State of the Stock Market Analysis for the Week Ending on October 29, 2017 (Strong Week for Tech Companies 10-29-17)
What a week it was for both new and old tech companies! Amazon (AMZN) posted strong earnings Thursday after the close, which set the stage for the Nasdaq’s 2.2% gain in Friday’s action that pushed the Nasdaq to an all-time high. The S&P 500 also benefited from a 13% rise in AMZN, as it hit an all-time high as well. The Dow was up marginally on Friday, and that capped off a 0.5% rise for the week. The Nasdaq was up 1.1%, while the S&P 500 was up 0.2%. Once again, the majors are quietly edging higher and higher.
While the likes of Amazon and Google (GOOGL) posted strong earnings, we also saw Microsoft (MSFT) and Intel (INTC) have blockbuster earnings, sending Microsoft up 6% and Intel up 7% on Friday alone. New highs for some of these “old techs” is a great sign for the tech economy as well as the broader economy. Microsoft and Intel were the “lead dogs” during the late 1990’s, but seeing them perform so well as “mature” companies right now is very impressive. They even pay dividends!
Aside from the performance of the FANG stocks on Friday, we saw some good news in terms of GDP numbers, as the third quarter GDP number remained at 3.0% versus estimates that it would be revised downward to 2.7%. GDP has been one of those elusive numbers that has disappointed investors all year, but seeing it hold at 3.0% was a plus. The 3.0% number is still somewhat lackluster, but it is strong enough to give validation to a stock market fluttering and flirting at all-time highs.
So what is ahead for the stock market? Market strategists are quick to note the lack of “euphoria” or even Alan Greenspan’s quote of “irrational exuberance,” are just not in the cards right now. There is no banter about hot IPOs, soaring stock prices, or even year-to-date returns (which are pretty good.) The bull market we have seen this year has been calm, cool and collected. This says that this bull run could still have legs at least into the end of the year, and barring any missteps along the way, we could see more upside.
As for the Federal Reserve, it looks like Janet Yellen might step down or be replaced in January. Jerome Powell seems to be the favorite pick, and the buzz is that he is no hawk on interest rates. He is a former investment banker with a law degree from Georgetown, and he seems likely to avoid any big controversies in receiving approval from Congress. Powell is a current Federal Reserve Governor, and he seems like a good candidate that will not “rock the boat” of an economy and a stock market that are both doing so well.
Earnings season has been fairly good, and we saw that with the big techs this past week. We have, however, has some disasters in terms of various retailers and even toy company Mattel (MAT), which fell almost 9% on Friday alone. The “Amazon Effect” is hitting many long-time businesses hard, and it remains to be seen how this all plays out in the end. Even oil companies like Chevron (CVX) are under earnings pressure, as CVX was down 4% on Friday as well. It has been a mixed bag for earnings, so we will continue to monitor these developments closely.
Halloween is not until Tuesday, but bulls are thrilled that October has been a big win for the stock market without any “thrills or chills.” This month has felt more like a January, and that is a big plus for a month that has historically been tough. The Gorilla still has not decided on his costume for Halloween, so any ideas are welcomed. That said, have a relaxing final weekend of October, and we will be back in action on Monday. We are moving into the “prime time” of year for stocks in November and December, so let’s hope this upside continues.
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