Bullish sentiment reignited this week as financial and technology shares once again led major indexes to new all-time highs. Investors are confident President-elect Trump’s administration and proposed economic policies will mean higher profits for U.S. companies. The Russell 2000 Index is up 16 percent since the election, one of its best months in history.
Financials rose more than 4 percent this week, while technology gained roughly 4 percent. Consumer cyclicals, materials and energy rounded out the week’s top five performers. Defensive sectors, such as utilities, consumer staples and healthcare, all lagged.
Although last weekend’s referendum in Italy rattled markets, the feared drop in the euro did not materialize. Later in the week, however, the European Central Bank (ECB) kept its benchmark interest rate unchanged and extended its quantitative easing program to the end of 2017. Central bank officials did say that the amount of bonds purchased each month would start to decline in April 2017, but traders reacted by selling the euro, sending it near its 52-week low in Friday trading. A break of the low will start the next phase of the euro’s decline, down to parity with the dollar.
Service sector Purchasing Managers Indexes (PMIs) out this week were bullish. China’s service PMI rose to its highest level in 16 months and the U.K. PMI reached a 10-month high. The U.S. service PMI declined fractionally, but it continues to signal robust economic expansion. News of record production by OPEC raised doubts about the cartel’s ability to follow through on production cuts, and hedging by U.S. shale producers raised the specter of U.S. production growth. On Wednesday, the latest weekly oil inventory report showed an increase of 3.8 million barrels. Oil finished the week above $50 a barrel nonetheless.
Weekly mortgage purchase applications dropped 0.7 percent, in line with economists’ consensus forecast. The Job Openings and Labor Turnover Survey (JOLTS) report reflected a slight rise in October job openings to 5.5 million, joining low initial unemployment claims figures released Thursday to demonstrate continued strength in the labor market.
In earnings news, H&R Block (HRB) had a net loss of $0.67 per share on revenues of $131.3 billion, marginally better than forecast estimates. Shares fell more than 5 percent on the report. Wholesale retailer Costco (COST) was flat after the company beat earnings per share estimates, but missed on its total revenues. After the bell, Wednesday, lululemon athletica (LULU) reported earnings that handily beat forecast estimates. Shares rose more than 18 percent. Same-store sales at Sears (SHLD) dropped another 7.4 percent this past quarter and earnings missed estimates. Shares fell more than 5 percent on the week.