A festive mood struck Wall Street this week and it translated into further gains for the major indices, which culminated in new record highs for the S&P 500 and Nasdaq Composite.
The Russell 2000 led the way as domestically-oriented small-cap stocks were pushed up on tax reform optimism.
The Nasdaq Composite followed close behind with a 1.6% gain that was led by the familiar contingent of Apple (AAPL), Amazon.com (AMZN), Facebook (FB), Alphabet (GOOG), Netflix (NFLX), and Microsoft (MSFT), as well as ongoing strength in the semiconductor stocks.
The Philadelphia Semiconductor Index jumped 2.7% for the week, underpinned by M&A activity that featured a bid by Marvell Technology (MRVL) to acquire Cavium (CAVM) and reports suggesting Broadcom (AVGO) might return next week with a higher offer to acquire Qualcomm (QCOM) after the latter company rejected its $70 per share cash-and-stock offer.
Beyond the news itself, though, the broader market was carried along by an embrace of the seasonality trade, which is to say participants rode the notion that this Thanksgiving week is often accented with a positive bias.
There was no denying the positive bias this time around.
The seasonality factor hit home in earnest on Tuesday when the major indices logged gains between 0.7% and 1.1% despite the Department of Justice filing a lawsuit to block the AT&T (T) - Time Warner (TWX) merger and a lack of any clear-cut news to explain the unmitigated bullish bias. That bullish bias took the S&P 500 above 2600 for the first time ever, squeezing short sellers and feeding a fear of missing out for sidelined participants.
There was only a slight retracement on Wednesday when the S&P 500 dropped two points despite an acknowledgment in the minutes for the October 31-November 1 Federal Open Market Committee meeting that "...several participants expressed concerns about a potential buildup of financial imbalances" given elevated asset valuations and low financial market volatility.
Those concerns could come home to roost at another time, but this week wasn't governed by any unsettling concerns.
The market traded up, and through, reports that talks in Germany to form a coalition government had failed (although reports Friday suggested a coalition might be struck after all); it traded up, and through, Fed Chair Yellen's announcement that she will be resigning from the Board of Governors upon the swearing in of Jerome Powell as Fed Chairman; and the stock market traded up, and through, another week in which a curve-flattening trade persisted in the Treasury market.
The spread between the 2-yr note yield and the 10-yr note yield narrowed to 60 basis points from 63 basis points a week ago and 125 basis points when the year began. A narrowing spread often piques concerns as being a harbinger of a slowdown in economic growth.
There wasn't much economic data this week, although the few reports that there were generally surprised on the upside. The Leading Economic Index, Existing Home Sales, and University of Michigan Consumer Sentiment reports were all better than expected.
The Durable Goods Orders report for October was weaker than expected (-1.2%), yet the disappointment over that headline was mitigated by the understanding that the weakness was driven by volatile aircraft orders. Excluding transportation, durable goods orders rose 0.4% on the heels of an upwardly revised 1.1% increase (from 0.7%) for September.
The coming week will feature a longer lineup of economic data, including the New Home Sales (Monday), Consumer Confidence (Tuesday), revised Q3 GDP (Wednesday), Personal Income and Spending (Thursday), ISM Index (Friday), and Auto Sales (Friday) reports.
That data will be competing for market participants' attention along with the confirmation hearing for Jerome Powell (Tuesday), Fed Chair Janet Yellen's economic outlook testimony before the Joint Economic Committee (Wednesday), the meeting between OPEC members and Russia to discuss extending production cuts (Thursday), and the expected vote on the Senate's tax bill (Thursday).
Clearly, then, there will be a lot to chew on for market participants in the coming week after they digest the fulfilling gains of another seasonally-strong Thanksgiving week.
|Index||Started Week||Ended Week||Change||% Change||YTD %|