Week in Review
The S&P 500 Index moved ahead by 2% on the week to an all-time high of 2,096.99. The Dow Jones Industrial Average finished up 1.1%, held back in part by American Express and Johnson & Johnson. The NASDAQ gained a robust 3.15%, making up for some softness last week. With the exception of “safe-haven” utilities, all major market sectors saw green arrows, led by technology stocks, up 4.5% on average. A cease-fire accord brokered by France and Germany was reached to end Ukraine’s conflict with Russian-backed separatists, but it is uncertain if Putin is on board with all the provisions. Nonetheless, the prospect of easing tensions sent European stocks higher that spilled over to U.S. markets. Also, Greece promised to do “whatever it can” to reach a deal with creditors, seen as another positive for the Continent. Oil prices perked up a bit during the week, with West Texas crude up $1.39/bbl. to $52.78 and the Brent April contract settled at $61.52, a third straight weekly gain for black gold. As central banks continue to pour money into their fledgling economies, results have been elusive at best. Hence, equities are getting ahead of themselves as there are virtually no alternatives in a zero interest rate environment. With valuations based on trailing twelve-month earnings approaching 19, U.S. stocks are vulnerable for a correction, as I do not see much of a fundamental catalyst ahead. True earnings growth has been decent, but much has to do with share re-purchases and cost-cutting, and less with organic growth. But it is difficult to fight the tape at this point, and the market could move higher before getting back to valuation reality. Monday is Presidents’ Day with markets closed for trading until Tuesday here in the U.S. Enjoy the holiday.
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