Can Nasdaq Make It 41? Benchmark Struggles As Markets Hug Flat Line

There’s a saying on Wall Street that the bulls walk up the stairs and the bears fall out the windows. This week, we appear to be watching the bulls methodically climb the stairs but there are no apparent signs of the bears lingering near any windows.

As is typical during most summer trading, volume has been low, but the three major benchmarks reached record-breaking heights this week. Even the Russell 2000 pierced new levels. Though we saw slight dips in the Dow Industrials ($DJI) and the S&P 500 (SPX) yesterday, the Nasdaq Composite (COMP) plowed ahead to a 10^th straight fresh high, this time by nearly 5 points. How many records has COMP broke through this year you ask? An amazing 41—and it’s only July.

In the early going, the big three were hugging the flat line after a mixed bag of earnings news and a dearth of economic reports. Of course, investors can never be absolutely sure of anything when it comes to the markets because there is so much potential noise knocking around on a global basis that can upend even the quietest of summer days.

What is known is that the economy appears to be mending itself well, albeit slowly, and companies are continuing to hire workers to keep up with demand—though many complain they can’t find enough qualified candidates to fill the holes. (See jobless claims below.) The economy is not the markets, but oftentimes juices them.

On the stock front, earnings news from General Electric Company GE, Honeywell International Inc. HON and Microsoft Corporation MSFT were mixed and their shares were choppy in the early going. GE results missed the earnings-expectations boat while HON and MSFT were ahead of them. Visa Inc V topped Wall Street’s forecast in another show of consumers’ penchant for spending when there’s something out there for them to buy. V shares were heading higher by 1% in the early going.  

What’s up with oil prices? As inventories have fallen, prices swelled for 16 of 19 consecutive sessions through Wednesday. But they slid yesterday to $46.79 a barrel after peaking at $47.55 in midday trading. Today, prices were off another 1%. Some momentum-focused traders appear to be speculating that this rally may not be over, but in break mode. Stay tuned for Monday’s Organization of Petroleum Exporting Countries’ (OPEC) meeting to review the production-cut deal. The meeting is scheduled to be held in St. Petersburg, Russia, and some market watchers are calling it a make-or-break summit.

FIGURE 1: HAPPY 20TH OF JULY. If this month is any indication, the rocky period the Nasdaq Composite (COMP), as tracked on the thinkorswim® platform from TD Ameritrade, endured in late May and June appears to be nothing more than a memory. Once again, COMP edged higher to reach a peak it has never touched and notched 41 record-breaking closes so far this year. Data source: Nasdaq. Chart source: The thinkorswim® platform from TD Ameritrade. For illustrative purposes only. Past performance does not guarantee future results.

Leading Indicators Soar

The economy might be ready for a takeoff if yesterday’s leading economic indicators (LEI) are any, well, indication. The LEI jumped 0.6% last month amid strong housing permits.

“The U.S. LEI rose sharply in June, pointing to continued growth in the U.S. economy and perhaps even a moderate improvement in GDP growth in the second half of the year,” Ataman Ozyildirim, director of business cycles and growth research at The Conference Board, said in the press release.

But You Can’t Leave this Job

That’s the word from employers, who apparently are having a tough time filling jobs when someone moves on, let alone when production rises and more bodies are needed to fulfill demand. Yesterday’s report that initial jobless claims were again scraping at 44-year lows might be yet another sign that the labor market is nearing what economists like to call ‘maximum employment.” Initial jobless claims, which track the number of Americans applying for unemployment benefits, fell by 15,000 to a seasonally adjusted 233,000.  

Good news for the economy, yes, but those reports didn’t include wage information—are employers ready to up salaries to attract and keep good workers yet?—or where the participation rate is sitting. We’re likely to hear at least a little bit more about all that next week when the Federal Reserve holds its two-day meetings of the Federal Open Market Committee, and then again on Aug. 4 when the July jobs numbers are released.

Centenarians Beware

Getting ready to celebrate that 100^th birthday might not be so festive if there’s a certain life-insurance policy that might get canceled at that milestone, according to a Wall Street Journal report. The story profiles a budding centenarian who will lose two policies totaling $3.2 million in death benefits because the man, who turns 100 in September, is still very much alive. Policies have expiration dates, and many times, that is at age 100.

“It is a standard feature of permanent life insurance, a product combining a tax-deferred savings component with a tax-free death-benefit,” according to the piece. “The provision calls for the termination of the death benefit and payout of all of the built-up savings when the policyholder reaches the specified age.”

The family is fighting the clause in federal court, alleging that the insurer “improperly marketed the policies as ‘coverage for life,’” the WSJ reported. Though many insurers have extended the standard maturity dates to 120 years old, the piece notes that an “unknown number of older contracts with the 100-year-old limit remain in consumers’ hands” and that might spell trouble for insurers down the road.