Market Direction Weekly Closing Numbers

Market Direction: BULLISH alert issued 6/2/2016

The economy

The stock market entered Friday with a modest weekly loss, but a rally that developed in the wake of a better than expected Employment Report for July (255,000 versus consensus 185,000) helped the S&P 500 log its fifth weekly gain in the past six weeks. S&P 500 and Nasdaq marked fresh all-time highs on Friday.

Investors received another heavy dose of quarterly earnings, but the latest batch of results came from companies that had little market-moving cachet. At the end of the week, nearly 90.0% of S&P 500 components had reported earnings, showing a 3.5% decline in blended earnings, which was worse than the 3.2% contraction projected by FactSet.

In addition to earnings, investors received the latest policy statement from the Bank of England, which proved to be a dovish surprise. The central bank lowered its key rate by 25 basis points to 0.25%, increased its purchase program to GBP435 billion from GBP375 billion, and announced it will buy up to GBP10 billion of corporate debt. The news pressured the pound into the 1.31 area against the dollar, but somewhat surprisingly, the stepped up easing efforts had little impact on global equity markets.

The S&P 500 advanced to a new record high on Friday after the Employment Report for July beat estimates, showing above-consensus average hourly earnings growth of 0.3% versus consensus 0.2%. Over the past year, average hourly earnings have risen 2.6%, but rate hike expectations remain subdued with the fed funds futures market not pricing in a 50.0%+ chance or a rate hike until March 2017 (51.2%).

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By the numbers the weekly closing index numbers compared to the initial BULLISH recommendation closing numbers: 

Stock Market Closing Numbers
compared to Recommendation Numbers
	6/2/2016	8/5/2016	Difference
Dow Jones	17,838.56	18,543.53	704.97
Nasdaq	4,971.36	5,221.12	249.76
S&P 500	2,105.26	2,182.87	77.61

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