Indexes were coming off a massive week and entered this past week somewhat overbought, so certainly were due for some sort of rest. For the week, the S&P lost 1.2%, and the NASDAQ 1%. While most of this political mumbo jumbo stuff is not really market moving for more than a hot minute while the algorithms scramble to react, it is worth noting the movement in key economic positions. To that end:
Lawrence Kudlow of CNBC fame has been officially named as director of the National Economic Council to replace Gary Cohn, who resigned earlier this month. Kudlow has supported Trump’s tax cuts but opposes tariffs.
Trump said Wednesday his administration will seek to trim the U.S.’s trade deficit with China by $100 billion. The announcement follows comments the previous day that he wants to impose up to $60 billion in tariffs on Chinese goods.
Since “trade wars!” have been on everyone’s tongue the past few weeks, I found this infographic pretty darn cool. It shows the top export of every country – click on the graphic to expand it. Would you have guessed France’s top export is aerospace? As interesting, globally you see so much focus on natural resources or food…
Inflation reports have been mostly ignored the past decade but with the market needing something to worry about after over a year of nearly unabated gains, they have finally returned to investors attention. Tuesday, the consumer-price index rose a mild 0.2% in February after a 0.5% increase in January. The cost of housing rose and the price of clothes and auto insurance posted large gains for the second month in a row. The year over year rate for CPI edged up to 2.2% from 2.1% in January. PANIC!
The producer-price index showed wholesale inflation up 0.2% in February, above the 0.1% that had been expected, but down from the 0.4% advance in January.
U.S. retail sales fell 0.1% in February, the third straight monthly decline. However, sales grew 0.3% if autos and gas are stripped out. Department stores recorded a 0.9% decline while internet retailers reaped a 1% gain in sales. “It’s looking like a frosty opening to 2018 for U.S. retailers,” said economist Royce Mendes of CIBC Economics.
Here is the 5 day weekly “intraday” chart of the S&P 500 …via Jill Mislinski.
If you enjoy bottled water this may be an issue…
The week ahead…
The Federal Reserve will have its two day policy meeting Tuesday and Wednesday, and is widely expected to deliver the first rate increase of 2018. Powell’s first news conference as Fed chief at 2:30 p.m Wednesday. The normal parsing of every sentence of the statement to see if there is a 4th rate hike coming in 2018 will be the main event for financial TV.
Short term: The NASDAQ was very overextended entering the week – and didn’t even come back to fill this mini gap above 7400 during this week of losses. Still well above the 20 day moving average and the best index at this time.
The Russell 2000 was again pretty solid, as the companies in this index are more domestic based and less export based, hence the least exposed to “trade wars!”
The NYSE McClellan Oscillator entered the week very overbought and remained positive during the pullback.
Long term: Uber strong on that NASDAQ chart.
Charts of interest / Big Movers:
Monday, Oclaro (OCLR) jumped 28% after Lumentum (LITE) said it would acquire the optical components company in a deal valued at $1.8 billion.
Tuesday, Qualcomm (QCOM) fell 5% after Trump on Monday blocked Broadcom’s $117 billion hostile bid for the semiconductor company, citing national security concerns.
Wednesday, Signet Jewelers (SIG) sunk 20% on heavy volume after the parent company for the Zales, Kay and Jared chains unveiled a restructuring plan to be carried out over the next three years.
Thursday, Solid Biosciences (SLDB) had a not so solid outing. The company plunged after the maker of muscular-dystrophy treatments announced a clinical trial had been put on hold. Its stock ended down 65%.
Have a great week and we’ll see you back here Sunday!