Going, Going, Gone!

Going, Going, Gone!  Equity markets fly to the edge of the ballpark and the NASDAQ Composite enters a new bull market.  On what would be negative news of a national emergency traders shrug off the   calamity and buy stocks… and bonds.

WHAT YOU NEED TO KNOW:

1)  Trump’s announcement that he will use his Presidential powers to call a national emergency to divert funds to build a border wall has fallen on deaf ears… on Wall Street.  Traders largely shrugged off the announcement for two primary reasons: it was expected and baked into the market and the mounting legal battles make the actual fund diversion a low probability event in the longer run.

2)  Confidence rebounded since its decline a month earlier.  On Friday, the University of Michigan Sentiment Index jumped to a greater than expected 95.5 vs last month’s figure of 91.2. This is a result of not only current conditions but also expectations rising.  This is most likely the result of the recent stock market recovery as a good amount of research now shows that the health of the stock market affects consumer spending – nice to know but scary considering that the market can be volatile.

3)  Trade talks with China progress and the only news seems to be good news so traders keep on buying stocks.  Talks with China are due to resume in Washington this week with senior officials joining in on Thursday.

4)  New trade noise is bubbling out of the EU.  WHILE YOU SLEPT Jean-Claude Juncker, the President of the European Commission, exclaimed in an interview that if Trump decides to exact tariffs on EU imported autos, they will respond in-kind by cutting Soy Bean purchases amongst other things.  Sounds familiar, eh?  Though this may be a tempest in a teapot it deserves to be watched closely.

Stocks soared last Friday with the S&P500 rising by +1.09%, the Dow Jones Industrial Average climbing by +1.74%, the Russell 2000 Index trading up by +1.56%, and the NASDAQ 100 floating up by +0.47%. The NASDAQ 100’s cousin, the NASDAQ Composite Index entered a new bull market, which is defined by an index climbing greater than +20% from a recent low.  The NASDAQ composite is a capitalization weighted index and comprises roughly 2,500 securities compared to the roughly 102 of the NASDAQ 100.  It is closely tied to the Information Technology sector and comprised of more growth oriented stocks making it far more volatile than other indexes.  It is typically the first in and first out for many stock market moves, which is why its entering a new bull market is seen by some as being positive for stocks as a whole.  Right now all equity indexes are in a nice technical position.  The primary driver for the recent move still remains the Federal Reserves policy shift and jawboning, which makes the Fed the single biggest threat to the markets current jovial mood.  Though they are not likely to disrupt the party any time soon, a careful look at economic numbers is warranted.  Due to the very same stimulus, bonds too have been enjoying strength with aggregate US bonds trading virtually unchanged on Friday despite the big move in equities.  The 10 year treasury closed out the week yielding 2.66% and the 2/10 yield curve flattened out slightly to 14 basis points.

WHAT TO LOOK FOR IN TODAY’S SESSION:

Today, we will get the NAHB (National Association of Home Builders) Housing Market Index and it is expected to come in at 59, slightly higher than last month’s 58.  In the week ahead, we will hear from 46 S&P500 companies as they report their 4th quarter earnings.  This morning before the bell, Noble Energy, Advance Auto Parts, and Walmart will deliver earnings amongst others.  After the bell earnings releases will include Devon Energy, Diamond Back Energy, and Herbalife Nutrition. The star release of the week will be the FOMC meeting minutes, which are due to be released tomorrow.  Others releases this week include Durable Goods Orders, Markit Manufacturing PMI, and Leading Indicators.  Pleaser refer to the attached weekly schedules of earnings and economic releases for all the details.  This will be a critical week for markets as traders attempt to follow through with recent bullish moves, if not at least to maintain these levels.

daily chartbook 2019-02-19

earnings releases 2_19

econ numbers 2_19

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