A solid week for the bulls as the panic of the “inverted yield curve” subsided and bears went back to getting mostly spanked. A big gap up Tuesday followed by a solid rally Friday provided most of the spark. Optimism about the Chinese-U.S. trade talks seemed to be the contributor for much of the gains – it has been amazing how the market has rallied on that same news over and over.
Global growth continues to show signposts of slowing:
Data from China’s National Bureau of Statistics, meanwhile, showed that profits at industrial firms fell by 14% in January and February, the largest decline since 2011.
The final reading of U.S. gross domestic product growth in the fourth quarter was lowered to 2.2% from an estimated 2.6% annualized rate.
Hmm I thought the tax cuts would juice growth to 4%+ and pay for themselves…
The real estate slowdown we’ve been speaking to for about a year is real and increasingly tangible:
Home prices grew at the slowest pace in more than six years, with the S&P CoreLogic Case-Shiller 20-city index rising at a seasonally adjusted rate of 0.2% in January compared with December. Pending home sales fell 4.9% from the year earlier, the National Association of Realtors said. Contract signings for homes have declined on an annual basis for 14 straight months.
The world is slowing but never fear…. central banks will save us (expect to hear a lot of this in the coming year):
“We’re in a period of consolidation as investors digest what is clearly a slowdown in the global economy and yet a very sharp shift in global central bank policy, led by the Fed,” said Carlos Dominguez, chief investment officer at Element Pointe Advisors.
“Stock performance is caught in a tug of war that’s left equities increasingly range bound and volatile,” wrote Alec Young, managing director of global markets research at FTSE Russell in an email. “Downside has been limited by increasingly dovish central bank guidance while upside is capped by plunging bond yields, curve inversion jitters and mounting evidence of weaker global growth.”
For the week, the S&P 500 gained 1.2% and the NASDAQ 1.1%. For the quarter the S&P surged 13.1% (recall it fell 14% in the fourth quarter of 2018) while the NASDAQ rocketed 16.5%! “Patience”!
Here is the 5 day weekly intraday chart of the S&P 500 … via Jill Mislinski.
If you are a woman between the age of 24 and 55 and speak German, and are willing to lay in bed for 2 months Germany is willing to offer you $19,000! Honestly this sounds nearly impossible!
The study will run from September through December 2019 in Cologne, and will begin with 15 days of familiarization, followed by 60 days of bed rest — where everything from showering, eating, using the bathroom and leisure activities will be done lying down, with researchers ensuring that you do not get up or lift your head — followed by 14 days of “astronaut rehab.”
The week ahead…
More rallying on the same China-U.S. trade deal hopes? Brexit doesn’t apparently matter. First quarter earnings season is here very soon.
Retail sales data will be released this week. ISM manufacturing and employment data will hit Friday. Recall last month we had that strange 20,000 number so it wouldn’t shock to see a “blockbuster” upside number to offset that. However if it’s something weak like say 80,000-100,000 job growth that would be interesting.
Short term: The S&P 500 is still grappling with our trendline.
The Russell 2000 did improve this past week after making a “lower low” the prior week. Still it is not even over the 200 day moving average like the other indexes.
The NYSE McClellan Oscillator has been in the red for nearly a month – it flipped back positive Friday.
Long term: Not awful but a bit choppy certainly.
Charts of interest / Big Movers:
Tuesday, Bed Bath & Beyond (BBBY) surged 22% after The Wall Street Journal reported that three activist investors are preparing to launch a proxy fight to replace the home furnishings retailer’s entire board.
Thursday, Lululemon (LULU) surged 14% following after the athletic-wear company released earnings that beat Wall Street estimates for fourth-quarter profits and sales.
Lyft (LYFT) IPO’d late this week at a $25 billion valuation – 5 things to know about the ride sharing company!
Celgene (CELG) closed 7.9% higher Friday, after the company announced a key European regulator “adopted positive opinions for two triplet regimens” based on proprietary Celgene drugs.
Have a great week and we’ll see you back here Sunday!