While it certainly wasn’t as convincing as Alabama’s victory over the Duke football team this past weekend, the stock market ‘bulls’ continued to stampede ahead this past week as all the major indexes finished higher. This bullish train continues to chug down the track in a month that most pundits said would most likely be very tough for stocks to say the least. Boy, have they ever been wrong! Thus far in the month of September, the Standard & Poor’s 500 is already up a very impressive 8% and the Nasdaq Composite is up nearly 10%. It just goes to show you that the market will do whatever it takes to confound the greatest number of people.
Despite mixed economic news, bad vibes coming out of Europe, and a boatload of other worries, stocks managed to notch yet another win for the week. The Dow Jones Industrial Average rose 1.4% this past week to a level of 10,608, while the S&P 500 index finished higher by 1.5% and now rests at the 1,125.59 mark. It was even better for the tech-heavy Nasdaq Composite Index which jumped 3.3%. Meanwhile, even the smaller-cap stocks as represented by the Russell 2000 managed to get back on its winning streak, as this index finished out the week higher by 2.35%.
Given that investors have had to deal with plenty of negative economic news as of late, it begs the question of where we currently stand in the Investor Sentiment Index shown below.Although our economic numbers are improving somewhat, the jobs numbers are still awful and the housing market continues to remain in a coma. Thus investors are torn between ‘throwing in the towel’ or on the other end of the spectrum, seeing spades of buyers stepping in. Thus far we’ve seen no evidence of either extreme. There apparently is a great divide between Wall Street and Main Street which could very likely play out in a big way in the November elections. For now, this dichotomy is putting most investors between the ‘depression’ and ‘hope’ stages of the Investor Sentiment Index.
The Investor Sentiment Index
This week the Federal Reserve Open Market Committee (FOMC) meets once again, and the September 21 policy meeting is expected to leave the fed funds target rate unchanged at a range of zero to 0.25 percent. The big question is whether any additional quantitative easing measures will be announced. Also, analysts will be looking for signs of any dissent over the timing of changes in the Fed’s balance sheet as well as the size of changes and even the planned composition of assets (mainly Treasuries versus non-Treasury assets.) This past week we saw Treasury yields mostly falling as per the already mentioned sluggish economic news. The two-year note yield slid to 0.472% from 0.555%, while the benchmark 10-year note dipped to 2.743%, from 2.799% a week ago.
As for the other economic news for the new week, look for the National Association of Home Builders release of its housing market index for September on Monday, as well as the release of housing starts on Tuesday. Thursday brings us the Labor Department’s release of weekly jobless claims as well as existing home sales for August. We’ll finally close out the week with the durable goods figure for August as well as new home sales for August on Friday. On all of these measurements, don’t ‘bet the ranch’ that they’ll be any empirical evidence supporting an overwhelmingly positive picture. We’re still confined to this slow growth mode for the time being, and until both the employment picture and the housing market firm up, it’ll be ‘tough sledding’ to say the least.
On a more positive note, the Apple Inc. juggernaut continues to roll on. The company’s shares hit a new high this past Thursday after struggling through the summer with the broader market. Given this past Thursday’s 2.4% jump to a record close of $276.57, Apple has now had only one losing day in the past 14 trading sessions, and is fast approaching Exxon Mobil’s market capitalization’s size. After soaring 52% over the last 12 months alone, another 23% rise in Apple’s share price would make it the most valuable U.S. company by market capitalization, taking Exxon’s crown. Exxon currently is worth $310.4 billion, a 13% drop over the last year. Apple is currently worth $252.6 billion. Market capitalization is a company’s stock price multiplied by the number of shares outstanding. Apple already has overtaken Microsoft, Berkshire Hathaway and Wal-Mart Stores this year to reach the No. 2 market-cap position. Given the tailwinds surrounding the cultish Apple story, it’s only a matter of time before Apple Inc. becomes the ‘top dog!’
Sources: Barron’s, The Wall Street Journal, CNN, The New York Times, Gorilla News, Bespoke Investment Group, The Kirk Report