Stocks soared last week on renewed hope of a tax cut and the vast majority of earnings (that were announced) beat estimates. The market went from being extended to being very extended as buyers continued to show up and aggressively accumulate stocks. From any normal perspective, the market is way over due to pullback but the fact that it refuses to pullback illustrates how strong the bulls are right now. In fact, the largest decline in the S&P 500 has only been -3% in the past year, which is extremely shallow on a historical perspective. Eventually, the market will decline but until it does, the bulls deserve the benefit of the doubt. Just keep in mind, in the short-term, we are way over due to pullback.
Stocks rallied on Monday as investors waited for a slew of earnings to be released this week. After the bell Netflix (NFLX) reported earnings and before Tuesday’s open Goldman Sachs (GS) and Morgan Stanley (MS) both reported earnings, among a slew of other companies. Crude oil jumped on geo-political tensions in parts of Iraq. Separately, the GOP is pushing hard to get a tax cut done later this year. On Tuesday, the Dow Jones Industrial Average crossed above 23,000 for the first time. The index first closed above 22,000 on Aug. 2. UnitedHealth (UNH), Johnson and Johnson (JNJ), Goldman Sachs and Morgan Stanley were some of the well-known stocks that reported earnings on Tuesday.
Stocks soared on Wednesday as buyers continued to send stocks racing higher. IBM (IBM) was the big name stock that gapped up after reporting earnings. In D.C, Treasury Secretary Steven Mnuchin pushed hard for the tax reform to get passed and said the stock market will see a “significant” drop if tax reform is not passed. Mnuchin said, “There is no question that the rally in the stock market has baked into it reasonably high expectations of us getting tax cuts and tax reform done.”
Thur & Fri Action:
Thursday marked the 30 year anniversary of the Oct 19, 1987 crash. Just to put that crash in perspective the Dow plunged 508 points or 22.6% in one day. That would roughly equal 5,000 points today! Overnight, Hong Kong stocks fell -2% which triggered a wave of selling in thinly traded overnight futures markets. Before Thursday’s open, Dow futures were down triple digits but the Dow barely lost ground by the close. Shares of Apple (AAPL) gapped down after a report was released that sales of the iPhone 8 was weaker than expected. Stocks soared on Friday as hope spread on the tax cut.
Market Outlook: Bulls Are Back In Control
The bulls are back in control and the market remains very strong.
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