An uneventful week as the stock market continues to trek higher this week. Economic data releases have been confirming the economy is on solid footing so the market is likely looking forward to the next Federal Reserve meeting on September 26th. Beyond that will be earnings season and a look under the hood of corporate America. The US markets have been a safe haven these past several weeks as emerging market volatility and sluggish growth prospects encompass many economies across the globe. Perhaps, the USA will pull everyone up from the doldrums once we get past the elections and trade disputes but that is a conversation for Q4.
For now, the US stock and bond markets are the place to be for foreign investors. We have been in a corrective price pattern since late August and we closed out the week on a good enough note that new highs are probably right around the corner. Only the DOW has lagged in taking out its January top – pessimists will largely be extinguished once this happens.
Below is the chart of the S&P 500 ETF, notice how the RSI (Relative Strength Indicator) below is channeling between its centerline (white) and overbought reading (green line) – a sign of a trending market.
What to watch next week:
- Semiconductors looked like they may have bottomed this week. Strength in this sector would really get the tech sectors moving.
- September 21st is options expiration (OPEX) – 3rd Friday of every month. Stocks do well in OPEX weeks (usually).
- The 10 YR Treasury bond is flirting with 3% again. Breaking 3.10% would be a significant technical event. Otherwise, we are rangebound between 2.8% and 3.01%.
Chart of the Week!
Economic & Central Banking Snippets
- The NFIB small business optimism index for rose to its highest level in the history of this survey dating back to 1973. The NFIB CEO bottom lined the report by saying “As the tax and regulatory landscape changed, so did small business expectations and plans. We’re now seeing the tangible results of those plans as small businesses report historically high, some record breaking, levels of increased sales, investment, earnings and hiring.”
- U.S. household incomes rose again in 2017, according to Census Bureau figures that suggest more Americans are benefiting from the strong economy. Median household income increased to $61,372 last year, up 1.8% when adjusted for inflation.
- The Producer Price Index (PPI) for August came in less than expected for both headline and core. Prices for services less trade, transportation and warehousing grew by .3% m/o/m. On the core goods side, prices were flat m/o/m. Clothing prices fell sharply. Major household appliance prices jumped almost 6% from July. Thanks to the big drop in soybean prices, food prices fell for a 3rd month while energy prices regained most of what they lost in July. (Block Report)
- Industrial output in the US grew solidly over summer, with data Friday showing a bigger-than-expected rise in August and an upward revision for July’s numbers bringing up three consecutive monthly increases for the gauge. A gauge of output at factories, mines, utilities and the like, industrial production rose 0.4% month-on-month to a record 108.2, according to data from the Federal Reserve. The Fed noted that “most” major market groups gained in August. In particular, the index of consumer goods was up 0.3%, production of business equipment rose 1.2%, materials gained 0.5% and defence and space equipment climbed 0.6%. (FT)
- Interactive Brokers, headed by one of the pioneers of computerised trading, has become the first company to list on IEX, the small stock exchange trying to break the US listing duopoly of the New York Stock Exchange and Nasdaq. Interactive will move its primary market listing from Nasdaq at the start of October. The retail brokerage is chaired by billionaire Thomas Peterffy, who in the 1970s was among the first traders to use computers to help calculate the value of securities and options. (FT)
That is all for now until next week’s Market Update. If you like this report, feel free to share it on social media through the share buttons on your left. Contact me at the information below if you would like a copy of the Kisco Capital brochure.
Paul J. McCarthy, III
President – Kisco Capital