And the hat trick continues.
The Dow Jones industrial average is on track for its best weekly gain in 2018.
And it hasn’t even started yet.
A week before a highly anticipated Federal Reserve meeting, the Dow and other major indices are poised to close higher for a fourth straight week.
Despite the broad optimism among stock investors, the question on everyone’s mind is whether the bull market is finally losing steam.
But in a market where sentiment, good or bad, is volatile and driving stocks down and up at a dizzying rate, the Fed’s decision to boost interest rates — and only marginally so — isn’t a decisive proof of anything, not even the months-long rally the Dow seems to have forgotten about.
“The Fed has demonstrated its ‘normalization’ of policy, which is monetary policy designed to restrain what policymakers see as an ongoing rise in market-based pricing of risk,” Wells Fargo & Co.’s John Silvia wrote in a research note.
Silvia believes that the Federal Reserve is in the business of controlling the market. And he correctly believes that the Federal Reserve is now back at the table.
“We doubt that a more aggressive rate posture of the FOMC will resolve the tepid speed of economic growth or bring swift policy normalization any closer,” Silvia wrote.
The news comes as concerns about inflation and the Fed continue to overshadow a strong quarterly report that sent Apple shares back to record highs.
This month, both Dow components, Microsoft and Boeing, reported fourth-quarter earnings well above Wall Street’s estimates.
Apple reported that it sold its first billion iPhones and that gross profit margins on iPhones rose. And Apple reported that it sold more iPhones and iPads than any other quarter in its history.
Meanwhile, Intel posted its strongest quarterly earnings in nearly two years, as revenue rose nearly 12 percent.
Technology, software and internet companies all reported strong revenue this quarter. Smaller companies, meanwhile, continued to post weak earnings despite a powerful sell-off in the broader stock market.
“Both the semiconductor and chip equipment sectors are solidly profitable and make great investments in a slow-growth economy,” wrote Jim Kennedy, CEO of MD&J Capital.
Kennedy added that despite slowing global growth and stretched stock prices, chip stocks remained inexpensive — an important point to consider given that the stocks are a proxy for earnings.
“The slowdown in global growth is real, but the market appears to be discounting this,” Kennedy wrote.
Kennedy, a first-time investor, contends that the stock market may have priced in the slowdown in global growth even though that doesn’t necessarily mean that stocks will crash. “Instead, the market is likely to continue to offer great opportunities if not provide contrarian help,” he wrote.
Kelvin Wong, an analyst at Bloomberg Intelligence, echoed this point, saying that many tech companies might sell off in the coming weeks because they were just cheap and will either look like a steal or should be avoided.
While it’s not uncommon for the market to offer good or bad bargains, Wong cautioned that there are a lot of arguments and debates still to be had about the Fed’s rate hikes.
That’s why Wong thinks there’s still time to get in on shares of Apple, which reports earnings Nov. 1, Amazon and other tech companies now that “very strong” earnings are becoming somewhat of a theme.
“It seems to be time to buy those that have reported earnings, such as Apple and Netflix, but the recent sell-off of large-cap stocks shows that the market isn’t always waiting for fundamentals to offer opportunities,” Wong wrote.