S&P 500; US Indexes Fundamental Forecast – December 20, 2016
The major U.S. equity indexes rose on Monday on extremely low volume as investors rotated out of recently outperforming stocks and into a few of the less-favorable stocks. The could be a sign of tax selling, profit-taking or just investors trying to hold the market in a range while supporting the uptrend. At this time of year, many of the major players take to the sidelines. However, they don’t want to kill the uptrend, but at the same time, they don’t want the market to rally too much either.
In the cash market, the benchmark S&P 500 Index closed at 2262.53, up 4.46 or +0.20%. The blue chip Dow Jones Industrial Average finished at 19883.06, up 39.65 or +0.20% and the tech-based NASDAQ Composite finished at 5454.58, up 17.42 or +0.32%.
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Telecommunication stocks recovered after closing lower last week. This sector has been the best performer over the past five weeks. Laggards, real estate, industrials and tech, all posted solid gains.
The NASDAQ 100 was strong, hitting a fresh all-time intraday high. The other three major indices closed near their all-time highs.
In economic news, the U.S. Flash Markit PMI Services index for December came in at 53.4, down from the 54.6 read in November and below the forecast.
Late in the session, Fed Chair Janet Yellen told a group of graduating college students at the University of Baltimore that the U.S. has the strongest jobs market in nearly a decade and that there are indications wage growth is picking up.
The market didn’t have any reaction to the news that the Russian ambassador to Turkey had been assassinated.
Finally, trade volume across the U.S. exchanges was just over 6 billion, its lowest since the day after Thanksgiving.
Forecast
Volume is expected to continue to come in below average on Tuesday and may actually progressing drop throughout the week. This is normal for this time of year. Additionally, the mutual funds, banks and institutions are likely sitting out the next two weeks. This could create a sideways grind, but investors have to continue to watch for volatility spikes.
There is still a question about whether the thin trading conditions will encourage investors to take a run at 20,000 in the Dow.
If the rotation out of expensive stocks and into the relatively cheaper stocks continues today then look for the indexes to continue to grind higher.