Un-Stop-a-Bull: Stocks Rise Friday, Book Weekly Gains

How to explain Friday’s rally? Perhaps the old saying “sell on the rumor, buy on the news” comes closest.

U.S. stocks rose Friday, as bad rumors didn’t happen. Major indices turned positive for the week. Both the Dow and the S&P 500 posted their third weekly gain. Friday’s gains were broad, with technology stocks the biggest gainers.

The reasons? Let’s start with jobs.

The Labor Department reported on Friday that the U.S. created 228,000 jobs in November, exceeding the expected number of 200,000. The unemployment rate held at 4.1%. The government reported that wages rose 0.2%. Wage growth is a sign of economic health, but it’s been modest enough to keep inflation in check.

Jobs data soothed fears of a slowdown. The “wealth effect” is strong. Jobs are plentiful. Gasoline is cheap. Interest rates are low. Home prices are rising. Cash registers are ringing.

The table is set for a “Santa Claus” rally. Investors on Friday scooped up shares of traditional retailers. Many of these stocks were beaten down earlier this year due to e-commerce rivalry. Apparel retailers and discount stores closed higher.

Worries about politics eased. Investors were cheered by the news Friday that the Senate and House approved a funding bill to avoid a shutdown. Tax overhaul moved forward.

Across the pond…

The picture is bright overseas. Growth across the globe is synchronized. Developed and developing countries alike are thriving. The bull is likely to enter 2018 alive and well.

European traders on Friday welcomed news of progress in Brexit talks. The U.K. and European Union got closer to agreement. Without a deal, British firms would be stranded outside the single market.

Brexit will weigh on Britain’s £229 billion annual trade with the EU. Once Britain leaves the EU, trade barriers will rise. An advantage of EU membership is free trade among member nations, which makes exporting goods to EU countries easier for British companies.

Brexit talks have been rocky. But British and EU leaders expressed comity Friday. Downing Street said the “divorce bill” would amount to about £39 billion, a figure both sides can live with. The European Commission president called it a “breakthrough.” European stocks rallied.

London is the financial capital of Europe, but Brexit could cost the city a lot of business. Frankfurt will likely gain a big slice of London’s banking, cementing Germany’s economic dominance of Europe. New York City also benefits; deregulation enhances its allure.

The EU is the second largest economy in the world if viewed as a single country. The Continent’s blue chips are flush with cash. Customers feel wealthier. Unemployment is falling. Populism is waning.

“Soft” Brexit is good news for all investors. Large U.S.-based tech stocks were top gainers Friday. The FANG group resumed their leadership role.

The bull seems unstoppable. The average bull market since World War II has lasted 52 months. The current bull market started in April 2009. Do the math.

When will the music stop? Stock valuations are high by price-to-earnings ratios, dividend yields, book values, and corporate earnings. But investors keep dancing to the tune.

World stocks have risen every month so far this year. If stocks don’t fall in December, it would mark the first year ever without a single monthly decline. Will stocks make history this month? Odds are good.

Friday Market Wrap

  • DJIA: +0.49% or +117.68 points to close at 24,329.16
  • S&P 500: +0.55% or +14.52 points to close at 2,651.50
  • Nasdaq: +0.40% or +27.24 points to close at 6,840.08

Friday’s Big Gainers

  • Qudian (NYSE: QD) +14.84%

Lender lifted by earnings growth.

  • CVR Partners (NYSE: UAN) +14.15%

Fertilizer firm enjoys rising demand.

  • Teva Pharmaceutical (NYSE: TEVA) +7.06%

Biotech considers layoffs to boost profits.

Friday’s Big Losers

  • Sturm Ruger (NYSE: RGR) -7.87%

Gun sales are declining.

  • CAI International (NYSE: CAI) -6.98%

Logistics firm hurt by transportation slump.

  • Cooper (NYSE: COO) -5.14%

Analysts downgrade medical device firm.

Letters to the Editor

 “I rarely read about Canada as a place for investment. Thoughts?” — Janet H.

Money is borderless. Your search for gains should include all regions. Which brings me to your question about the Great White North.

O Canada! You get little respect. Americans treat their neighbor like a 51st state. The media ignore Canadian stocks.

But in Canada, good governance ensures stability. The OECD expects the Canadian economy to grow by 3.2% this year, outperforming every other G7 country (France, Germany, Italy, Japan, the U.K., and the U.S.).

The country’s banks stand out. Canadian banks refrain from the practices that triggered the 2008 crisis. If you’re looking for undervalued growth, consider Canada’s banking sector.

Which region of the world interests you as an investment? Share your views: mailbag@investingdaily.com

John Persinos is managing editor of Personal Finance and chief investment strategist of Breakthrough Tech Profits.