Following optimistic economic data, markets continue to surge
Weekly market-view from LMK Wealth Management
Stocks climbed again as the S&P 500 and Dow notched their seventh straight week of gains on positive economic data. The S&P 500 and Dow both hit new record closes, and the Dow posted its longest winning streak in nearly three years. For the week, the S&P 500 gained 0.37%, the Dow rose 0.65%, and the Nasdaq swelled 0.14%.
Optimistic economic data was behind a lot of the market movement last week. Initial jobless claims fell to their lowest level since the government shutdown; though seasonal factors may have affected the data, the four-week moving average (a less volatile measure) supports the trend. This trend is not unexpected as retailers often pick up seasonal employees before the holiday shopping season. October retail sales were moderately good after a weak September, as consumers felt good enough to spend more on electronics, appliances, and eating out. This is a very optimistic sign heading into the all-important holiday shopping season. On the other hand, factory activity slowed, dropping to its lowest rate since May as manufacturers lost some optimism about the future.
Minutes from the October FOMC meeting were released and it’s clear that there’s a lot of debate among Fed officials about when to begin tapering. The one thing that participants seem to agree on is that the tapering of quantitative easing should not be automatic. With the level of disagreement between major players so high, it’s hard to believe that a tapering decision will come at the December 17-18 meeting, but the decision will ultimately depend on what the economic tea leaves show.
Markets have picked up a head of steam and the rally has continued for nearly two months, hitting new highs along the way. Whenever market rallies continue, especially without the support of solid fundamentals, many investors start to expect a pullback. Though we don’t like to put too much confidence in technical stock market indicators, the Chicago Board Options Exchange Volatility Index (VIX), a popular measure of volatility in the S&P 500, has been steadily falling, which has often presaged a market decline.
On the other hand, buyers are still buying on every dip, and there’s no sign yet that holders are selling out their positions to take profits. While we’re delighted that markets have been performing so well in 2013, we always take measures to prepare our clients for potential declines, and we continue hunting for opportunities amid the volatility. As always, we’ll keep you informed.
Looking ahead at the shortened holiday week, analysts will be focusing on the economic data released before the Thanksgiving holiday. They will also be closely monitoring any early retail data that might give a hint as to sector performance this quarter.
- Monday: Pending Home Sales Index, Dallas Fed Mfg. Survey
- Tuesday: Housing Starts, S&P Case-Shiller HPI, Consumer Confidence
- Wednesday: Durable Goods Orders, Jobless Claims, Chicago PMI, Consumer Sentiment, EIA Petroleum Status Report
- Thursday: U.S. Thanksgiving Holiday. All Markets Closed