China – U.S. trade talk continued to dominate the week. A heavy selloff Monday was followed by 3 up days, with Friday moderately down.
On Monday, Chinese officials announced retaliatory tariffs against the U.S., hitting $60 billion in annual exports to China with new or expanded duties that could reach 25%.
Then on Wednesday:
The Trump administration plans to delay a decision on instituting new tariffs on car and auto part imports for up to six months, according to media reports.
Trump also called the most recent news “a little squabble”.
On the economic front, retail sales came in below par Wednesday.
Retail sales figures for April showed that U.S. retailers are seeing decelerating purchases for a second time in three months, declining 0.2% last month, compared with expectations for a 0.1% increase. Excluding autos, retail sales were flat for the month, versus expectations for 0.7% growth.
“The 0.2% [monthly] decline in retail sales in April was weaker than the consensus expectation of a small gain and supports our view that GDP growth is set to slow in the second quarter,” wrote Andrew Hunter, senior U.S. economist with Capital Economics.
For the week, the S&P 500 fell 0.8% and the NASDAQ 1.3%.
Here is the 5 day weekly intraday chart of the S&P 500 … via Jill Mislinski.
The week ahead…
Interesting data point:
Trading in fed-fund futures reflect a 74.1% chance of a rate cut this year, with a 32.1% probability of two or more rate cuts by end of 2019, according to CME Group. That is a sharp reversal from just two weeks ago, when the market gave a more than 50% chance that the Fed would hold steady through the remainder of the year.
As a “trade deal has become much less likely [in the near term], what the bond market sees as increasingly likely is the Fed easing policy, a net benefit to stocks,” Gary Pzegeo, head of fixed income at CIBC U.S. Private Wealth Management, said in an interview with MarketWatch.
Wednesday, the Fed will release minutes from its meeting that ended May 1. A few major earnings reports are on the docket, mostly from retailers.
Short term: Both the S&P 500 and NASDAQ might have double tops in which would be bearish. That would be erased by the index powering through those highs.
The Russell 2000 has been stuck in a range since February.
The NYSE McClellan Oscillator has been in the red for a few weeks now – that raises caution.
Long term: the S&P 500 actually bounced nicely off this trend lines that connects the lows of 2017 and 2018.
Charts of interest / Big Movers:
Beyond Meat (BYND) continues to impress post IPO.
Thursday, Cisco Systems (CSCO) rallied 6.7% after the networking- and telecom-equipment company reported quarterly results that topped Wall Street forecasts and delivered an upbeat revenue forecast.
Also Thursday, Dillard’s (DDS) slumped 10.5% following an earnings release that showed the department-store chain missing revenue projections for the first quarter, while same-store sales were flat.
Friday, Pininterest (PINS) sunk 14% after the social media company announced first-quarter losses of $41.4 million, which were three times as large as analysts had expected.
Deere (DE) fell 7.7% after the agricultural, construction and turf care equipment maker reported fiscal second-quarter earnings that missed expectations and provided a downbeat outlook.
Have a great week and we’ll see you back here Sunday!