Washington, not Wall Street, will be driving stocks this week: NYSE trader

Alan Valdes
Alan Valdes

By Alan Valdes, Director of Floor Operations at Silverbear

After what seemed like a pretty successful trip abroad, President Trump is back in Washington D.C., armed with his Twitter account. With or without the president’s Tweets, it should be a pretty busy week for markets. Most of the market movers won’t come from Wall Street, but from Washington.

Today we received a strong read on personal consumption expenditures. That index showed consumers were spending big in April. The index came in at +0.4% versus the March read of +0.3%. Personal income also increased 0.4%, twice the amount of growth in March. Consumer confidence came in weaker than expected this morning—117.9 versus economists’ expectations of 119. Case/Shiller reports today that US home prices reached a 33-month high, though the index grew less than analysts had been expecting—rising 5.8% vs expected 5.9%.

Tomorrow we get another data-driven day with Chicago PMI, then pending home sales and the Fed’s Beige Book out of Washington. On Thursday, it’s ADP payrolls, initial jobless claims, PMI Manufacturing Index, and the ISM Manufacturing Index, to name a few.

Friday, it’s all about the (BIG!) non-farm payrolls report, where economists are looking for a number around 185,000, which, if it holds, would be down from last month’s 211,000. Friday’s jobs missive also brings us the unemployment rate, average work week, and hourly wages—all important reads. However, with today’s strong consumer spending and personal income, it would have to be a really weak jobs number to derail the Fed from hiking 25 basis points (0.25%) at its June meeting.

Stock investors increasingly worried as new highs are forged

Last Friday, traders and investors seemed to take the early train home. The Dow (^DJI, DIA) closed slightly lower, the NASDAQ (^IXIC, QQQ) rose a scant 0.1%, with the S&P 500 (^GSPC, SPY) settling barely above the breakeven line. As expected, volume was down across the board.

Although the market is trading at or near new highs weekly, it seems that with 17 new highs this year alone, traders are starting to worry both about the lack of volume and the fact this rally is being powered by a very select group of stocks—the so-called “FAANGs.” Those would be Facebook (FB), Amazon (AMZN), which broke above $1000 a share today, Apple (AAPL), Netflix (NFLX) and Google (GOOGL, GOOG).

If you step back and look at the rest of the market, about 50% of issues are not participating in this rally for the year. As we head into June can the “FAANG” group keep this rally going? It should be an interesting summer ahead, and Friday’s job number could set the tone for a rally continuation.

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