Thursday, 27 July 2017

US stocks at record highs amid investor optimism seen as warning sign

Markets mostly rose on Wednesday.

The Dow Jones Industrial Average, STOXX Europe 600 and Nikkei 225 all rose 0.5 percent. The Dow, S&P 500 and Nasdaq Composite all closed at record highs.

US stocks shrugged off the Federal Reserve's announcement after its monetary policy meeting that it will start to reduce its holdings of government and mortgage debt “relatively soon”.

Kim Forrest, senior portfolio manager at Fort Pitt Capital, said that the market has been driven by corporate earnings, and that “so far we’ve had enough upside surprises” and “there is still room to grow” for the market.

Indeed, optimism is pervasive among investors. CNBC reported that bullishness in the most recent Investors Intelligence survey hit 60.2 percent, the highest level since late February.

Bears comprised just 16.5 percent of respondents.

“The latest sentiment is not encouraging for the rest of the year as markets rarely fulfill expectations,” John Gray, editor at II, wrote. “This is a new major warning calling for defensive measures to protect profits, renewing the same signal from earlier this year.”

Wednesday, 26 July 2017

S&P 500 at record high, “bull play still in place”

Markets were mostly higher on Tuesday.

The S&P 500 rose 0.3 percent to close at a record high and the STOXX Europe 600 rose 0.4 percent.

Early on Tuesday, however, Asian stocks finished mixed, with the Nikkei 225 falling 0.1 percent.

Terry Sandven, chief equity strategist at US Bank Wealth Management, said that “valuations are full, but we’re cautiously optimistic because earnings are increasing and the Federal Reserve remains accommodative”.

Ian Winer, head of the equities division at Wedbush Securities, concluded that “the bull play is still pretty much in place”.

Tuesday, 25 July 2017

Markets mixed as IMF leaves growth forecast unchanged

Markets were mixed on Monday.

In the US, the S&P 500 fell 0.1 percent but the Nasdaq Composite rose 0.4 percent to close at a record high.

Elsewhere, the STOXX Europe 600 fell 0.2 percent while in Asia, the Nikkei 225 fell 0.6 percent but the Shanghai Composite rose 0.4 percent.

The International Monetary Fund left its forecast for this year's global growth unchanged at 3.5 percent in its latest quarterly update to its World Economic Outlook but lowered its forecast for the US economy to 2.1 percent from 2.3 percent.

Meanwhile, though, US corporate earnings for the second quarter have been generally positive, according to Savita Subramanian, equity and quantitative strategist at Bank of America Merrill Lynch, with “the highest proportion of top and bottom-line beats at this point during earnings season in over five years”.

Monday, 24 July 2017

US stock market seen overvalued, may be at inflection point

The US stock indices saw mixed performances last week. The Dow Jones Industrial Average fell 0.3 percent but the S&P 500 rose 0.5 percent and the Nasdaq Composite rose 1.2 percent.

However, with US stock indices near record highs, 65 percent of investors think that the US stock market is overvalued, according to a quarterly investment manager survey performed by Northern Trust Asset Management. That is the highest since the survey began in the third quarter of 2008.

In contrast, 36 percent of investors think the US market is undervalued or fairly valued, the lowest reading on record.

Indeed, Mark Hulbert at MarketWatch pointed out last week that the volume of short selling has been increasing each month since last December.

That, according to a study he cited, suggests that the market may well be at or close to an “inflection point”.

Saturday, 22 July 2017

Markets fall as euro rises

Markets fell on Friday.

The S&P 500 slipped less than 0.1 percent but the Nikkei 225 fell 0.2 percent and the STOXX Europe 600 tumbled 1.0 percent as the euro hit a two-year high against the US dollar.

“The fear the European Central Bank will discuss the possibility of trimming its bond buying scheme later this year has driven investors to dump their eurozone equities,” said CMC Markets’ markets analyst David Madden. “To make matter worse, the relative strength of the euro is making eurozone stocks more expensive.”

In the US, the market was held back by General Electric, which fell 2.9 percent after reporting a drop in its second-quarter earnings and revenue.

“From an earnings perspective, it’s been kind of mixed so far and there is no earnings tailwind that investors had been expecting,” said Bruce Bittles, chief investment strategist at RW Baird & Co.

Still, Wayne Kaufman, chief market analyst at Phoenix Financial Services noted that “the breadth we saw in the Nasdaq over the rally speaks very well for what can happen down the road”.

Friday, 21 July 2017

Markets mixed as markets shrug aside Draghi's dovish message

Markets were mixed on Thursday.

While Asian stocks rose following the advances overnight in the US and Europe, the S&P 500 was flat and the STOXX Europe 600 fell 0.4 percent.

European stocks fell despite ECB President Mario Draghi saying at a Thursday press conference that a “very substantial degree of monetary accommodation is still needed”.

“Draghi’s trying to send as dovish a message as possible,” said Oanda’s senior market analyst Craig Erlam. “Markets aren’t buying it anymore.”

Nevertheless, Jeffrey Saut, chief investment strategist at Raymond James, remains sanguine. He wrote in a note that “any downside pressure should continue to be muted while the conditions by the end of next week favor the upside”.