S&P 500 struggled to retain its peak
The S&P 500 Index (SPY) stayed closer to its lifetime high of 2484.04 so far this week, closing the week ended August 4, 2017, at 2476.83 with an overall weekly gain of 0.19%. Earnings drove the markets higher, but mixed signals from the macro front limited gains.
On one side, Fed members sounded dovish in their recent speeches, but the strong payroll report supported the case for another hike.
Economic data reported from the US was in line or better than expected. Pending home sales rose 1.5%, while manufacturing and services PMI data was better than expected.
The key standout was the US non-farm payroll data, which indicated that the US economy added 209,000 jobs in July. The unemployment rate fell from 4.4% to 4.3%. The financials sector (XLF) was the best-performing sector with a weekly gain of ~1.8%. The energy sector (XLE) lost the most, recording a weekly loss of ~1.0%.
Speculators decrease bullish bets for the first time in eight weeks
For the week ended July 28, 2017, the total outstanding net bullish contracts of large speculators on the S&P 500 Index fell to 15,517 compared to 23,631 contracts in the previous week.
This data was reported by the Commodity Futures Trading Commission (or CFTC) through its weekly Commitment of Traders report (or COT). This is the first decline in speculative positions on the S&P 500 Index in eight weeks.
No major moves expected this week
This week’s economic calendar in the US does not have much major data to be reported except for the inflation (TIP) data on Friday, August 11. The focus is expected to be on the Fed members, whose views would be important in assessing the next Fed move.
Technical traders could be watching for signs of exhaustion in the index as fundamentals give little reason for further gains. Sector rotation should be in play as investors could try to move into better-performing stocks. Overall, this week could be another directionless week, unless there are any surprises hidden in Friday’s inflation data.
In the next part of this series, we’ll analyze why the US dollar (USDU) bounced back from its multi-month lows.