Like an English major wading through James Joyce’s Ulysses, the market last week was trying to make sense of overlapping narratives. That didn’t stop it from extending its weekly winning streak.
The Dow Jones Industrial Average breached the 21,000 mark for the first time, gaining 183.95, or 0.9%, to close the week at 21,005.71—its fourth straight weekly gain. The Standard & Poor’s 500 index rose to 2383.12, and the Nasdaq Composite advanced 0.4%, to 5870.75; both have been up for six straight weeks.
Much of the action was compressed into one day. After barely moving last Monday and Tuesday, the Dow surged more than 300 points on Wednesday, its largest one-day point gain since Nov. 7, just before the election that swept Donald Trump into office. That the big gain followed Trump’s speech to Congress Tuesday night wasn’t lost on many observers, who noted its conciliatory tone. “Trump became presidential,” Strategas Research Partners Dan Clifton wrote in a note to clients last week. The market appeared to agree, even if some of the enthusiasm was tamped down by the need for Attorney General Jeff Sessions to recuse himself over his unacknowledged contact with Russia’s ambassador during the presidential campaign.
But it was more than just a speech that got the market’s juices flowing. Barclays strategist Keith Parker points to the slew of economic data that was released in the hours following the address. A survey of Chinese manufacturing activity rose for the eighth month, while a similar measure in the U.S. hits its highest reading in nearly three years. “You have synchronized developed-market and emerging-market growth,” Parker says. “That’s a big driver of the rally.”
Is sentiment getting too frothy? The big gains have prompted strategists to lift their S&P 500 projections, with Bank of America Merrill Lynch taking its target to 2450, from 2350, and Stifel taking its to 2500, from 2400. And then there’s Snap (ticker: SNAP). Its initial public offering went off without a hitch after all, as the stock soared 44% on its first day of trading, from the offering price of $17 to a closing price of $24.48. The move meant that Snap left $1.5 billion on the table, the fourth largest amount ever, according to data from University of Florida finance professor Jay Ritter.
Yet Snap, at this point, remains something of a one-off, as others remain reluctant to go public. And Merrill Lynch’s Sell Side Indicator, a measure of Wall Street’s bullishness, still sits in neutral territory despite hitting its highest level in 16 months, a level that in the past has preceded an average gain of 17% over the following 12 months.
Yes, the market narrative has many strands. But for now, they’re pointing to a happy ending.
(Source: Barrons Online)