U.S. stocks hit new highs again this week, with the Dow Jones Industrial Average (DJI) soaring past the 26,000 level, thanks to another round of well-received fourth-quarter earnings reports. The momentum stalled by week's end, however, when profit-taking and fears of a government shutdown took hold on Wall Street. As a result, the CBOE Volatility Index (VIX) notched its best weekly win since Dec. 1 -- a second straight double-digit weekly rise for the fear gauge. While the Dow, S&P 500 Index (SPX), and Nasdaq Composite (IXIC) are still set for positive finishes to the week, a slight pullback in stocks may not be surprising, given the extreme optimism seen from investors and signs of an overbought market.
Outside of the ongoing political drama, earnings remained the main focus for traders this week. Heavyweight bank stocks like Goldman Sachs (GS), Morgan Stanley (MS), and Bank of America (BAC) were some of the main highlights, and blue chip IBM reported its first increase in revenue in 23 quarters -- though shares of the Watson creator still pulled back. Fellow Dow stock American Express (AXP) whiffed after earnings, too.
Transportation concern Kansas City Southern (KSU) saw heavy options trading ahead of earnings, with the stock ultimately rewarding the bearish traders. Netflix bulls, meanwhile, are lining up ahead of the company's release next week, with the FAANG stock already trading at record highs.
Still early in the new year, many analysts were again making notable changes to their outlooks for stocks across all sectors. Most of the attention was bullish, with Deutsche Bank calling for a breakout from Sirius XM stock -- though the firm lowered its price target for this healthcare stock. Nomura's predicting a 60% surge in Square stock, and Credit Suisse gave Starbucks (SBUX) some credit.
Meanwhile, one analyst said to buy Walmart stock after tax reform, and another downgraded Apple (AAPL). Also in the tech space, cybersecurity stock Palo Alto (PANW) apparently has "room to flourish," and self-driving technology is one reason Mizuho sees more upside for Nvidia (NVDA), as the chipmaker hit record highs yet again.
One of the biggest moves this week came from GNC stock, as the shares rallied following an upbeat sales report. Shares of Papa John's (PZZA) also continued to push higher, and call buyers are betting on more technical strength. Retail showed signs of life again, too, with shares of discount retailers enjoying tailwinds.
And what would the week be without several stocks rallying on blockchain developments? In fact, one Chinese tech stock doubled in value in one day on blockchain buzz, and Overstock.com (OSTK) could continue to attract bullish traders -- much like Tesla (TSLA) did this week. As for notable losers, generic drugmakers slid on competition concerns, and Snap continued to disappoint investors.
Looking ahead, Facebook's "buy" signal could be an opportunity for traders to replicate gains seen from our winning options trade on aluminum stock CENX. For a longer-term time frame, check out AMD stock. Of course, traders may just want to use options to hedge, since even the VIX is flashing a rare signal that could be bad news for stocks. But as earnings season rolls on, the January Barometer says to keep buying into February if stocks hold their monthly gains.