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Market Snapshot: Time to throw out the stock-market playbook as S&P 500 nears 3,000?

November 26
07:04 2017

Is Wall Street’s traditional playbook in effect?

Few of Wall Street’s prognosticators, if any, predicted the S&P 500 would have eclipsed 2,600 before the end of 2017.

Yet, that is where participants find the market with about 24 trading days left in the year, highlighting the challenge of making predictions amid a defiant ascent to records. Investors have shaken off concerns about political uncertainty, a chorus of worries about low volatility,too-rich valuations and torpid inflation.

Read: Investors face ‘extreme mental exhaustion’ in markets where nothing is ‘normal’

Also read: By one measure, stock valuations are at their highest level since 2004

In the abbreviated session of Black Friday, the S&P 500 index SPX, +0.21%  marked its fastest rise to a 100-point milestone—closing at an all-time high at 2,602.42—since 1998, according to WSJ Market Data Group. (As the index climbs, each 100-point gain represents a smaller percentage move.)

The broad-market benchmark traversed to a milestone close above 2,600 from 2,500 hit on Sept. 15 in a blistering 49 trading sessions (see table below):

The Nasdaq Composite Index COMP, +0.32% also ended at a fresh all-time peak at 6,889.16, while the Dow Jones Industrial Average DJIA, +0.14%  finished up 0.1% at 23,557.99, less than 0.1% shy of its own record.

Check out: Why investors are shrugging off high valuations in stocks

According to Bloomberg News, average analysts’ estimates call for the S&P 500 to hit 2,800 by the end of 2018. Brian Belski at BMO Capital Markets is the most bullish among those surveyed with his call for a rise to 2,950 next year, supported by strong corporate earnings.

To be sure, forecasting markets hasn’t been easy.

And equity indexes haven’t been cooperative. Stocks have failed to hew to seasonal trading patterns. September and October, considered traditionally weak periods for equities, failed to comply with the trend.

Solid earnings, a global, synchronized economic upswing in the wake of years of easy-money policies from central banks and hope of market-boosting tax reforms from President Donald Trump are all part of the catalysts that have helped to buoy markets, strategists say.

Read: Investors can feel safe ignoring the Black Friday and Cyber Monday shopping reports

However, for many investors, that backdrop has made for an unsettling climb, with “Downtown” Josh Brown, CEO at New York-based Ritholtz Wealth Management, writing in his The Reformed Broker blog that market participants are entering into a phase of “living dangerously,” where the “rules of thumb are worthless”

It is worth pointing out, however, that not everyone has been equally flummoxed by this market.

Savita Subramanian, market strategist at Bank of America Merrill Lynch, began 2017 with a prediction for a 20% gain for U.S. stocks, would have placed the Dow at 24,000, the S&P 500 at 2,700 and the Russell 2000 at 1,650. She wasn’t that far off the mark.

Which major events are on deck for the week?

Investors will be focused on the Senate confirmation of Fed. Gov. Jerome Powell on Nov. 28. President Trump has nominated the Federal Reserve member to replace Janet Yellen as the head of the central bank.

The Organization of the Petroleum Exporting Countries will meet on Nov. 30 to decide on extending beyond March 2018, output curbs intended to limit the glut of oil in the global market. West Texas Intermediate crude oil futures trading on the New York Mercantile Exchange for January delivery CLF8, +1.64%  finished Friday trade at a more than 2-year high at $ 58.95 a barrel. An extension of the global producer pact could offer oil prices a further leg higher.

What key data are ahead?

Monday

  • New home sales at 10 a.m. Eastern Time

Tuesday

      • Case-Shiller home price index at 9 a.m.

Wednesday

  • Gross domestic product at 8:30 a.m.
  • Pending home sales
  • Beige book

Thursday

  • Weekly jobless claims at 8:30 a.m.
  • Consumer spending
  • Core inflation
  • Chicago PMI at 9:30 a.m.

Friday

  • ISM manufacturing at 9:45 a.m.
  • Construction spending
  • Car sales throughout the day

—Ken Jimenez contributed to this article

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