Equity Market Insight from Nasdaq MID - January 25, 2017

Wednesday, January 25, 2017, 11:15 AM, EST

  • NASDAQ Composite +0.9% Dow +0.8% S&P 500 +0.6% Russell 2000 +0.85%
  • NASDAQ Advancers: 1590 / Decliners: 540
  • Today’s Volume (100 day avg): +18%
Dow hits 20k Tower Shot

The Dow was able to open today’s session above the long awaited 20k milestone, as the blue chip index is on pace for its 2nd consecutive triple digit gain, a streak that hasn’t been achieved since the days following the election results. Corporate earnings are the catalyst to the upside this morning, on strong trading volume, and 8 out of 11 S&P sectors advancing. Financials and Energy leading the way, higher by 1.1% and 0.9%, respectively. Crude and Nat Gas are both in the green, while Gold is lower by 1%.

  • The Dow just traded at the 20,000 level for the first time. One year returns for the Dow exceed 25% - helped by low starting levels following the January 2016 selloff. The Dow was just below 16,000 then. Over the same timeframe the SPX is up 22%, Nasdaq is up a similar 24% and the Russell 2000 has been the best at over+37%. YTD moves are much more modest, about 2% for the Dow and 1% for the Dow and Russell 2000. The Nasdaq Composite is up over 4%.
  • The US Dollar has “peaked” according to UBS analyst’s Wayne Gordon, and it will probably decline this year. Precious metals should benefit from any pullback in the dollar, as the SPDR Gold Shares ETF is higher by ~4% YTD. Gordon noted ““The more debt that Donald Trump promises through higher infrastructure and lower tax and tax cuts tends to lead itself to a twin deficit situation in the U.S., which clearly is negative for the currency.”
  • On the earnings front, Seagate Tech is up more than the 20% and the best performer on the S&P 500. The company reported strong results that beat expectations, helped by a strong demand for its cloud product. Western Digital is up more than 5%, as the positive news from Seagate is fueling bullish sentiment ahead of WDC’s results this afternoon. Boeing’s profit beat has the stock higher by 4.75%, and contributing ~30% of the upside in the DOW (+147pts).
  • Crude oil remains in a tight range thus far this year and WTI has not topped its Jan 3rd price level as higher US shale production counters lower OPEC output. DOE inventory reflects a higher than expected build of 2.8k barrels, about the same as API reported last night. Gasoline inventories rose far more than expected for the third week in a row. Futures drifted a little lower on the data: WTI -0.5%; Brent -0.7%

Technical Take:

Euphoria is growing throughout the marketplace as today the Dow, S&P 500, and Nasdaq Composite are each making fresh all-time highs. In case you haven’t heard the Dow also reached the 20,000 milestone today which is 30% higher from its 2016 low, 15,451. The top performing sectors driving the markets to new highs in 2017 have been materials, technology, and consumer discretionary with gains of 6.1%, 5.5%, and 4.7%. Amongst the underperforming groups is energy which is down (0.6%) YTD, however in 2016 energy led all sectors with a 27.4% gain. The below chart of the energy ETF XLE shows the sector peaked on December 12th and has since been consolidating in a parallel channel resembling a bull flag pattern. On Monday it closed below its 50-day moving average, now $74.57, for the first time since mid-November, however this has so far proven to be a false move as it immediately moved back above it. The XLE is now up against the channel’s resistance above which could trigger the resumption of the 2016 uptrend. While many are waiting for the big correction in the major equity indices, sector rotation into recent underperformers like energy could propel them higher.

Nasdaq's Market Intelligence Desk (MID) Team includes:

Michael Sokoll, CFA is a Senior Managing Director on the Market Intelligence Desk (MID) at Nasdaq with over 25 years of equity market experience. In this role, he manages a team of professionals responsible for providing NASDAQ-listed companies with real-time trading analysis and objective market information.

Jeffrey LaRocque is a Director on the Market Intelligence Desk (MID) at Nasdaq, covering U.S. equities with over 10 years of experience having learned market structure while working on institutional trading desks and as a stock surveillance analyst. Jeff's diverse professional knowledge includes IPOs, Technical Analysis and Options Trading.

Steven Brown is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq with over twenty years of experience in equities. With a focus on client retention he currently covers the Financial, Energy and Media sectors.

Christopher Dearborn is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq. Chris has over two decades of equity market experience including floor and screen based trading, corporate access, IPOs and asset allocation. Chris is responsible for providing timely, accurate and objective market and trading-related information to Nasdaq-listed companies.

Annie O'Callaghan is Director on the Market Intelligence Desk (MID) at Nasdaq. Annie has worked for NASDAQ in a variety of roles including support of Nasdaq C-level management in client retention and customer service. Annie also served as a Sales Director in Nasdaq’s Transactions Services business. Prior to joining Nasdaq, Annie worked at AX Trading, managing accounts for its Alternative Trading System and served on Credit Suisse's trading desk as an Electronic & Algorithmic Sales Trading Analyst.

Brian Joyce, CMT has 16 years of trading desk experience. Prior to joining Nasdaq Brian executed equity orders and provided trading ideas to institutional clients. He also contributed technical analysis to a fundamental research offering. Brian focuses on helping Nasdaq’s Financial, Healthcare and Airline companies among others understand the trading in their stock. Brian is a Chartered Market Technician.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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