Nice rally yesterday, but the "internals" were not as strong as the averages.
Well it was certainly a good day for the markets yesterday…as we got some positive news on two fronts. First, ECB President Draghi said that they were prepared to cut rates and reinstate QE if the economy were to stumble further in coming months…and President Trump & President Xi announced that they would meet at the G20 meeting next week. The rally left the S&P 500 less than 1% from its all-time highs…and gave a whole new meaning to the term “Fed drift” the day before the Fed’s announcement/press conference.
However, the internals for the rally were not very impressive. Although volume was higher than the previous two days, it was still 7% below the average daily volume for the year. Also, the breadth (advancers vs. decliners) was mediocre (at best) for a day where the averages rallied 1% or more. It was just 2.8 to 1 positive for the S&P 500, 3 to 1 for the NYSE Composite Index, just 2.3% for the Nasdaq Composite (which 1.4%) and 2.9 to 1 for the Russell 2000. These are not the kinds of numbers that you’d like to see on such a strong move….but if the global central banks are going to engage in a coordinated stimulus plan immediately, the stock market could indeed go higher.
Markets strong despite a weaker economy & declining earnings estimates.
The stock market has now rallied 6.3% in just 2.5 weeks and as we mentioned above, it’s less than 1% from its all-time highs. This has taken place despite a slightly weaker U.S. (and global) economy and a lowering of the consensus 2019 S&P 500 earnings. We ...