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Markets Poised For More Gains As Retail Breaks Out

The markets ended mixed on Friday with the Dow, the S&P, and the Nasdaq off modestly. But the Russell 2000 Small-Cap Index finished in the green. Always great to see the more 'risky' smaller-cap stocks leading the way as it's often a bullish sign. It's also important to note that both the Nasdaq and the Russell were up for the week. And the Dow and the S&P only barely missed the cut.

Tax cuts dominated the news last week, which resulted in a powerful rally after the House passed their version of this landmark bill. The Senate is on stage this week.

But looking back, I think one of the standout things for me was the rally in retail stocks. I have been saying that I thought retail stocks had bottomed. And I think that was underscored last week by plenty of excellent earnings reports and big breakout moves, not the least of which came from Wal-Mart, Restoration Hardware, and Foot Locker. And there are plenty more on deck.

In other news, Friday's Housing Starts jumped from 1.127 million units (annualized) to 1.290 mil. for a 14.5% gain. And permits were up from 1.215 mil. to 1.297 mil. for a 6.7% gain.

And while the Kansas City Fed Manufacturing Index slipped from 23 to 17, analysts were quick to point out that manufacturing is 'growing solidly'. And the dip in the recent reading was welcome since the numbers that have come before it were 'unsustainably hot'. This print continues that growth without fear of flaming out.

All in all, it was a solid week of news and economic reports.

And the markets performed well as everything continues to hover near their all-time highs, and are poised for even bigger gains to come.

See you tomorrow,

Kevin Matras

Executive Vice President, Zacks Investment Research


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