Stocks jumped 3% in a quiet, holiday-shortened trading week. Dross was boss, as the rally was led by short-covering in some of the most beaten-up and hated stocks of the year, particularly in the commodities sector.

Equities were boosted by a reversal in crude prices, which bounced 9% off lows and finished the week at $38.10. The market reversed the losses it sustained in the aftermath of the Federal Reserve’s interest-rate hike the previous week.

Energy stocks rose 5% on the week, but remain down 22% this year. Materials stocks tacked on 4% last week, but are still off 9% on the year. Aluminum and even coal stocks had a good week. The Dow Jones Industrial Average gained 424 points, or 2.5%, to 17,552.17, and the Standard & Poor’s 500 rose 55 to 2060.99. As of Thursday, the Dow is down 1.5% for the year.

Oil prices stabilized, lifting many stocks in the energy complex and materials, too, says Ernest Cecilia, chief investment officer of Bryn Mawr Trust. Still, longer-term, commodities prices continue to have a downward bias technically, he says. The Organization of the Petroleum Exporting Countries said last week that it expects oil prices won’t reach near triple digits per barrel—last seen in 2014—until 2040. That could be about as a good a contrarian signal as you’ll get.

“It was a ‘losers’ rally,” says Scott Colyer, chief executive officer of Advisors Asset Management. Equity that was considered junk turned into gold in a furious short-covering bounce, he notes. Indeed, data from Bespoke Investment Group showed that those Russell 1000 stocks in the bottom 10% of performance for 2015 jumped an average of 7% last week, as of Wednesday. The worst 20 stocks for the year were up 10% last week.

There wasn’t much individual-investor buying, and sentiment remains negative, says Bucky Hellwig, regional portfolio manager at BB&T Wealth. Still, market breadth improved as investors went for oversold stocks, he says.

That’s at least a positive sign, as equity gains have been concentrated this year in a handful of mostly tech stocks that have risen by double and even triple digits, including Amazon.com (ticker: AMZN), up 114% this year.

This is a traditionally strong season for stocks, with the so-called Santa Claus rally typically visiting in the last two weeks of December. Notwithstanding last week’s activity, it will take another 1% rise this week for December to be in the black.

(Source: Barrons Online)

Stocks fell 0.3% last week, but the pain was worse than it looked. A 3% market surge ahead of the Federal Reserve’s widely expected interest-rate hike Wednesday proved fleeting and was followed by a nasty hangover of selling in the last two days of trading.

Investors are dissatisfied with the Fed’s indicated pace of future rate hikes. The selloff was also driven by further weakness in commodity prices, which reignited fears of a slowing global economy. Crude lost 2.5% to $34.73 per barrel, the third consecutive weekly drop and a 52-week low.

The Dow Jones Industrial Average fell 137 points, or 0.8%, to 17,128.55, and the Standard & Poor’s 500 gave up 7 to 2005.55. As of Friday the S&P 500 index was down 2.6% for the year, while the Dow was off 4%. The Nasdaq Composite Index is down 10, or 0.2%, to 4923.08.

There was some euphoria going into the Fed meeting, but afterwards the reality of four hikes set in, as weak U.S. economic data was released, says Timothy Ghriskey, chief investment officer of Solaris Asset Management. The market is telling the Fed that the U.S. economy isn’t strong enough for four increases, says Andrew Ahrens, CEO of Ahrens Investment Partners in Lafayette, La.

Economic data outside employment continues to be flat to weak. In November U.S. industrial production fell 0.6%, the Fed said Wednesday, the biggest drop in over three years. The flash purchasing-managers’ index compiled by Markit hit 51.3 from a final reading of 52.8 in December.

“It’s not terrible data but it shows the American economy is choppy and anemic,” Ghriskey adds.

Cameron Hinds, regional chief investment officer for Wells Fargo Private Bank, says that weak oil prices and slowing global growth remain overriding investor concerns. Look for more volatility in coming weeks if oil isn’t seen to be making a bottom, he says.

Volatility might increase over the near term for a couple of other technical reasons. Institutional investors will be selling their dogs to take advantage of tax losses in 2015, both Hinds and Ahrens note. That, plus the likelihood that many market participants will be away in the next two holiday-shortened weeks, and you have the makings of potentially big swings—up or down—in the rest of December because of low trading volume.

(Source: Barrons Online)

Last week oil prices plunged, the high-yield bond market unraveled, and stocks registered their worst performance in four months. All of it felt like a prelude to Wednesday, when the Federal Reserve is almost certainly going to raise interest rates for the first time in nine years.

“The withdrawal of Fed policy creates these hissy fits,” said Peter Boockvar, the chief market analyst at The Lindsey Group. “It’s pretty clear everyone expects it to happen, and the decision comes with so much baggage.”

The Dow Jones Industrial Average fell 582 points, or 3.3%, last week to 17,265.21, while the Standard & Poor’s 500 index dropped 79 points to 2012.37. It was the S&P’s steepest drop since August, and left the index in negative territory for the year, down 2.3%. The Nasdaq Composite fell 4.1% to 4933.47.

Just one Dow stock ended the week in the black— DuPont (DD) rose 4% on news that it will merge with Dow Chemical (DOW) to create a $130 billion giant that will eventually split into three companies. The merger could result in DuPont being taken out of the Dow index.

A sharp decline in oil prices helped precipitate the slump. On Friday, the International Energy Agency forecast that supply would stay high and demand would stay low into next year. Crude futures fell $4.35, or 10.9%, on the week, to $35.62 per barrel. Oil stocks fell hard, with ExxonMobil (XOM) off nearly 6%. Smaller energy companies plunged even further, with Chesapeake Energy (CHK) dropping 9% on Friday alone.

The drop in crude also accelerated a selloff Friday in junk bonds, many of which had been issued by energy companies. Two prominent exchange-traded funds that track high-yield bonds fell 2% each.

Investors are so spooked that they are stockpiling greenbacks. In the past week, money-market funds saw $13 billion in inflows, versus $6 billion in outflows from both bonds and equities, according to a Bank of America Merrill Lynch report issued Thursday. Junk bonds saw their largest outflows in 15 weeks, at $3.8 billion.

“The cost of capital is going up for corporate America,” Boockvar said. “Investors are realizing that credit is tightening, monetary policy is tightening, earnings have been weak. It’s all coming together.”

This is the stage onto which Janet Yellen will walk next week. Despite the Fed’s foreshadowing of a rate increase in recent weeks, it still feels momentous, and much hangs in the balance.

(Source: Barrons Online)

The Federal Reserve signaled it is “good-to-go” for an interest-rate increase next month. Investors are OK with that and sent the stock market roaring to its best weekly finish this year, up over 3%.

Mounting certainty that the Fed will finally raise rates next month, the first time in nearly a decade, bolstered investor confidence. A hike would indicate the Fed believes the economy is showing enough strength to justify monetary tightening.

More importantly, there’s a wide-ranging conviction now that the central bank will move slowly next year. U.S. stocks also received support from across the Atlantic, as European equities rose 3.3% on dovish rate talk Friday from European Central Bank President Mario Draghi that the central bank “won’t hesitate” to expand its monetary stimulus.

The Dow Jones Industrial Average jumped 3.4%, or 579 points, last week to 17,823.81, while the Standard & Poor’s 500 index gained 66 to 2089.17. The Nasdaq Composite advanced 3.6% to 5104.92.

After many weeks flip-flopping over whether a rate hike is a good thing for stocks, investors opted to celebrate what is typically a key market aspiration: certainty. Fed speakers last week were generally clear that a hike of the benchmark federal-funds rate is in the cards at the next meeting of the Federal Open Market Committee, Dec. 15-16. But Wednesday’s release of minutes of the previous FOMC meeting surprised equity markets and made the bulls happy.

Michael Arone, chief investment strategist at State Street Global Advisors, says the market took that to mean that “the Fed will be slow and gradual” when it comes to future tightening. “It was a relief to the fears of continual hikes,” he adds.

Raymond James chief investment strategist Jeffrey Saut says the market will be spurred on during the rest of 2015 by “performance anxiety,” that is, underperforming money managers trying to catch up and boost their annual return by buying during a traditionally bullish season for equities. History shows “it’s tough to put the equity market down in December,’ he notes.

(Source: Barrons Online)

Stocks broke a six-week winning streak, slumping nearly 4%. The rout last week came amid falling commodity prices and disappointing third-quarter earnings reports from key retailers.

Lurking in the background is market anxiety about the Federal Reserve’s expected interest-rate increase next month. After the release of more economic data showing weakness, investors are trapped between poor global growth and the expected Fed hike.

The Dow Jones Industrial Average fell 3.7% or 665 points last week to 17,245.24, while the Standard & Poor’s 500 index lost 76 to 2023.04. The Nasdaq Composite fell 4.3% last week to 4927.88. Oil fell 8% to $40.74 per barrel.

On Dec. 16, the Federal Open Market Committee concludes its next meeting, which might see the first rate hike of the benchmark federal-funds rate, however small, in about a decade. As a report from Wellington Shields noted: The last time the Fed raised that rate, the iPhone didn’t exist.

Data Monday showed China imports fell 19% in October, and commodities were whacked last week. That’s interpreted as a lack of demand, so “the global growth scare has returned,” says David Donabedian, chief investment officer at Atlantic Trust Private Wealth Management. “This time, however, the market senses that the Fed won’t back down on the expected hike.”

The week’s drop began in earnest Thursday after Nordstrom (ticker: JWN) reported disappointing third-quarter earnings and lowered guidance. That followed similarly bad news Wednesday from Macy’s (M) and others.

The “horrible” retail figures took some wind out of a six-week rally that had made investors complacent, says Aaron Clark, a portfolio manager with GW&K Investment Management. Many assumed the October stock gains were a forerunner of “an end-of-year melt-up,” he adds, in what is traditionally a good season for stocks. This week, however, better earnings reports from Home Depot (HD) and Lowe’s (LOW) could reverse the negative sentiment, he says. While many are expecting an end-of-year market flourish, “the Santa rally actually happened in October,” argues Terry Sandven, chief equity strategist at U.S. Bank Wealth Management.

There are lingering concerns about the pace of corporate earnings growth, the Fed rate liftoff, and mixed expectations for holiday retail sales, he says. The analysts’ corporate profit-growth estimate of 9% next year for the S&P 500 is probably too high, and as estimates reset lower the market is likely to stay in the narrow range it’s inhabited most of the year. Holiday sales could be the swing factor, he says.

Friday saw the release of contradictory economic news. The University of Michigan preliminary November sentiment index rose above expectations to 93.1 from 90 in October. The Labor Department said October producer prices decreased 0.4%, weaker than an anticipated rise of 0.2%. The Commerce Department said retail sales rose 0.1% last month, also softer than expected.

(Source: Barrons Online)

The stock market rose last week in mostly humdrum trading, but closed off mid-week highs, restrained by the growing likelihood that the Federal Reserve will raise interest rates in a matter of weeks.

A nearly 2% rise by Wednesday began to fade after Fed Chair Janet Yellen said that a hike was a “live possibility” for the Dec. 15-16 Federal Open Market Committee meeting. The FOMC decides the key benchmark federal-funds rate, the overnight rate depository institutions use to lend to each other on Fed balances.

Strong jobs data Friday, which should help push the Fed to hike, dampened spirits some more, but stocks still managed a healthy 1% rise for the week. Financials rallied 2.7% on the rate sentiment, while the high-dividend-paying utility and telecom sectors fell 3.6% and 1.6%, respectively.

The Dow Jones Industrial Average rose 1.4% or 247 points last week to 17,910.33, while the Standard & Poor’s 500 index added 20 to 2099.20. The Nasdaq Composite gained 1.9% last week to 5147.12.

The jobs data was a “game changer” in terms of increasing the probability of a Fed rate hike next month, says Michael Sheldon, chief market strategist at RDM Financial Group. “It was solid across the board,” he adds. Friday, the Labor Department said October payrolls grew by 271,000, above expectations of 185,000, and that the unemployment rate fell to 5% from 5.1%. Average and weekly earnings were up nicely, too.

Below the headline jobs data, there were changes that point to some winning sectors in the near term, Kinahan says. Jobs grew in the retail and financial sectors, so retail, restaurants and bank stocks could be winners, he says.

Meanwhile, “bond proxies,” such as utilities, telecom, and some high-dividend, low-growth staples stocks will face some head winds. “You could see pressure on them building up,” he says.

“We are likely at the beginning of a rate- cycle tightening,” says RDM’s Shelton. The market will soon be considering what happens after the first hike. Is it one-and-done for a while, or will the Fed raise rates faster than the market expects? Sheldon sees markets choppy in the near term.

(Source: Barrons Online)

For investors, October was a treat. Stocks finished the week and the month on a high note. The market rose 0.2% in light trading last week, fuelled in part by short-covering and continued merger activity.

The Dow Jones Industrial Average soared 8.5%, and the Standard & Poor’s 500 index 8%, in October, for both the best monthly gain in four years. On the week, after a late Friday swoon, the Dow finished up 0.1%, or 16, to 17,663.54, while the S&P 500 index rose four points to 2079.36. The Nasdaq Composite moved up 0.4% last week to 5053.75.

There wasn’t much “plain vanilla” buying from institutional investors, says Tom Carter, a trader at JonesTrading. With market short-interest levels at the highest they’ve been in years, last week’s Federal Reserve news pushed shorts to cover, he adds.

Wednesday, the Fed’s Federal Open Market Committee meeting statement specifically—and unusually—emphasized the potential for a rate hike at its next meeting, Dec. 15-16.

The Fed futures market shows that investors now think a rate hike is a toss-up in December, up from a 33% chance before the meeting. Though the initial market reaction to the statement was negative, shares turned decidedly positive by day’s end.

The market appears to be toggling back and forth on the desirability of a Fed hike, says Terri Spath, chief investment officer for Sierra Investment Management.

There will be numerous opportunities for continued confusing signals from various Fed officials, in speeches and the like before its December meeting. Chair Janet Yellen testifies in Congress Dec. 3. That likely means more volatility.

Chris Gaffney, president of EverBank World Markets, says what the Fed does in December doesn’t matter as much as what it does after. The central bank has said the path to higher rates will be gradual, he says, not hard to believe given the prognosis of more tame U.S. economic data.

Spath adds: “The possibility of a one-and-done by the Fed is higher than a lot of people think.” Though the market has recovered most of its losses since August, “it’s a muddle-through [U.S.] economy and there’s not a lot of room for price/earnings multiple expansion,” she adds. “We’re not poised for a big run from here.”

(Source: Barrons Online)

Quiet markets perked up Thursday, when European Central Bank President Mario Draghi said the ECB would revisit monetary stimulus moves in December. That drove European stocks higher and ignited a rally in the U.S. Friday’s surprise rate reductions by the People’s Bank of China stoked the fire and helped global stocks end higher.

Third-quarter earnings reports from Google owner Alphabet (ticker: GOOGL), Microsoft (MSFT), and Amazon.com (AMZN) topped Wall Street expectations. Struggling McDonald’s (MCD), like Microsoft, a member of the Dow, gave the index a boost when it announced the first quarterly U.S. same-store sales increase in two years.

Last week, the Dow Jones Industrial Average jumped 2.5%, or 431 points, to 17,646.70. The Standard & Poor’s 500 index tacked on 42 to 2075.15. The Nasdaq Composite soared 3%, to 5031.86.

American and Chinese economic reports were decent. China reported Monday that its economy grew by 6.9% in the third quarter, the slowest since 2009. But it was good enough, says John Canally, investment strategist at LPL Financial, to help allay the fears of a “hard economic landing” that had set off the market correction in August. It helps that so far there has been no big profits miss blamed on China, he says.

“Good reports from leading tech names always bolster investor psychology,” says Joseph Amato, chief investment officer of Neuberger Berman. “There’s a better tone in the market now.”

Earnings growth remains mixed due to problems in the energy patch. In general, revenue growth continues to disappoint, though earnings somehow have managed to overcome that. Analysts’ expectations of 10% profit growth next year for companies in the S&P 500 “feels aggressive,” but that doesn’t mean the market will turn down, Amato says. Something modestly below 10% can still support equities, which remain a better alternative than fixed-income assets, he says.

A rate rise isn’t expected from the Federal Reserve’s Open Market Committee, which meets Tuesday and Wednesday. Should the market stay strong in the fourth quarter, that, together with improved credit-market spreads and lower joblessness, might give the Fed a chance to raise rates, says John Brady, an institutional sales trader for broker R.J. O’Brien.

Sentiment has improved and the rally has put the market back into positive territory for the year. Given that stocks are entering a seasonally positive quarter, the default is rally mode.

(Source: Barrons Online)

Stocks finished the week on a high note, up nearly 1%, helped by good quarterly results from some big industrials and more signs that the Federal Reserve mightn’t hike interest rates come December. Encouraging credit-market data from China also gave investors hope that the country’s growth might reignite.

Last week, the Dow rose 0.8%, or 132 points, to 17,215.97. The Standard & Poor’s 500 index increased 18, to 2033.11. The Nasdaq Composite moved up 1.2% last week to 4886.69.

The stock market has recovered much of the ground lost in the summer. Sentiment indicators, such as breadth, have improved significantly. That bodes well for the near term, but more volatility wouldn’t be surprising, says Liz Ann Sonders, chief investment strategist at Charles Schwab. She says a December rate hike is a toss-up.

The rally has been short and bracing, but it only returns the market to the narrow range that it has trudged in the last 12 months, notes Ralph Fogel, head of investments at Fogel Neale. The market sees the low U.S. economic growth and still-dropping unemployment figures as the “Goldilocks” scenario, he says. “The Fed won’t move in December…and maybe for a while longer,” he adds.

The U.S. bond market, which rallied strongly last week, is a tell, indicating there’s been a “further pushout” in market’s expectations for a Fed tightening, says Steven Einhorn, vice chairman of Omega Advisors.

The market recovered from midweek lows, caused by a surprisingly poor outlook from Wal-Mart Stores (ticker: WMT). The giant retailer, the biggest private employer in the U.S., said Wednesday that its earnings in 2016 would drop significantly, given its pledge to raise U.S. workers’ wages and invest in online sales.

Nevertheless, a continuation of mixed-to-sluggish U.S. data releases increasingly has investors believing the Fed won’t act this year. The bank’s beige-book survey, released Wednesday, indicated “continued modest expansion.”

Most of the market’s rally came Thursday, when many hedge funds began to cover short positions, says Michael O’Rourke, chief market strategist at JonesTrading.

Given that investors have returned to embracing the no-rate-hike idea, the Fed’s data and comments “spooked the shorts,” he adds.

Some surprisingly good news Friday from industrial bellwethers, such as General Electric (GE) and Honeywell International (HON), boosted stock market confidence, too. Both beat analyst third-quarter profit expectations.

Chinese September lending data were also stronger than expected, bolstering the idea that the government’s efforts to ramp up the country’s growth are taking hold. It shows there is credit-market support for Chinese expansion, and ultimately it should help the U.S., Einhorn adds.

(Source: Barrons Online)

The “risk on” trade is back. Stocks finished a torrid week with major indexes rising more than 3%. In a sign of improved investor confidence, riskier assets outperformed. Shares of small-caps and the most beaten-down companies rallied, as did emerging-market equities, up nearly 7%.

There’s enough global economic weakness for the Fed to delay an interest-rate hike, but investors came round to the conclusion that things are not quite as bad as they thought back in August, says Jason Pride, director of investment strategy at Glenmede Investment and Wealth Management. Last week the Dow rose 3.7%, or 612 points, to 17,084.49. The Standard & Poor’s 500 index advanced 64, to 2014.89. The Nasdaq rose 2.6% on the week, to 4830.47. Stocks have risen eight out of the past nine trading sessions.

The expectation of no hike by the Federal Reserve Bank has weakened the dollar. The greenback is down from early August, which has bailed out some of the hardest-hit stock groups. Rising commodity prices, particularly oil, have also paced the market’s rebound and braced resource stocks. Crude rose 9% last week, its largest gain since August, and closed near $50 per barrel.

It’s no coincidence that the three best stock sectors since Sept. 18 have been energy, up 9%, and industrials and materials, both up 5%, the groups most pressured by higher commodity prices and a stronger dollar.

“The realization that a hike in December is a question mark, that the dollar has stopped going up, and that commodities have stopped going down” renewed interest in riskier assets, says Brian Belski, chief investment officer at BMO Financial Group. Many big investors were underexposed to resources, industrials, and financials, and those sectors took in some cash, he says.

(Source: Barrons Online)