Thursday, 17 January 2019

Markets rise but “easy money is in the rearview mirror”

Markets were mostly higher on Wednesday.

The S&P 500 rose 0.2 percent and the STOXX Europe 600 rose 0.5 percent but Asian markets were mixed.

Despite two consecutive days of gains, some analysts remain cautious.

Bob Doll, senior equity strategist and portfolio manager at Nuveen, said that “the easy money is in the rearview mirror”.

Mark Newton, independent market analyst at Newton Advisors, wrote: “Reversals of trend look likely technically, and one should consider using strength Wednesday to flatten out and/or adopt hedges for an above-average chance of a drawdown into next week.”

“The average bear rally in history is approximately 11%,” noted Gary Gordon, president of Pacific Park Financial. “We stand at roughly 11.5% off of the correction lows right now.”

“If you missed an opportunity to lighten your allocation to risk assets like stock and high yield bonds when the S&P 500 was peaking near 2930-2940, you might want to tactically lower some risk during the current rally,” suggested Gordon.

In contrast, JP Morgan strategist Marko Kolanovic thinks that the stock market is “drifting higher”. The firm has a 3,000 target for the S&P 500 for the end of the year.

Wednesday, 16 January 2019

Markets rise, UK Parliament rejects Brexit deal

Markets rose on Tuesday.

The S&P 500 jumped 1.1 percent, the STOXX Europe 600 rose 0.3 percent and the Nikkei 225 rose 1.0 percent.

Markets largely shrugged off the uncertainty associated with the UK's departure from the European Union as the UK Parliament voted against Prime Minister Theresa May's Brexit deal on Tuesday.

Christopher Smart, head of macroeconomic and geopolitical research at Barings, said that the impact of Brexit “will be minimal” and that “Britain will remain deeply integrated with the EU”.

Tuesday, 15 January 2019

Markets fall on concerns over trade and corporate earnings

Markets fell on Monday.

The S&P 500 declined 0.5 percent, the STOXX Europe 600 fell 0.5 percent and the Shanghai Composite fell 0.7 percent.

Market sentiment was hit by weak Chinese trade data released early on Monday. Imports dropped by 7.6 percent in December while exports fell 4.4 percent.

Also possibly weighing on markets are concerns for corporate earnings. S&P 500 earnings are estimated to have grown 14.5 percent in the final quarter of 2018, the slowest since the third quarter of 2017, and sharply lower than the 28.4 percent rise in the third quarter.

“Analysts have been backpedaling earnings expectations faster than usual in the run-up to the Q4 releases,” said Jasper Lawler, head of research at London Capital Group, in a note.

Monday, 14 January 2019

After third weekly rise, S&P 500 may be at critical juncture

The S&P 500 rose 2.5 percent last week for its third consecutive weekly advance.

According to a stock market checklist from Citi, the bull market is alive and well.

Of the 18 factors tracked by Citi, only 3.5 are flashing sell versus previous bear markets such as 17.5 in 2000 and 13 in 2007.

“The checklist is telling us to buy this dip,” said Robert Buckland, chief global equity strategist at Citi, in a report.

Some technical analysts think that the S&P 500 is at a critical level as it approaches 2,600.

Instinet's Frank Cappelleri noted that the violent swings of recent weeks has subsided as the S&P 500 approached 2,600.

“The most surprising move could be that the last few days developed into a potential bullish flag, and you have another move before there's a decline,” he said.

In contrast, Julian Emanuel, BTIG chief equity and derivatives strategist thinks the level is a “wall of resistance”.

“This is where the bulls and bears come together, and you're going to start to see this tussle,” said Robert Sluymer, a technical analyst at Fundstrat.

Friday, 11 January 2019

US stocks rise as Fed chairman reiterates monetary policy flexibility and patience

Markets were mostly higher on Thursday.

The S&P 500 rose 0.5 percent and the STOXX Europe 600 rose 0.3 percent.

However, earlier in the day, the Nikkei 225 fell 1.3 percent.

Marko Kolanovic, global head of quantitative and derivatives strategy at JP Morgan, told CNBC that “both mutual fund and pension flows suggest positive market performance in the future”.

Investors may also have been encouraged by remarks by Federal Reserve Chairman Jerome Powell during a discussion at the Economic Club of Washington that the central bank will be “flexible” and “patient” on monetary policy as inflation is “under control”.

Still, Powell also did warn that the “long-run fiscal, nonsustainability of the U.S. federal government” is something that he is “very worried about”.

Thursday, 10 January 2019

Continuation of market rally evokes comparison with 2016 rebound

Markets rose on Wednesday.

The S&P 500 rose 0.4 percent, the STOXX Europe 600 rose 0.5 percent and the Nikkei 225 rose 1.1 percent.

Emmanuel Cau, head of European equity strategy at Barclays, said that investors may be buying stocks now because the market had become “very very oversold as of two weeks ago”.

Trade talks between the US and China ended on Wednesday. US Under Secretary of Agriculture for Trade and Foreign Agricultural Affairs Ted McKinney said that he thought negotiations “went just fine”. However, Vishnu Varathan, head of economics and strategy at Mizuho Bank, wrote in a morning note: “It is not over until the fat lady has sung.”

Some analysts noted that there are some similarities between the 2018 pullback and the one that bottomed in early 2016, which eventually proved to be merely a pause before a series of all-time highs.

However, other analysts thinks that the stock market is too damaged for a sustained rally.