According to a neighbor of ours in upstate New York, bear meat is tasty. Last week, bullish investors found out just how tasty.  After being caged in a tight range for nearly 14 months and after several fruitless attempts to top its all-time high set in May 2015, the bull charged to a new high in convincing fashion. The two major stock indexes set records every day but one and rose about 2%.

The rally’s proximate causes were short covering by mauled bears; good-to-decent economic news out of the U.S. and China; and indications from central banks that the global ultralow interest rate regime will continue. The turn-on-a-dime, rollicking 8% rally since Brexit lows on June 27 made it feel as if somewhere a power switch had been flipped on.

The Dow Jones Industrial Average gained 370 points, or 2%, to 18,516.55, a new high. The Standard & Poor’s 500 index soared 32 points to finish at 2161.74 on Friday, just off Thursday’s all-time peak of 2163.75. The Nasdaq Composite rose 1.5%, to 5029.59.

Trading volume and many other market technical measures, like breadth, are strong. “That tells you this breathtaking run is a good breakout,” says Keith Bliss, director of sales at broker-dealer Cuttone. He adds that another confirming measure is the 11% post-Brexit rise in the small-cap Russell 2000 index, which has outperformed large-cap measures.

Yet that’s cause for concern to Ralph Fogel, head of investments at Fogel Neale. The Russell 2000, the Nasdaq, and the Dow transports are not near their highs, which he thinks is a lack of confirmation and “disconcerting.”

Fogel notes that if you “take a few hundred stocks out of the equation, the broad market hasn’t surpassed the highs.” The market’s price/earnings ratio isn’t cheap, at 18 times, and corporate earnings-per-share growth is deteriorating, adds Fogel, who nevertheless remains “fully invested.”

Tradition Capital Management Chief Investment Officer Benjamin Halliburton concurs. “It’s hard to see significant upside from here,” he says. And yet, he adds, for most investors the choices are limited, given the extraordinarily low yields that government and corporate bonds offer. The 10-year Treasury yields about 1.6%.

“If the economy continues to show some backbone, it should be OK,” says Tom Carter, trader at JonesTrading Institutional, who calls himself “somewhat bullish.” Second- quarter earnings are going to be down from a year ago, but perhaps the results will be better than the lowered expectations, he says.

Many professional market participants still don’t seem to believe in this aging bull, which could be a positive signal. Moreover, individual investors have yet to join the festivities. Lately, the heavy lifting has been done to a large extent by corporations buying back their own stock in huge bunches.

In recent months, we’ve been more skeptical than downright bearish about the prospects for this seven-year bull market’s sustainability. We have to admit our view now seems off the mark. We’re nonplussed by a market at all-time highs that betrays few signs of irrational exuberance.

(Source: Barrons Online)

After an uneven start to the week, U.S. stocks finished on a high note, thanks to a strong June jobs report that reassured investors about the health of the U.S. consumer.

“Today’s report helped alleviate those concerns that the economy was rolling over,” Mike Ryan, chief investment strategist at UBS Wealth Management, said on Friday.

Powered by that good news, the Standard & Poor’s 500 index finished the week at 2129.90, just shy of its all-time closing record of 2130.82, set in May 2015. The index rose 32 points, or 1.53%, on Friday.

Eight of 10 sectors ended the holiday-shortened week in positive territory. The best performers were consumer-discretionary stocks, up 2.27%, and health care, which gained 1.99%. Materials, industrials, and technology also did well, each rising more than 1%. Telecommunications and energy each finished the week down a little more than 1%, and utility stocks were up slightly.

Energy stocks came under pressure as oil prices, which had rallied recently, fell back to the mid-$40s on news that oil inventories were higher than expected.

It was a solid week overall for the big U.S. stock indexes. The Dow Jones Industrial Average closed at 18,146.74, up 1.1% for the week, with all 30 of its constituents posting gains on Friday. The Nasdaq Composite, a technology bellwether, advanced 1.94%, to 4956. The gains stretched across market capitalizations; the Russell 2000 Index, a small-cap benchmark, closed at 1177, up 1.78%.

U.S. markets were closed last Monday, July 4.

THE BIG DRIVER behind Friday’s gains was the much-anticipated U.S. Labor Department jobs report. In June, nonfarm payrolls increased by 287,000, easily surpassing the consensus estimate of 180,000. The results marked a reassuring turnaround from May, when only 11,000 jobs were added.

“The job gains were broad-based outside of construction in June,” notes Jason DeSena Trennert, CEO of Strategas, an investment research firm. Trennert describes the U.S. economy as “a workhorse against a tepid global backdrop.” He adds, “Job growth is OK, but there’s still no rush for higher rates in a maturing cycle with a flattening yield curve.”

Indeed, the yield on the 10-year U.S. Treasury settled on Friday at 1.366%, a record low, as stocks sold off earlier in the week amid further concerns about the vote in the United Kingdom to exit the European Union.

Dennis DeBusschere, head of global portfolio strategy at Evercore ISI, attributes the low yields to more of a “money-flow, central-banking issue than a sign that the U.S. economy is in trouble.” With yields so low in other developed countries, U.S. Treasuries look relatively attractive, he says.

The market didn’t seem to mind that the U.S. unemployment rate ticked up to 4.9% from 4.7%; this was mainly attributed to more people entering the job market.

The jobs report was a referendum of sorts on the U.S. consumer, whose durability has been called into question by the market, given how long the current recovery has lasted.

“It was a strong enough report to reduce any recession fears that might have increased due to extended labor-market weakness,” says DeBusschere.

(Source: Barrons Online)