Stock Market Today: January 28th - February 1st, 2019

Now What?

What a year it has been. After the worst December for stocks in 87 years that contributed to the worst fourth quarter since the 2008–09 financial crisis, stocks have bounced back in spectacular fashion. In fact, with a day to go, stocks are looking at their best first month of the year in 30 years.

What could happen next? “We like to say that the easy 10% has been made off the lows and the next 10% will be much tougher,” explained LPL Senior Market Strategist Ryan Detrick. “Things like Fed policy, China uncertainty, and overall global growth concerns all will play a part in where equity markets go from here.”

With the S&P 500 Index about 10% away from new highs, we do think new highs are quite possible at some point this year. Positive news from the Federal Reserve (Fed) and China trade talks, as well as the realization by investors that the odds of a recession in 2019 are quite low could spark potential new highs. Remember, fiscal spending as a percentage of overall gross domestic product (GDP) is higher this year than it was last year. Many think the tax cut and fiscal policies in play last year were a one-time sugar high. We don’t see it that way and expect the benefits from fiscal policy to help extend this economic cycle at least another year—likely more.

As we head into February, note that it hasn’t been one of the best months for stocks. In fact, as our LPL Chart of the Day shows, since 1950, February has been virtually flat, and over the past 20 years only June and September have shown worse returns. Overall, the market gains have been quite impressive since the December 24 lows, but we wouldn’t be surprised at all to see a near-term consolidation or pullback.

 

so as was mentioned in here yesterday, the cash spx is on pace for its best january since 1987.

here is a chart showing all of the spx returns in jan. since the 1950s.

right now we're looking at potentially the 5th best jan.

i guess not a complete surprise as we came off the worst dec. in nearly 100 years

 

5% Months
Jan 31, 2019

7%? Bulls will take it! After an abysmal December, the S&P 500 is currently set to finish the month with its best January return since 1987. This month’s gain will mark the 16th time since the lows of the Financial Crisis in March 2009 that the S&P 500 has rallied more than 5% in a given month. The table below highlights each of the 15 prior months where the S&P 500 rallied more than 5% and shows how much the S&P 500 gained on the month as well as its performance on the last trading day of the month and the first trading day of the subsequent month.

When looking at the table, a few things stand out. First, the first trading day of a month that follows a month where the S&P 500 rallied more than 5% has been extremely positive as the S&P 500 averages a gain of 0.84% (median: 1.01%) with positive returns 13 out of 15 times! In addition to the positive tendency of markets on the first day of the new month, there has also been a clear tendency for the S&P 500 to decline on the last trading day of the strong month. The average decline on the last trading day of a strong month has been 0.09% with positive returns less than half of the time. This is no doubt related to the fact that funds are forced to rebalance out of equities to get back inline with their benchmark weights. However, on those five prior months where the S&P 500 bucked the trend and was positive on the last trading day of a 5%+ month, the average gain on the first trading day of the next month was even stronger at 1.52% with gains five out of six times.

 

With month end today, here's a quick view on how the indices performed in January to open up 2019.

 

Good Friday morning to all. Welcome to the first trading day of February!

Here is this morning's pre-market news thread for those of you wanting to get a quick read before today's open-
<-- click there to read!

Hope everyone has a good trading day ahead today on this final trading day of the week.

 

Morning Lineup – Change Comes Fast
Feb 1, 2019

Futures are right around unchanged this morning as investors await the monthly Non-Farm Payrolls report for January. Despite the lackluster trading in futures, Chinese equities had a very strong night, and there was a ton of economic data released around the world overnight.

You don’t need us to tell you that change comes fast in the markets (as well as business in general). The last several weeks are a perfect example, and we don’t even have to go as far back as December to illustrate that. The chart below shows how the S&P 500’s YTD performance stacked up to all other years since 1928 for each trading day so far in 2019.

The year started off innocently enough on January 2nd, when the S&P 500 was up slightly, putting the start to the year right in the middle of the pack at 38th place relative to all other years. Things changed quickly, though, after the close on the 2nd when Apple (AAPL) lowered guidance. On January 3rd (the second trading day of the year), the S&P 500 declined 2.5%, putting the YTD loss at 2.35%. That swoon quickly sent the rank of the S&P 500’s YTD change two days into the year at 87th out of 91, or the 5th worst of all time! Equities quickly rebounded from there on the January 4th, sending the YTD ranking back up to 37th out of 91. From there, the YTD performance steadily improved and by the close yesterday, the S&P 500 was off to its 7th best start to a year (after 21 trading days) of all time. Quite a change from four weeks earlier!

The point here is that while equities and other asset classes usually do tend to follow trends, those trends can and will change, and when they do it often happens quickly. Therefore, just as it wouldn’t have been a good idea to pack it in and go home and January 3rd thinking it would be a horrible year, now that the S&P 500 is off to its 7th best start to a year in history doesn’t necessarily mean investors can put things on ‘auto-pilot’ from here.

 

not sure if anyone will find this useful or what, but starting from this week (or actually it was from last week) i'm going to be setting up the most anticipated earnings threads on friday morning's as opposed to doing them after i've setup the new weekly threads for the following week.

for example, here is next week's earnings thread-

• Most Anticipated Earnings Releases for the week beginning February 4th, 2019 <-- click there to view!

i do these on reddit for a couple of stock communities, particularly on r/StockMarket so i figured why not just do the same here, and post them on friday morning's rather than waiting until friday night or saturday morning.