Wednesday, 21 November 2018

Morgan Stanley: Bear market sign irrefutable

Markets fell sharply on Tuesday.

The S&P 500 plunged 1.8 percent, the STOXX Europe 600 fell 1.1 percent and the Nikkei 225 fell 1.1 percent.

Oil fell. West Texas Intermediate crude plunged 6.6 percent while Brent fell 6.4 percent.

“The broader financial market complex was roiled by weakness in tech stocks and the seemingly hard-to-bridge rift between the U.S. and China, at least as far as trade is concerned,” said consulting firm JBC Energy.

Morgan Stanley thinks that the US stock market is now in a bear market.

“The technical damage is irrefutable,” wrote the bank’s analysts.

Tuesday, 20 November 2018

US stocks plunge with homebuilder confidence

Markets mostly fell on Monday.

The S&P 500 plunged 1.7 percent while the STOXX Europe 600 fell 0.7 percent.

Earlier on Monday, the Nikkei 225 had risen 0.7 percent.

“Trade war concerns with China weigh on the global supply chain for large technology companies while global growth fears worry many that future earnings will be lower,” said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance, in a research note.

“Today’s housing data was pretty bad,” said Jim Smigiel, chief investment officer of non-traditional strategies at SEI Investments, referring to a report that showed that the National Association of Home Builders’ monthly confidence index plunged eight points to 60 in November.

Jefferies economists are sanguine though, writing after the NAHB release that housing “appears to be settling into a plateau”, with “no signs of threatening excesses such as inventory overhangs and a surge in delinquencies”.

Monday, 19 November 2018

US investors ignoring strong earnings

The S&P 500 fell 1.6 percent last week.

The US stock market has been falling despite strong earnings growth. According to a MarketWatch report, earnings for S&P 500 companies grew by 25.8 percent in the third quarter, the strongest performance since the third quarter of 2010.

However, from the start of earnings season to the close of trade last Friday, the S&P 500 has fallen 2.7 percent.

“Wall Street doesn’t care what you’ve done in the past. It’s all about what you’re going to do next quarter,” said Michael Arone, chief investment strategist at State Street Global Advisors.

“The market knows that earnings growth has peaked, and so earnings growth can’t be a reason any longer to ignore the macro picture,” said Tom Essaye, president of the Sevens Report.

Indeed, Bert Dohmen, president of Dohmen Capital Research, suggested in a Forbes article that central bank tightening and stock market overvaluation could push stocks down as much as 35-40 percent just to “normalize”.

Saturday, 17 November 2018

Markets mixed, oil steady as “negative news priced in”

Markets were mixed on Friday.

The S&P 500 rose rose 0.2 percent but the STOXX Europe 600 fell 0.2 percent.

Earlier in Asia, the Nikkei 225 fell 0.6 percent but the Shanghai Composite rose 0.4 percent.

Oil was steady, with West Texas Intermediate crude unchanged and Brent gaining 0.2 percent.

The Energy Information Administration had reported on Thursday that US crude supplies rose by 10.3 million barrels for the week ended 9 November, an eighth consecutive increase.

“Price reaction to the U.S. inventory data shows that negative news is now largely priced in,” said Carsten Fritsch and the commodities team at Commerzbank in a note.

Friday, 16 November 2018

Markets mixed amid concerns over trade tension and Brexit

Markets were mixed on Thursday.

The S&P 500 jumped 1.1 percent to end a five-day losing streak but the STOXX Europe 600 tumbled 1.1 percent. Earlier in Asia, the Nikkei 225 fell 0.2 percent but the Shanghai Composite jumped 1.4 percent.

Despite the rebound in US stocks, some analysts see continued headwinds for the market.

Lindsay Bell, investment strategist at CFRA, said that concerns over US-China trade tensions “will continue to intensify as we grow closer to January, when tariffs will jump from 10% to 25%”.

Mark Esposito, president of Esposito Securities, said that the UK's exit from the European Union is having second-order effects on the US economy. “Brexit doesn’t help the European economy, and it’s helping to drive up the dollar, which weighs on earnings and means fewer people will come here to buy our goods,” he said.

Thursday, 15 November 2018

Stocks fall but oil rises as “macro demand concerns likely overdone”

Markets fell on Wednesday.

The S&P 500 fell 0.8 percent and the STOXX Europe 600 plunged 2.2 percent. Earlier in Asia, the Nikkei 225 rose 0.2 percent but the Shanghai Composite fell 0.9 percent.

Oil prices stabilised though, with West Texas Intermediate crude rising 1 percent to end a 12-session losing streak.

Jeffrey Currie and the commodities team at Goldman Sachs wrote in a note that “the macro demand concerns from October were likely overdone”.

Nevertheless, Jameel Ahmad, global head of currency strategy & market research at FXTM, said that “traders are waking up to the significant threat that slowing global growth in 2019 will weaken demand for commodities like oil”.

While oil's gain provided some relief for stocks on Wednesday, the stock market is still experiencing “a continuation of the selling pressure that began in early October”, according to Robert Pavlik, chief investment strategist at SlateStone Wealth.

“We're still working through this corrective phase a little bit and I think that could take some time,” said Jeffrey Mills, co-chief investment strategist at PNC Financial Services Group.