Each of the three major US stock indices made a new record intraday and closed at highs on Friday, December 20, 2019. The stock market ignored any negative news such as Trump’s impeachment this week, and while concerns exist about the valuation of equities at these high price levels, economic news shows that the US economy is still performing well.

Plenty of economic data was released this week, most if not all of it showing a strong US economy. On Tuesday, December 17, the monthly figures for the US Housing Starts, Building Permits, Industrial Production and Manufacturing Production for the month of November all beat expectations. For the Industrial Production and Manufacturing Production specifically the forecasts were 0.9% and 0.8% respectively, and the actual figures came in at 1.1% and 1.1% respectively. On Thursday, December 19, the figures for the weekly US Continuing Claims, Initial Jobless Claims, and monthly Existing Home Sales were not good, as the actual figures were worse than the forecasts.

n Friday, December 20,  the US Gross Domestic Product Annualized (QoQ) came in at 2.1% exactly as the forecast, but the Personal Consumption data beat the estimates, with a figure of 3.2%, better than the forecast of 2.9%. Personal Consumption is a very important key financial metric about the GDP growth. The US PCE (personal consumption expenditure) Core yearly for the month of November reading came in at 1.6%, beating the forecast of 1.5%. This is another key figure to monitor for inflationary pressures on the real economy and future monetary policy decisions.

The monthly US Personal Income, Personal Spending and University of Michigan Final readings were 0.5%, 0.4% and 99.3 respectively, compared to the forecasts of 0.3%, 0.4% and 99.2 respectively. Overall most of the financial reports were positive for the state of the US economy.

For the week of December 16 – December 20, 2019 the major US stock market indices closed as follows:

• Dow Jones Industrial Average: Close 28,455.09, +1.14% for the week, +21.98% Year-to-date

• S&P 500 Index: Close 3221.22, +1.65% for the week, +28.50% Year-to-date

• NASDAQ: Close 8924.96, +2.18% for the week, + 34.51% Year-to-date

• Russell 2000: Close 1671.90, +2.07% for the week, +23.98% Year-to-date

Weekly Stocks Gainers

These are the top 3 gainers, stocks with 5 days of consecutive price advances:

1. Axsome Therapeutics (NASDAQ: AXSM), Close 100.67, 5-day change +115.15%

2. TravelCenters Of America  (NASDAQ: TA), Close 15.96, 5-day change +79.53%

3. Cortexyme Inc (NASDAQ: CRTX), Close 66.08, 5-day change +69.22%

Weekly Stocks Losers

These are the top 3 losers, stocks with 5 days of consecutive price declines:

1. Technical Communications Corp. (NASDAQ: TCCO), Close 4.15, 5-day change -30.95%

2. Preformed Line Products Corp.  (NASDAQ: PLPC), Close 59.45, 5-day change -18.95%

3. Avadel Pharmaceuticals Plc (NASDAQ: AVDL), Close 6.01, 5-day change -16.53%

Stock Market Commentary

Is the FOMO (fear of missing out) effect driving stock market prices higher? There is good news, but the fact that stocks with poor fundamentals or extreme valuation move higher is an alarming condition. Nobody knows whether stocks can move even higher for the rest of 2019 and in 2020. But extreme caution and tight stop-loss orders should be implemented at these price levels, or trailing stops in the event prices do move higher. The fact that stocks, mainly momentum stocks, move higher ignoring their real valuation is an early and prolonged sign that already bubbles are forming for individual stocks.