From Briefing.com: Weekly Recap - Week ending 11-Nov-16The stock market enjoyed an upbeat week, rallying despite a surprising outcome in the U.S. presidential election. The S&P 500 gained 3.8% for the week while the Dow Jones Industrial Average (+5.4%) outperformed. Domestically-oriented small caps had an even better showing with the Russell 2000 surging a remarkable 10.1%.
Equity indices rallied at the start of the week amid rising expectations that Hillary Clinton would win Tuesday's election. That sentiment led to another round of gains on Tuesday before the surprising election results were announced in the evening.
Capital markets were startled when it became clear that Donald Trump would come away victorious. However, a huge overnight slide in equity futures gave way to broad-based gains on Wednesday and Thursday.
The post-election rally developed despite warnings that a Trump victory would be negative for stocks. On the contrary, Mr. Trump's victory, combined with Republicans retaining control of both the House and the Senate, was met with a sell-off in the Treasury market while stocks surged, riding the expectation that Republican control of the executive and legislative branches will lead to lower tax rates, reduced regulation, and fiscal stimulus oriented toward infrastructure spending.
The advance in equities was paced by the financial sector (+11.3%), which benefited from a rapid steepening in the yield curve as the 2s10s spread jumped 25 basis points to 123 basis points. The health care sector (+5.8%) also displayed relative strength due to receding fears about government-imposed price controls on the horizon.
Expectations for aggressive infrastructure spending by the new administration helped fuel strength in growth-sensitive groups like industrials (+8.0%) and materials (+3.6%).
The same expectations boosted concerns about inflation, which contributed to selling in longer-dated Treasuries. The benchmark 10-yr yield surged 37 basis points to 2.15%, its highest level since January while the 5y5y forward rate spiked 22 basis points to a 14-month high of 2.05%.
For its part, the Dollar Index swooned on Tuesday night, but recovered swiftly to add 2.0% for the week, ending within a point of its 2016 high of 99.95 that was notched in mid-January.
The upset victory in the presidential race did not upset rate hike expectations. Instead, the implied probability of a December rate hike increased to 81.1% from last Friday's 71.5%, per the CME's FedWatch Tool.
Index Started Week Ended Week Change % Change YTD %
DJIA 17888.28 18847.66 959.38 5.4 8.2
Nasdaq 5046.37 5237.11 190.74 3.8 4.6
S&P 500 2085.18 2164.45 79.27 3.8 5.9
Russell 2000 1163.81 1281.53 117.72 10.1 12.8
4:16 pm Closing Market Summary: Russell 2000 Leads Post-Election Rally (:WRAPX) :
The stock market ended an extremely strong week on a fairly solid note as the post-election rally effort was maintained for the most part. The S&P 500 slipped just 0.1% while the Dow Jones Industrial Average ended with a gain of 0.2%. The two indices locked in respective weekly advances of 3.8% and 5.4%. The Russell 2000 (+2.4%), however, managed to extend its weekly gain to an impressive 10.2%.
The major averages rallied in the prior two sessions as investors rapidly re-positioned to account for the expected pro-growth policies of a Trump Administration. Mr. Trump is expected to advance a reduction in regulations, lower tax rates, and fiscal stimulus through large infrastructure projects. That combination resulted in heavy positioning in the financial (+0.4%), industrial (+0.3%), and materials (-1.7%) sectors throughout the week.
Conversely, increased inflation concerns and fiscal stimulus expectations drove investors out of the Treasury market and defensively-oriented positions.
The S&P 500 (-0.1%) finished modestly lower on some otherwise light profit-taking from a huge move that was highlighted by an 11.3% gain for the financial sector, the vast majority of which came after the election. Six sectors lost ground on Friday.
The health care sector (-1.5%) displayed relative weakness as pharmaceutical and biotechnology names narrowed their weekly gains. Those groups had been on the rise as investors dialed back fears that they might face drug pricing legislation. The iShares Nasdaq Biotechnology ETF (IBB 288.00, -1.78) finished lower by 1.1%, but ended the week up 14.4%. The broader health care sector rose 5.8% this week.
Banking names continued to outperform in the financial sector (+0.4%) as the S&P Bank ETF (KBE 38.94, +0.71) jumped 1.9%. Bank stocks benefited handsomely this week from a steepening yield curve and talk the Trump Administration is looking at dismantling a good chunk, if not all, of Dodd-Frank.
In the consumer discretionary space (+0.6%), Dow component Disney (DIS 97.68, +2.72, +2.9%) finished at the top of the price-weighted average as some upbeat guidance for the company's ESPN division overshadowed weaker-than-expected quarterly results. On the flip side, mixed results from the retail sub-group kept the sector in check. Michael Kors (KORS 49.70, -2.06) finished down 4.0% after missing top- and bottom-line estimates for the quarter and lowering its third quarter and full year outlook.
The high-beta chipmakers outperformed, evidenced by the 3.9% gain in the PHLX Semiconductor Index. NVIDIA (NVDA 87.97, +20.20, +29.8%) led the group after beating consensus estimates for the quarter and issuing upbeat guidance. The company also increased its buyback and quarterly dividend.
Bonds sold off in recent days as the yield on the benchmark 10-yr note jumped 38 basis points from last Friday's settlement to 2.15%. There was no action in the Treasury market today, however, as the bond market was closed in observance of Veterans Day.
There was plenty of action in the oil pit. Crude futures settled 2.8% lower at $43.39 per barrel, facing ongoing pressure from concerns about excess supply and a strengthening dollar. Crude futures settled the week 1.5% lower.
Today's trading volume at the NYSE was above the average of 914 million as more than 1.1 billion shares changed hands at the NYSE floor.
Today's economic data was limited to the University of Michigan Consumer Sentiment Index for November:
The University of Michigan's Index of Consumer Sentiment for November increased to 91.6 (Briefing.com consensus 87.9) from the final reading of 87.2 for October. That was the highest reading since mid 2016, although it won't be taken at face value since the data were compiled before the election result was known.There is no economic data of note scheduled to be released on Monday.
Russell 2000: +12.8% YTDDow Jones: +8.2% YTDS&P 500: +5.9% YTDNasdaq Composite: +4.6% YTD
Stocks rallied late in the session to finish a verystrong week for equities after Donald Trump was elected president of the UnitedStates.
The Nasdaq 100 (QQQ) was flat while Dow rose 0.2% andthe S&P 500 fell 0.1%. The Russell 2000 (small caps) outperformed, rising 2.5%to a seventeen-month high.
Large cap technology stocks lagged other cyclicalplays yesterday as money rotated toward sectors that would benefit from inflationand fiscal stimulus -- financials, materials and industrials.
The F A N G stocks -- Facebook (FB -1.5%), Amazon(AMZN -0.4%), Google (GOOG/GOOGL -1.1%) and Netflix (NFLX -0.6%) were allvictims again today. Fears of a more protectionist US may also be weighing onthese global technology companies.
NVIDIA (NVDA) rose 30% to a new all-time highafter blowing out Q3 estimates and guiding Q4 well above consensus. NVIDIA alsoraised its dividend and added to its buyback. The stock has literally goneparabolic and is now up 167% YTD. NVDA led the semiconductor index 3.9% higher. "We had a breakout quarter - record revenue,record margins and record earnings were driven by strength across all productlines," said Jen-Hsun Huang, founder and chief executive officer, NVIDIA."Our new Pascal GPUs are fully ramped andenjoying great success in gaming, VR, self-driving cars and datacenter AIcomputing. "We have invested years of work andbillions of dollars to advance deep learning. Our GPU deep learning platformruns every AI framework, and is available in cloud services from Amazon, IBM,Microsoft and Alibaba, and in servers from every OEM. GPU deep learning hassparked a wave of innovations that will usher in the next era ofcomputing."
The Trade Desk (TTD) rose 8.6% after its firstreport as a public company. The profitable ad-tech company beat Q3 estimatesand guided Q4 ~in-line.
Acacia Communications (ACIA) fell 1.1% after guidingQ4 EPS above consensus with revenue in-line with estimates. The companyreported Q3 EPS above guidance that had been raised twice during the quarter.
Stifel and Needham downgraded Photronics (PLAB-12.6%) after the company lowered fourth quarter guidance.
