Despite the slew of economic releases, corporate earnings, and the ongoing stimulus negotiations, stocks had a relatively quiet and clearly bullish week on Wall Street. The major indices resumed the post-crash rally, more and more stocks joined the party, and the Nasdaq proved its strength once again, despite the declining trend in the number of COVID cases, which lifted cyclical issues. Tech stocks remained strong despite the reversal of the “lockdown trade” with the tech giants’ blockbuster earnings from last week still fueling the rally. Treasury yields got close to their record lows, as investors priced in more fiscal and monetary stimulus, which also pushed gold to a new all-time high above the $2,000 per ounce price level.
The job market was clearly at the center of attention this week, as for economic releases, but we got a slew of other crucial indicators as well. Non-farm payrolls increased by much more-than-expected, the unemployment rate came in at 10.2% while hourly earnings also beat expectations, rounding up the bullish jobs report. New and continuing jobs claims both fell significantly, providing a huge bullish surprise on Thursday, breaking the streak of gloomy reports. The ISM manufacturing and non-manufacturing PMIs both surprised on the upside, hitting more than one-year highs despite the fears that the recovery is slowing. The IBD/TIPP economic sentiment number, factory orders, and crude oil inventories also supported the bullish case, with only construction spending missing the consensus estimate.
The technical picture improved thanks to the broad-based rally and the Dow’s relative strength this week. The Nasdaq hit new all-time highs again, and there is no question that the post-crash rally is intact. The S&P 500, the Dow, and the Nasdaq all closed the week above their 50-day moving averages, and the indices are also above their 200-day moving averages. Small-caps had a blowout week, with the Russell 2000 hitting a new recovery high thanks to the improving COVID outlook, and the benchmark closed the week above both its moving averages yet again. The Volatility Index (VIX) hit its lowest level since the start of the pandemic, spiking as low as 21 on Thursday, but the “fear gauge” only finished the week slightly lower near the 22.5 level.
Market internals were boosted by the rally in small-caps, and the most reliable breadth measures all improved, confirming the bullish trend on Wall Street. The Advance/Decline line hit new a recovery high again, as advancing issues outnumbered decliners by a 6-to-1 ratio on the NYSE, and by a 5-to-1 ratio on the Nasdaq. The average number of new 52-week highs surged higher on both exchanges, jumping to 93 on the NYSE and 138 on the Nasdaq. The number of new lows declined in the meantime, edging lower to 4 on the NYSE and 5 on the Nasdaq. The percentage of stocks above their 200-day moving average hit another recovery high, staying above the key 50% level all week and closing near 55% on Friday.
The most-shorted issues continued to outperform the large-cap benchmarks, hand-in-hand with small-caps as bears rushed to the exits due to the bullish catalysts. Carvana (CVNA) skyrocketed thanks to its positive earnings surprise, hitting a new all-time high, and burning shorts in the process, as its short interest still stands at a whopping 47%. Match Group (MTCH) also benefited from its strong quarterly numbers, and with its short interest at 40%, the stock’s record-breaking streak could continue in the coming weeks. Whirlpool (WHR) popped up on the list with the highest days-to-cover (DTC) ratios, with a reading of 9, and given the stock’s recent lofty gains, shorts could easily support the continuation of the rally.
Compared to this week’s job market bonanza, we are in for a quieter week, in terms of economic releases, with a focus on the consumer economy and inflation. The Producer Price Index (PPI) and the Consumer Price Index (CPI) will be out on Tuesday and Wednesday respectively, the weekly jobless claims report will be in the spotlight on Thursday, and the week will end with the retail sales report and the Michigan consumer sentiment number. While a majority of key earnings reports have already been released, we will still have Cisco (CSCO), Marriot MAR), Applied Materials (AMAT), and Duke Energy (DUK) reporting. Hopefully, the companies will add to the past weeks’ bullish surprises, giving another boost to the market. Stay tuned!
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