State of the Market: January 6th, 2018

S&P 500 (SPY)

How about this start to the year?!?!  In last week's State of the Market newsletter, I said I wouldn't be surprised if 2018 got off to a good start.  But I definitely did not expect this.

Monday = New Years Day.

Tuesday = Record high.

Wednesday = Record high.

Thursday = Record high.

Friday = Record high.

Every single trading day this week the S&P 500 closed at a new all-time high.  I've never seen anything like this before.  I could barely believe it with my own two eyes as the week progressed.  But it happened and we should be thankful.  This is a very bullish sign for 2018.

A strong start to the year typically leads to strength throughout the year.  It tells me that there is a lot of money on the sidelines.  Investors were waiting until the new year to put that money to work.  We obviously won't be seeing record highs every day, but I expect the market to trend higher.  Four days into the year and the S&P 500 is already up 2.46%.


Top Performing Stocks

Some of the top performing stocks in the S&P 500 this week were Advance Auto Parts (12.5%), CarMax (9.6%), Micron (9.5%), NVIDIA (9.1%), and Netflix (9%) while the worst performing stocks were L Brands (-17.5%), Viacom (-5.6%), The Gap (-5.5%), and Dominion energy (-5.2%).

December Jobs Report

Jobs are the lifeblood of the economy and stock market.  When job growth is strong, it means the economy is in good shape.  And when the economy is in good shape, stocks head higher.  That's why I tell our members, if they're only going to pay attention to one economic report a month make sure its the monthly jobs report.

This December jobs report was an interesting one.  On Thursday, Payroll processor ADP reported a jobs number that easily beat estimates.  This report helped push stocks higher.  However, the Labor Department's jobs number on Friday came in under the estimate.  Some investors were confused by this but stocks still moved higher anyways.

It's important to mention that these jobs reports are just estimates.  No one really knows exactly how many jobs are created or lost each month.  That's why reports from different organizations can be so different.

Despite the conflicting numbers, the unemployment rate remained near an all-time low of 4.1%.  This is an outstanding number.  Wage growth came in a 2.5%.  That's a decent number but I'd like to see that number a little higher.  I expect job growth to continue but slightly slow down in 2018 as the economy reaches full employment.


Other December Economic Data

A couple other smaller economic reports came out this week.  Manufacturing activity rose in December and beat estimates.  Construction spending slowed slightly in December but still beat estimates.  December auto sales also beat estimates.  These are all good signs for the economy and bullish for the stock market.

Let's take a look at some charts!

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