The Week Ahead: Will the Stock Rally Last?
Monday is a bank holiday in the U.S. – Presidents’ Day – so U.S. markets are closed. And for the shortened week ahead, a big question remains. Will the extended stock market rally we saw last week, which began in a big way from the late December lows, last much longer? In last week’s Week Ahead, we noted how the S&P 500 (SPX) had turned down from resistance at its 200-day moving average. And we wondered if the market had enough momentum to break out to the upside given ongoing concerns about U.S.-China trade.
Market Surges Higher
Well, needless to say, the market did break out. And in a pretty big way. On Friday, the S&P 500 hit a new 2-month (and year-to-date) high above its 200-day moving average. Does this mean we’re back in a bull market now? One technical definition of a bullish market is when there’s sustained trading above the 200-day moving average. Another definition is a +20% move or more above the most recent price trough, or low point. The Nasdaq Composite did that last week. But the S&P 500 is not quite there at only around +18% above its late December low. So the week ahead will be pivotal in determining whether or not a bull market will take hold once again.
Individual Stocks Stumble Despite Market Rally
Despite the strong market rally last week, some individual stocks had a hard time participating in the good cheer. Coca-Cola’s stock (KO) plunged after its earnings release, which featured a much-lowered earnings outlook. Mattel (MAT) was similarly hit hard by disappointing guidance for sales and earnings in 2019. Facebook (FB) fell back last week, as it will likely face a multi-billion dollar fine from U.S. authorities over the Cambridge Analytica scandal. Also, while it’s stock has not been affected in a major way yet, Amazon.com (AMZN) has scrapped its plans to build new headquarters in New York City amid opposition from local groups.
The Week Ahead
Earnings season is winding down – more than 85% of S&P 500 companies have already reported. And around 63% have beaten expectations thus far. Major remaining earnings releases in the week ahead include: WMT, AAP, CVS, GRMN, NTES, NCLH, HPE, KHC, BIDU, INTU, and W, among others. Key global economic releases include the monthly U.K. jobs report on Tuesday, U.S. FOMC (Federal Reserve) meeting minutes on Wednesday, and U.S. durable goods orders and the Philly Fed Manufacturing Index on Thursday. Check out our Market Events & Earnings Calendar for more.
So will the stock market rally last into next week and beyond? While short-term fluctuations are inevitable, investor sentiment is undeniably bullish. Barring any major negative news, equities appear poised for a return to a strong bull market.
IMPORTANT: The information above should not be construed as investment advice and should not be considered as a solicitation to buy or sell securities. Trading and investing in the financial markets involves substantial risk of loss, and may not be suitable for all investors.
Disclosure: At the time of this article’s publication, we have no position in any security or trade/investment mentioned, nor do we have any business relationship with any company whose stock may be mentioned.
Senior Market Analyst at The Technicals
A veteran global macro trader/analyst, Bart focuses on major market moves in currencies, commodities, fixed income, and global equity indexes. Bart stresses inter-market correlations and dynamics while keeping a close eye on risk. He has published countless market analysis pieces and has been a guest expert for a variety of major financial media. Contact Bart