- Stocks higher to begin holiday-shortened week. Equity markets are modestly positive this morning after gaining for the second week in a row; though the S&P 500, Dow, and Nasdaq each fell 0.2% on Friday. The healthcare sector (-1.1%) underperformed, led lower by biotech, while no other sector moved by more than 0.5%. Overseas, both the Nikkei and the Shanghai Composite advanced 0.8% overnight, while European markets are ticking higher in afternoon trading. Elsewhere, last week’s strength in crude oil ($47.65/barrel) has carried over as the commodity is up another 2.8% ahead of next week’s official OPEC meeting in Vienna, COMEX gold ($1214/oz.) is up 0.4%, and the yield on the 10-year Treasury is a couple of basis points lower after finishing the week at 2.34%, its highest close in over a year.
- Final earnings push to the finish line. With just a couple dozen S&P 500 companies left to report Q3 2016 results, Thomson-tracked earnings for the index are tracking to a 4.2% year-over-year gain, representing a 5% upside surprise. Excluding the energy sector’s earnings declines, earnings on pace for a solid 7.5% year-over-year gain. As impressive as the Q3 upside has been, the minimal 0.8% drop in estimates since October 1 for the next four quarters, including a small increase over the past week, has been particularly noteworthy and we think bodes well for the next two or three quarters.
- Another weekly gain for the S&P 500. The S&P 500 gained 0.8% for the week last week, but what is more worthwhile is it did this after gaining more than 3% the week before. Incredibly, this is now 10 consecutive times that the week after a 3% gain was green. Leading the way again were small caps and mid caps, as both the Russell 2000 and S&P 400 Midcap indexes closed at new all-time highs on Friday. The Russell 2000 is now up 11 consecutive days for the longest winning streak since 12 in a row back in 2003.
- Holiday shopping preview. Although the market’s attention has been squarely on the election for the past several weeks, we should not forget how important this time of year is for the U.S. economy. Consumers are in good shape, with low financial obligations, steady job and wage gains, and high consumer sentiment measures. This, along with retailers’ back-to-school shopping increases and the solid stock market performance in 2016, suggest the National Retail Federation’s 3.6% forecast for year-over-year holiday sales growth may be doable. We do not necessarily expect these sales gains to translate into outperformance for the consumer sectors, but we do not expect them to spook markets.
- Housing, manufacturing, and the consumer in focus this week as investors await the OPEC meeting. While a high-level OPEC meeting is set for Monday and Tuesday this week, the official OPEC meeting in Vienna isn’t until November 30. Until then, investors will digest Black Friday sales figures, which have become much less important in recent years, along with data on home sales, durable goods orders, and the Markit Purchasing Managers’ Index (PMI) for manufacturing. The Federal Reserve Bank (Fed) will release the minutes of its November 1-2, 2016 meeting this week as well. Other than the key German IFO data for November, it’s a fairly quiet week for international events and data, aside from a speech by European Central Bank (ECB)President Mario Draghi early in the week.
- Welcome to Thanksgiving week. Historically the week of Thanksgiving has had a slight bullish bias, as do most trading days around major holidays. Over the past 20 years, the average return during the week of Thanksgiving for the S&P 500 has been 0.8%, positive 65% of the time (13 out of 20). Looking at the day-by-day performance, Monday has the best average return, up 0.5%, although Wednesday has been higher more often, 70% of the time. Surprisingly, the best Thanksgiving week over that timespan was 2008, when all four days were green and the S&P gained 12.0%. The worst? All four days in 2011 were red and the index fell 4.7%.
- OPEC Meeting in Vienna
- ECB’s Draghi Speaks in Strasbourg
- OPEC Meeting in Vienna
- Durable Goods Orders and Shipments (Oct)
- Markit Mfg. PMI (Nov)
- FOMC Minutes
- Eurozone: Markit Mfg. PMI (Nov)
- Japan: Nikkei Mfg. PMI (Nov)
- Germany: Ifo
- Advance Report on Goods Trade Balance (Oct)
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