The S&P 500 performance was perhaps most dramatic in that it was able to power past 2,500 for the first time ever. Although its gain on Friday was only 0.2 percent as it reached 2,500.23, it gained 1.6 percent over the week. This was its largest advance since January. For the year, it is up 12 percent and may be on its way to the best performance in the last four years. Even though there was tremendous damage from hurricanes Harvey and Irma, perhaps there was a perception that the worst case scenarios did not develop. However, it could be that investors hope that at least some areas will benefit from the rebuilding boom. However, others such as tourism may suffer declines. There may be a perception that with respect to North Korea that so far at least the military option has not been employed. The positive reasons for the market moves appear to be that there is stable economic growth in the US and many other places, and corporate earnings look to increase through 2019. Frank Cappeleri, of Instinet LLC in New York said: “This kind of resiliency has allowed the market to absorb negative headlines time and again. While traders may be hesitant to invest fresh capital at price levels that may appear too high, they are forced to anyway. Otherwise, they run the risk of missing out.”
Most of the weeks’ gains came on Monday after hurricane Irma weakened and Florida damage was less catastrophic than it at first seemed it would be. There may have been relief too that North Korea did not conduct a missile test. However it did so later in the week on Friday without any significant effect on markets. Perhaps on Monday markets could fall. Matt Maley of Miller Tabak and Co. based in New York said: “Basically all of this week’s gains came on Monday, but it’s still nice to see that the market has been ‘digesting’ these gains with a sideways move rather than a pull-back.”
The Dow Jones Index also reached a new high by rising above 22,200 and the Nasdaq Composite approached 6,500. The Dow rose 64.86 to a record close of over 22,268. The intraday high was 22,275.02. Boeing, 3M, and a resurgent Apple contributed to the gain. The Nasdaq closed 0.3 percent higher at 6,448.47 with an intraday record of 6,464.27. JJ Kinahan of TD Ameritrade said: “People are always looking for a reason for the market to go down but stocks keep going up and earnings remain strong.” Another analyst Katie Stockton of BTIG said: “The market has been digesting its gains in a consolidation phase following Monday’s gap up” in the S&P 500. The breakouts that have developed suggest overbought conditions will be absorbed without a significant pullback.”
With some dips the bull market has been ongoing since 2009 and many investors may be wary about betting against it so that negative events even within the business community such as the recent Equifax data breach seem to be shrugged off. Terry Sandven the US Bank Wealth Management chief equity strategist noted that overall earnings growth still looks strong, as analysts predict profit increases of about 10 percent this year and the same for 2018. No doubt this is a big factor in driving the rise in stock prices. He thinks the stock market could still grind higher.
Next week, the Federal Reserve is expected to make an announcement on interest rates. Most in the market do not expect a hike. However, the central bank is expected to announce that it will begin to unwind its huge $4.5 trillion portfolio that it built up during the financial crisis. US treasury yields have risen this week from 2.09 percent to around 2.19 percent Friday. The markets rose even though retail sales for August were down 0.2 percent while economists predicted a 0.1 percent gain. Industrial production fell nearly one percent last month. After Friday’s launch of a missile over Japan by North Korea, the Japanese Nikkei 225 index rose 0.52 percent. Christian Magoon, CEO of Amplify ETFs said:” You could spin this as resiliency or complacency. This market seems a bit out of touch with reality. … The risk to the downside is not getting as much respect as the upside risk.” Where there are increasing profits, there are rose-colored glasses! Of course some still predict a crash, as on the appended video.
