Its All Bullish in the End as Stocks Post Best Week Since 2014


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A stretch that goes down as the best week for U.S. stocks in two years has been anything but easy money for the traders who had to navigate it.

Three distinct narratives have driven trading, combining to lift the S&P 500 Index more than any time since 2014 and give the Dow Jones Industrial Average its best week in five years. Stocks rallied on Monday and Tuesday on speculation Hillary Clinton would win the presidency, then posted almost equally big gains Wednesday and Thursday as investors warmed to Donald Trumps fiscal stimulus policies.

The week ended on a down note for the S&P 500, as gains in banks and drug stocks were pared. In the middle was an hour-long election night plunge that wouldve lopped $1 trillion from the S&P 500 had it come during regular trading hours.

The last two to three days have had everything to do with re-pricing in a complete regime change, said Kevin Caron, a Florham Park, New Jersey-based market strategist and portfolio manager who helps oversee $180 billion at Stifel Nicolaus & Co. You have markets that now have to contend with the idea of a much larger fiscal push then they were expecting just a few days ago. Youre seeing a big rally in economically sensitive assets.

The S&P 500 rose 3.8 percent in the five days, while the Dow rallied 959.38 points for its best week since 2011. Small caps in the Russell 2000 Index surged 10 percent. The Nasdaq 100 Index added 1.5 percent.

Along the way, the Dow also closed at record for the first time in three months as investors snapped up what they calculated would be beneficiaries of a Trump presidency. The surge in stocks following a presidential election echoed 1996 and 1972, when the blue-chip index made fresh highs after victories by Bill Clinton and Richard Nixon.

Exchange-traded funds tracking U.S. equities took in $16.3 billion of fresh cash on Wednesday and Thursday, data compiled by Bloomberg show. It included $8 billion of inflows into a security tracking the S&P 500 that was the biggest in 14 months. It was the first week in history that had two days with more than 12 billion shares traded.

Its only 72 hours after the election but going by reactions in big chunks of the stock market, investors arent waiting around to find out how hard it will be for Trump to enact his economic agenda. Theyre shooting first without a clear read on how strong a tie hell forge with the Republican Congress, a key to getting potentially deficit-swelling proposals like tax cuts and spending implemented.

Banks surged 11 percent in the five days, the most since 2009, on speculation that the president-elect and Republican-controlled Congress will roll back regulations. Trumps promise to revive the nations infrastructure sent industrial shares soaring more than 7.5 percent, with commodities needed for everything from airports to bridges expected to benefit, according to Goldman Sachs Group Inc.

Small caps also benefited from the election news, extending a rally to six days and leaving the Russell 1 percent below an all-time high it hasnt eclipsed in 18 months. The reason may be speculation Trumps homeward-looking policies will favor the more domestic-focused index. At the same time, looser financial regulations touted by Trump could provide a relief to banks and insurers, which have a heavier weighting in the Russell 2000 than in the S&P 500.

While technology shares in the benchmark index finished the week up 1 percent, the sector slipped 1.6 percent on Thursday amid concern that Trumps overseas trade policies would crimp profitability for a group that thrives overseas. All four stocks in the FANG block of Facebook Inc., Amazon.com Inc., Netflix Inc. and Google parent Alphabet Inc. showed losses for the week.

They were simply a victim of a shift in sector leadership, said Richard Sichel, chief investment officer at Philadelphia Trust Co., which oversees $2 billion. Investors took some profits and moved money into other sectors. It doesnt necessarily mean tech is going to be a negative place to be going forward — its still a driver of productivity and represents exciting things ahead for the economy.

Violent swings this week were almost too numerous to count. While bonds sold off and 10-year yields climbed above 2 percent, stocks whose high payouts have aligned them with fixed-income markets tanked. Utilities fell 4 percent on the week. Makers of consumer necessities dropped 2.1 percent.

At the other end, encouraged that Clintons promises to investigate drug pricing are off the table, an S&P index of pharmaceuticals companies gauge jumped 11 percent, the most in data going back to 1999.

Individual stocks were no less volatile. Navient Corp., a servicer of student loans, jumped 28 percent, possibly reflecting speculation that regulatory pressure will ease on for-profit colleges now that the founder of Trump University is president.

Freeport-McMoRan Inc. jumped 26 percent as copper saw its biggest gain in seven years. Kohls Corp. rose 24 percent after the department store chains third quarter earnings were 10 cents ahead of analyst per-share estimates. Martin Marietta Materials Inc., which sells to the construction industry, added 19 percent on speculation infrastructure spending will jump.

There are definitely some things to be concerned about, and theres definitely some uncertainty going forward, said Matt Maley, an equity strategist at Miller Tabak & Co. LLC in New York. But boy, the market has held up well considering what people thought was going to be a disaster.

Investors are also considering what a Trump presidency means for Federal Reserve policy and the trajectory of interest rates. Odds for a December increase in borrowing costs have risen to 80 percent from 78 percent a week ago. Rate-sensitive corners of the equity market have been punished. Utilities, real-estate investment trusts and consumer staples — stocks that have been coveted for their high dividend payout as a source of income amid record-low bond yields — have all retreated over the past five days.

Read more: http://www.bloomberg.com/news/articles/2016-11-11/terror-proves-transitory-as-s-p-500-heads-for-best-week-of-year


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S&P 500 Halts Rally, Small Caps Surge as Election Winners Sought


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U.S. stocks ended mixed in whipsaw trading, with the Dow Jones Industrial Average edging higher to another record in its best week in five years, as investors speculate how Donald Trumps policies will impact the economy and interest rates. Small caps in the Russell 2000 surged.

The S&P 500 Index slid 0.1 percent to 2,164.37 at 4 p.m. in New York, paring its best weekly gain since 2014. The Nasdaq 100 Index rose 0.1 percent as large-cap technology shares rebounded from a slide. The Dow rose to 18,847 for a second consecutive record close. The Russell 2000 Index surged 2.5 percent, extending its rally this week to 10 percent. U.S. bond markets were closed for the Veterans Day holiday.

The spotlight is intensifying on Trumps policies as investors place bets on possible winners and losers. Banks have surged 11 percent in the five days, on track for the best weekly gain since 2009, on speculation that the president-elect and Republican-controlled Congress will roll back regulations. Trumps promise to revive the nations infrastructure sent industrial shares soaring more than 7.5 percent, with commodities needed for everything from airports to bridges expected to benefit, according to Goldman Sachs Group Inc.

Today youre seeing some simple profit-taking going into a weekend, and understandably so, said Matt Lloyd, chief investment strategist at Advisors Asset Management, which oversees $16.5 billion in Monument, Colorado. People were saving money on the sideline heading into the election, which was always going to exacerbate whatever move was going to happen. We ended up getting a good rise following a short panic, and now people are pulling back a bit.

Investors are also considering what a Trump presidency means for Federal Reserve policy and the trajectory of interest rates. Odds for a December increase in borrowing costs have risen to 84 percent from 78 percent a week ago. Rate-sensitive corners of the equity market have been punished. Utilities, real-estate investment trusts and consumer staples — stocks that have been coveted for their high dividend payout as a source of income amid record-low bond yields — have all retreated over the past five days.

Small caps extended their rally to a sixth day. The reason may be speculation Trumps homeward-looking policies will favor the more domestic-focused index. At the same time, looser financial regulations touted by Trump could provide a relief to banks and insurers, which have a heavier weighting in the Russell 2000 than in the S&P 500.

As Trump prepares to take over the White House, earnings season is coming to an end. About 76 percent of companies that reported so far beat profit projections and 56 percent topped sales estimates. Analysts now expect quarterly earnings growth of 2.5 percent for the benchmarks constituents, reversing forecasts for a 1.6 percent decline at the start of the month.

Lets face it, we still have to see what Trumps policies are going to be and whos going to be in his cabinet, said Matt Maley, an equity strategist at Miller Tabak & Co. LLC in New York. People want to take a breather and digest whats gone on this week heading into the weekend.

A slide of more than 3 percent in crude weighed on energy shares Friday, making them the worst-performing group in the S&P 500. Materials producers also retreated as gold and silver plunged. Expectations for higher inflation that have sparked a bond rout make precious metals vulnerable as a store of value.

Walt Disney Co. climbed 3 percent after predicting renewed growth next year and beyond even as fourth-quarter profit fell short of estimates. Nvidia Corp surged 30 percent after the biggest maker of graphics chips used by computer gamers forecast quarterly sales that signaled continued strong demand for its signature products and gains in new markets such as data centers.

Read more: http://www.bloomberg.com//news/articles/2016-11-11/s-p-500-futures-fall-as-trump-policies-in-focus-apple-retreats


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Unexpected Election Outcome Begets Unexpected Winners and Losers


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Heres one way to sum up how markets behaved following the U.S. presidential election: Investors didnt do what they were expected to do after American voters didnt do what they were expected to do.

Donald Trumps upset victory was supposed to tank developed stock markets, especially in the U.S. Instead, the Dow Jones Industrial Average closed its best week since 2011 at a record high. Investors were supposed to flee to safety and send the Japanese yen, Treasuries and gold soaring. All three have fallen 1.4 percent or more since the election. The U.S. dollar was sure to plunge. Nope: The greenback had its strongest three-day rally in five years. Emerging-market securities and tax-free municipal bonds are among the few assets reacting as predicted: Theyre getting crushed.

Heres a look at the winners and losers.

Stocks

The big story of the week was the beating emerging equity markets took on fears that President-elect Trumps protectionist proclivities will crimp their exports. Of 68 emerging country stock indexes tracked by Bloomberg, 51 fell in the three days after the election. Latin America took the biggest hit with Mexico, Brazil, Argentina and Colombia being the worlds worst performers. The U.S. ranks among all four countries top three trading partners.

While more developed stock markets fell (18) than rose (eight), the damage was much more limited. Only five dropped more than 2 percent — New Zealand, Portugal, Spain, Denmark and the Netherlands. The MSCI World Index of developed economies rose 0.3 percent post-election. The Stoxx Europe 600 Index added 0.8 percent, though it fell in dollar terms.

In the U.S., the rally has been led by cyclical stocks. The S&P 500 Financials Index soared 8.3 percent in three days to levels last seen in May 2008. All 64 members ended the week up at least 2.3 percent, on hopes for eased banking regulations. Industrial companies were the S&P 500s second-best performer, fueled by Trumps promises of massive infrastructure spending increases.

The Nasdaq Biotechnology Index had its best week since 2000, up 14 percent on relief that Democrat Hillary Clintons plans to rein in prices were dashed. Generic drugmaker Endo International Plc soared 21 percent in three days, fourth best in the S&P 500, after an Election Day earnings beat gave it an added boost.

Utility and consumer-staples stocks, traditional havens, fell. The biggest post-election loser in the S&P 500 was managed care provider Centene Corp., which was downgraded to neutral by Credit Suisse Group AG amid fears that Trumps plan to dismantle Obamacare will hurt such companies.

Government Bonds

The more the U.S. government spends, the more bonds it sells, increasing supply, depressing prices and increasing yields and, more generally, borrowing costs worldwide. So Trumps ambitious spending plans tamped down demand in the Treasurys post-election auctions of 10- and 30-year obligations, particularly from foreign central banks and mutual funds.

The benchmark 10-year U.S. Treasury yield surged 37 basis points this week, the most since the so-called taper tantrum in June 2013, as inflation-expectation gauges soared. Long bonds fared worse, with investors holding 30-year Treasuries losing 6.8 percent in the first 10 days of November, Bank of America Corp. data show. The U.S. yield curve is the steepest its been in 2016.

Moves in the U.S. weighed on sovereign debt around the world, with 10-year yields in all but two of 24 developed nations climbing at least 15 basis points. In total, more than $750 billion was wiped off the value of government bonds worldwide. German 30-year yields rose to the most since May. Italys reached the highest since July 2015, and its borrowing costs increased at an auction of debt due in three decades on Friday, allotting the securities at the highest yield for a sale of 30-year bonds since July 2015.

State and local-government bonds tumbled this week as Republican plans for big tax cuts lessened tax-free municipal debts appeal. The yield on the Bond Buyers 20-year index jumped a quarter-percentage point to 3.52 percent, the biggest weekly increase in six years.

Corporate Finance

Oil explorer and driller company bonds were among the top gainers in the corporate bond markets on speculation that Trump, a climate-change skeptic, will be friendlier to fossil fuels than Clinton would have been.

Hospital group Quorum Health Corp.s bonds rallied after the company reported better-than expected third-quarter results, even as many of its rivals notes declined over fears that Republicans will repeal President Obamas Affordable Care Act. Debt tied to mining companies rallied, as did the bonds of prison operators, driven by speculation that Trump may scrap a government policy against privatized correctional facilities.

Currencies

The dollar was the big winner. The Bloomberg Dollar Spot Index gained 2.8 percent this week, the most since September 2011. The gains were the most pronounced against developing-world currencies, with the MSCI Emerging Markets Currency Index falling 2.3 percent in its worst week in more than three years.

The Mexican peso fell 8.7 percent, the most since 2008, to a record low. The South African rand lost 5.3 percent. The pound was the only major currency to best the dollar, eking out a 0.6 percent gain and rising even more against its other major peers as political risks shifted from Brexit to America and Italys constitutional referendum next month. The euro was in the middle of the pack with a 2.6 percent loss against the greenback.

Commodities

Trump was meant to be golds best friend. Signs he was closing in on Hillary Clinton in the election run-up reignited a year-long rally that had begun to flag. Since winning, his plan to boost the economy sent gold spiraling amid fears it will speed the Federal Reserves interest-rate hikes. Gold fell almost 6 percent in its worst week since June 2013.

Trumps promise of $550 billion in infrastructure spending sparked a buying frenzy for industrial metals like copper, surprising analysts from Goldman Sachs Group Inc. to Long Leaf Trading Group Inc. Copper gained 11 percent, its best week in at least four years. Coal, an industry that Trump promised to revive, remained essentially flat after the vote, and oil fell 4 percent on dual concerns about where the U.S. market is heading and OPEC being unable to support prices by limiting output.

Read more: http://www.bloomberg.com//news/articles/2016-11-12/unexpected-election-outcome-begets-unexpected-winners-and-losers