The Week In Review

11/25/16

The stock market endured a lazy, upward drift on Friday to end the abbreviated post-holiday session on a modestly higher note. The S&P 500 added 0.4%, extending its weekly advance to 1.4%. The benchmark index will enter the final three days of the month with a November gain of 4.1%.

To little surprise, the day after Thanksgiving was very uneventful for equities, as the bulk of the action unfolded in the first and last 30 minutes of the trading day. The benchmark index opened with a four-point gain and built on its advance during the home stretch. Trading volume was particularly low with fewer than 400 million shares changing hands at the NYSE floor.

Ten of eleven sectors ended the day with gains, paced by relative strength in utilities (+1.4%), telecom services (+1.1%), and consumer staples (+0.8%). Most cyclical sectors registered modest gains, but energy (-0.4%) bucked the trend as crude oil retreated.

Rate-sensitive utilities finished in the lead, even though moderate selling in the Treasury market resulted in higher yields. Despite the advance, the sector remains at the bottom of the November leaderboard, showing a decline of 5.1%.

For its part, the consumer staples sector also shows a November loss (-3.1%), but like utilities, the staples sector settled among today's leaders. Wal-Mart (WMT 71.22, +0.39) was among the sources of relative strength, rising 0.6%, after ChannelAdvisor reported that third party sellers on the Wal-Mart website saw a 39.7% year-over-year surge in sales.

Understandably, today's market-related news was limited to reports surrounding the retail sector, but investors will have to wait until next week to get a better feel for how retailers did during the Thanksgiving weekend. Last evening, Adobe Digital Insights estimated that as of 17:00 ET on Thursday, online sales totaled $1.15 billion, representing year-over-year growth of 13.6%. The news was insufficient to keep online retail giant Amazon (AMZN 780.22, +0.10) among today's outperformers despite an upbeat start. Amazon settled flat while the broader discretionary sector (+0.3%) ended just behind the broader market.

On the downside, the energy sector (-0.4%) spent the entire session in negative territory, pressured by crude oil, which dropped 3.2% to $46.41/bbl. Shortly before the close, Bloomberg reported that Monday's meeting between OPEC and non-OPEC producers has been cancelled, adding another wrinkle to the ongoing supply cut saga.

The Treasury market will remain open until 14:00 ET, but a quiet finish is expected, considering the 10-yr note holds just a slim loss, sending its yield higher by one basis point to 2.36%.

Today's economic data was limited to International Trade in Goods and advance Wholesale Inventories:

The October International Trade in Goods report showed a $62.00 billion decline to follow last month's $56.10 billion drop

October advance Wholesale Inventories showed a 0.4% decline (Briefing.com consensus 0.2%) on top of a revised 0.1% uptick in September (from 0.2%)

Monday's session will be free of noteworthy economic data.

Russell 2000 +13.1% YTD

Dow Jones Industrial Average +9.9% YTD

S&P 500 +8.3% YTD

Nasdaq Composite +7.8% YTD

Week in Review: Three in a Row

The stock market extended its winning streak to three consecutive weeks with the S&P 500 rising 1.4% to mark a fresh all-time high. Not to be outdone, The Dow Jones Industrial Average (+1.5%), Nasdaq (+1.5%), and Russell 2000 (+2.3%) also registered weekly gains and marked new record highs during the holiday-shortened week.

Treasury yield have been on a big post-election run, but selling in the bond market eased up a little during the past week. The 10-yr yield edged up to 2.36% from last Friday's 2.34%. Interestingly, the modest uptick in the benchmark yield did not stop rate-sensitive sectors from receiving some inflows. Post-election laggards like telecom services (+4.6%) and utilities (+1.9%) had a better showing than the broader market during the past week.

Things were a bit more mixed on the cyclical side where only three sectors outperformed the broader market. The energy space (+2.2%) rallied as OPEC members continued playing 'Deal or no Deal' while the consumer discretionary sector (+2.3%) benefitted from expectations for a better than feared holiday shopping season. Industrials (+2.3%) also outperformed, largely thanks to shares of Deere (DE), which surged in reaction to above-consensus results and an upbeat outlook.

It is worth noting that market participants received the policy minutes from the November FOMC meeting during the past week, but the release did not invite a particularly strong reaction. The minutes acknowledged that the Fed is 'relatively close' to raising rates, which was universally received as a sign of a rate hike coming in December. The market had been anticipating this type of a statement, evidenced by the limited movement in the fed funds futures market, which projects a 93.5% implied likelihood of a rate hike in three weeks.