economic data, so we expect these to be more in focus moving forward, which is our preferred trading environment.

Key Events to Watch this Week

Q3 Earnings for HD, AZN, CSCO, DIS
October U.S. Retail Sales
October CPI & PPI Reports

Now that we are largely done with Q3 earnings season as 91% of S&P 500 companies have already reported, we can go ahead and chalk this one up as a solid reporting season. With that said, there are still a handful of impactful earnings reports looming that our team is looking out for. The first few of these will come on Tuesday when both Home Depot, Inc. (HD) & AstraZeneca PLC (AZN) will report their Q3 results in the pre-market hours. Next up on Wednesday, once the market closes, Cisco Systems, Inc. will report their Q3 earnings. Finally, on Thursday morning before the market opens, Walt Disney Company will report their latest quarterly results. AZN & DIS are expected to post nice EPS growth while HD & CSCO are expected to show a YoY decline in their Q3 EPS. In addition to these earnings reports, there are a handful of economic reports that our team will be keeping an eye on this week as well. The most important of these will be Friday’s October U.S. Retail Sales report. This report is important to watch as this is a powerful gauge to measure what the U.S. consumer is ‘actually doing’ with their money as opposed to simply what they are feeling or say in a survey. What American consumers are doing with their wallets is incredibly important for the stock market so many eyes will be on this report. Finally, on Wednesday and Thursday we will get the October CPI & PPI inflation reports. Now, it appears that the Fed’s fight against the rate of inflation has been all but won at this point, but these reports should serve as an additional piece of evidence that inflation has been tamed.

Thank you for reading this week’s edition of the Weekly Market Periscope Newsletter, I hope you enjoyed it. Please lookout out for the next edition of the newsletter as we will give you a preview of the upcoming week’s important market events.

Thanks,