By Sue Chang, MarketWatch
Range-bound market may be good harbinger for stocks in week
ahead
The stock market just did something it hasn't done in 53 years.
As of Friday, the S&P 500 moved less than 20 points in either
direction eight days in a row, the longest streak since the Beatles
first visited North America.
But for all the dramatic scenarios this factoid could imply, for
stocks, it may be a good omen given the historical precedent.
In 1964, the last time the S&P 500 was range-bound for this
long, the stock market eventually threw off its shackles to gain
0.5% the following week and rise 1.7% one month later, according to
analysts at Bespoke Investment Group.
Those may not be numbers to crow about, but Bespoke analysts
stressed that the limited downside amid low volatility is
remarkable.
Jonathan Krinsky, chief market technician at MKM Partners,
blamed some of the market's lethargy on investors moving to foreign
assets.
The underlying trend in the U.S. is bullish, he said, but "there
is some rotation out of U.S. into international stocks. Europe
continues to break out and hit new highs, Asia--Japan, Korea, and
Taiwan--are acting very strong."
"So I think after seven years of outperformance, there is
finally a shift into some international markets and that's why the
U.S. hasn't seen the big breakout," Krinsky said.
Range-bound trading notwithstanding, both the S&P 500 and
the Nasdaq closed at records
(http://www.marketwatch.com/story/us-stock-futures-glued-in-place-as-oil-takes-a-roller-coaster-ride-jobs-data-ahead-2017-05-05)
this week while the Dow Jones Industrial Average finished higher as
well.
Here are the key events and trends to watch for in the week
ahead:
French election: The runoff round of the French election is down
to centrist Emmanuel Macron, who is pro European Union, and
euroskeptic Marine Le Pen. Investors are heavily rooting for Macron
as many believe a Le Pen victory could lead to the dismantling of
the European Union and global financial upheaval.
Read:Brace for market mayhem if Le Pen unexpectedly wins French
presidency
(http://www.marketwatch.com/story/brace-for-market-mayhem-if-le-pen-unexpectedly-wins-french-presidency-2017-05-04)
Polls show Macron with a comfortable lead over Le Pen, but there
is always room for an upset as the U.S. election and the Brexit
vote proved.
"Sell in May and Go Away": This adage may be a good candidate
for a self-fulfilling prophecy or a cliché explanation for why
stocks seem to underperform during certain months. "Sell in May and
go away" is a reference to the six months from May to October, when
returns historically lag the November-April period.
According to Sam Stovall, chief investment strategist at CFRA,
the S&P 500 has only gained 1.6% from May to October
(http://www.marketwatch.com/story/are-planets-aligned-for-a-renewed-stock-market-rally-2017-04-24)
versus an average of 6.7% from November to April since April
1945.
Nonetheless, strategists at LPL Financial recently suggested
that the seasonal factor may be increasingly losing its
relevance.
"The recent November-to-April period was up more than 10%; when
that has happened, the next six months of the year have been up
2.3% on average. Not to be outdone, looking at the four-year
presidential cycle, the May-to-October period has been strongest
during a postelection year (which we happen to be in now), up 2% on
average," Matthew Peterson, chief wealth strategist at LPL
Financial, wrote in a note.
Earnings: U.S. corporations are continuing to deliver strong
first-quarter results as anticipated. Roughly 80% of S&P 500
companies that have reported so far are beating earnings estimates
and posting earnings per share growth of more than 10% year on year
while revenue is up 6% year on year, according to Emmanuel Cau, an
equity research analyst at J.P. Morgan Cazenove.
Dow component Walt Disney Co. (DIS) will be the big draw next
week, while several retailers like Macy's Inc. (M) and Kohl's Corp.
(KSS) , are scheduled to announce results. The year's most
prominent addition to the markets, Snapchat parent company Snap
Inc. (SNAP) , is scheduled to release its first post-IPO earnings
report as well
(http://www.marketwatch.com/story/snap-earnings-first-report-since-ipo-is-major-test-for-snapchat-parent-company-2017-05-05).
Berkshire Hathaway's annual meeting: Warren Buffett and his BFF
Charlie Munger will hold court at Berkshire Hathaway's annual
meeting in Omaha, Neb., this weekend, with investors, fans and
reporters gathering to pay homage to one of the most successful
investing duos in history.
Read: 6 topics Warren Buffett can't avoid at Berkshire's annual
meeting
(http://www.marketwatch.com/story/6-things-to-watch-when-warren-buffett-hosts-berkshires-annual-meeting-2017-05-05)
Ahead of Saturday's Buffett-fest, Berkshire Hathaway Inc.
(BRK.LN) (BRKA) reported Friday that its first-quarter profit fell
(http://www.marketwatch.com/story/berkshire-hathaway-first-quarter-earnings-decline-2017-05-05)
to $4.06 billion, or $2,469 a share, from $5.59 billion, or $3,401
a share, in the year ago quarter. Analysts polled by FactSet had
forecast earnings of $2,674 a share.
Sohn Investment Conference: The marquee event for the hedge-fund
community will be held on Monday in New York. The annual charity
event attracts some of the world's most respected investors,
including Bill Ackman, founder of Pershing Square Capital
Management, and Greenlight Capital's David Einhorn. While the
conference itself is not a pan-market influencer, recommendations
or rejections by the famous fund managers
(http://www.marketwatch.com/story/what-will-be-the-hot-pick-from-this-years-sohn-hedge-fund-conference-2017-05-05)
tend to affect individual stocks.
(http://www.marketwatch.com/story/berkshire-hathaway-first-quarter-earnings-decline-2017-05-05)
(END) Dow Jones Newswires
May 06, 2017 08:00 ET (12:00 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.