It was a good day for stocks, unless you were the Dow Jones Industrial Average, then it wasn’t.
Reuters Shares of the S&P 500 rose 0.2% to 1,987.01, while the small-company Russell 2000 gained 0.2% to 1,158.14 and the tech-heavy Nasdaq Composite advanced 10.4% to 4,473.70. The price-weighted Dow Jones Industrial Average fell 0.2% to 17,086.63, dragged down by Boeing, (BA) which fell 2.3% to $126.71 after releasing earnings that weren’t as good as they looked.
RBC’s Robert Sluymer and Anna Drotman think the market could be setting up for a push higher:
After a 3-4 week correction short-term indicators are again in oversold territory supporting a rebound…however…Short-term momentum indicators, tracking 2-4+ market swings have moved from overbought levels at the end of June back to suitably oversold levels to support another equity rally attempt. The Russell 2000 better illustrates the short-term 'oversold' condition of many higher beta names. However, we continue to highlight that small-cap relative performance versus the S&P 500 has been negatively diverging since last fall and is at risk of breaking below the April-May lows.
Janney’s Mark Luschini thinks “risk assets should continue to reward.” He explains why:
U.S. companies have high levels of cash, healthy balance sheets, and are recording record profits. U.S. equity markets are not cheap, but valuations have further room to expand. Priced off 12-month forward consensus earnings estimates, the S&P 500 trades at a 16x price-to-earnings ratio. The equity risk premium remains above historical trend, suggesting it could still compress toward 3%. Earnings will need to do the heavy lifting this year. Some valuation expansion may result from decreased macro uncertainty.
In other words, keep on keepin’ on.
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