The U.S. stock market passed a major milestone in Week 4 of January 2017, but one that's just not as big a deal as the market's next major milestone, which isn't far away.
We'll discuss that a little bit more after reviewing the rest of the week's news. For now, we find that the S&P 500 continued to behave as expected during the fourth week of January 2017.
Let's get to the more significant market-driving headlines for the week that was.
- Monday, 23 January 2017
- Fed's Lacker favors faster rate hike path to curb inflation
- Oil slips as U.S. drilling recovery offsets OPEC-led cuts
- Trump signs order withdrawing U.S. from Trans-Pacific trade deal
- Good example of what we meant when we mentioned "noise out of Washington D.C." last week. President Trump's action came at approximately noon, which marked the bottom for the market during the day, after which stock prices went on to recover a little over half of its range for the day.
- Wall Street dips on Trump protectionism, Qualcomm drag
- Tuesday, 24 January 2017
- Trump signs executive orders on manufacturing, infrastructure
- U.S. home sales drop as supply tumbles to 17-year low
- S&P 500, Nasdaq set records as tech, banks lead
- The S&P 500 is on course to do something it hasn’t in 52 years
- You have to love stories like this one, which come on the day before certain CNBC reporters' long-held wishes are finally granted!
- Wednesday, 25 January 2017
- Thursday, 26 January 2017
- Friday, 27 January 2017
- Fed to stop mortgage reinvestments in 2018: Morgan Stanley
- If so, this will mark the real end of the Fed's third round of quantitative easing, which it has quietly kept going at low levels since the taper "officially" ended in the fourth quarter of 2014. The Fed has been using its proceeds from the loans that government entities Fannie Mae and Freddie Mac have been paying back since the financial crisis to continue funding its low volume purchases of Mortgage Backed Securities.
- Oil prices fall as U.S. drillers add rigs
- Wall Street slips after soft GDP data, earnings
Elsewhere, Barry Ritholtz summarized the week's positives and negatives for the U.S. economy and markets.
Looking forward again, the next big psychological threshold for the market is more meaningful than Dow 20,000 - it's S&P 2300!
Today, the S&P 500 rules. And that’s why a record high close above 2300 (it briefly crossed that milestone intraday on Thursday before closing a little more than 5 points shy Friday) carries more weight than the headline-grabbing Dow 20,000.
“The S&P 500,” says Bill Hornbarger, chief investment strategist at Moneta Group, “has surpassed the Dow in terms of its importance. The simple reason is that it is broader and more representative of the domestic economy.”
The Dow, for example, only has six tech stocks, and mainly old-tech names like Microsoft, Intel and IBM, versus more than five dozen tech stocks in the S&P 500. The Dow doesn’t have online-advertising giant Alphabet (the parent of Google) or social media giant Facebook or online-retail powerhouse Amazon.com. Nor does the blue-chip Dow have any exposure to the utilities or real estate sectors, or regional banks like Cincinnati-based Fifth Third Bank or oil services-related firms like Schlumberger.
Money flows show the S&P 500's supremacy. Currently, $2.1 trillion is invested in “passively managed” index mutual funds and exchanged traded funds that mimic the S&P 500, vs. only $35.6 billion invested in these types of funds that track the Dow, according to S&P Dow Jones Indices.
Sure, we could spend time forecasting where the Dow will go next, but it just isn't as meaningful an exercise as it is for the S&P 500!
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Closing values for previous trading day.
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