Dow, S&P500, Nasdaq Close at Records on Same Day for First Time Since 1999
Comment of the Day

August 11 2016

Commentary by David Fuller

Dow, S&P500, Nasdaq Close at Records on Same Day for First Time Since 1999

Here is the opening of tonight’s interesting comparative report from The Wall Street Journal

Major U.S. stock indexes set records again Thursday, the first time since Dec. 31, 1999, that the Dow Jones Industrial Average, the S&P 500 and the Nasdaq Composite have hit those milestones on the same day.

The rally was sparked by higher oil prices and earnings reports from U.S. retailers that weren’t as weak as feared.

Consumer-discretionary and energy stocks led broad gains across the market. The Dow industrials rose 118 points, or 0.6%, to 18614, above its previous record close of 18595 hit July 20. The S&P 500 gained 0.5% and topped its Aug. 5 record. The Nasdaq Composite added 0.5%, surpassing its previous high set at Tuesday’s close.

Investors are “into stocks because there’s nowhere else to go,” said Tim Rudderow, president of Mount Lucas Management, which oversees $1.6 billion.

Shares of Macy’s rose 17% as the department-store operator reported better-than-expected sales and said it plans to close 100 stores. Kohl’s gained 16% after reporting a surprise increase in profit even as it cut its earnings forecast for the year.

The two retailers were the S&P 500’s best performers Thursday, but they were still among the worst over the past 12 months. Retail-store owners have been hit in part by the growth of Internet-based competitors, and even Macy’s well-received results included a sharp drop in quarterly profit and another period of declining sales.

David Fuller's view

Here is a PDF of the WSJ article.

Yearend 1999 was not the most auspicious time for Wall Street.  Veteran subscribers may recall that it was the beginning of the end of the last secular bull market.  However, the S&P 500 and the Nasdaq Composite carried higher into 2Q 2000 before commencing their bear market.

Background circumstances are inevitably different in August 2016.  Nevertheless, what we do have is a momentum move helped by record low interest rates and bond yields, plus another infusion of liquidity from central banks, although not from the Fed. Momentum moves justified by: “…because there’s nowhere else to go” can be strong but they also end badly.  Watch out for an eventual shift in momentum for the Dow, S&P 500 and Nasdaq Composite, although weakness will most likely appear first on smaller stock market indices in other countries.   

Incidentally, I still expect another secular bull market but most likely not until after we have seen a normalisation of interest rate policies in leading economies.  Meanwhile, I think we will see plenty of turbulence and another cyclical bear market before the next secular bull trend occurs.     

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