Wednesday, 26 April 2017

Markets rise, Nasdaq breaks 6,000

Markets rose on Tuesday.

In the US, the S&P 500 rose 0.6 percent while the Nasdaq Composite rose 0.7 percent to close at a record 6,025.49.

The STOXX Europe 600 rose 0.2 percent, with the DAX 30 closing at a record high and the CAC 40 finishing at a nine-year high.

The MSCI Asia Pacific Index rose 0.7 percent.

Michael Antonelli, equity sales trader at Robert W. Baird & Co, noted that US corporate earnings “have been strong” and “so far it looks like the market is very optimistic on tax cuts”.

Meanwhile, Barclays on Tuesday reiterated its overweight rating on European equities. “A reduction in political risk, coupled with an end to the seven-year stagnation in earnings, should lead to an acceleration in foreign investor buying of European equities,” Barclays strategist Dennis Jose wrote in a note.

In contrast, some analysts think that investors' enthusiasm for Asian stocks is waning on concerns that economic and business cycles may have peaked.

Tuesday, 25 April 2017

Markets surge on French election result

Markets surged on Monday following the strong showing by centrist Emmanuel Macron in the French presidential election.

The S&P 500 rose 1.1 percent and the STOXX Europe 600 jumped 2.1 percent, with the CAC 40 surging 4.1 percent.

Asian markets were mixed though. While the Nikkei jumped 1.4 percent, the Shanghai Composite Index tumbled 1.4 percent on worries over potential government action to reduce market risk.

Safe-haven assets like gold, the Japanese yen, and US Treasuries all fell. The CBOE Volatility Index dropped more than 25 percent to below 11, its largest one-day percentage drop since August 9, 2011.

“With Macron heavily favored in head-to-head polling against Le Pen, it seems most likely that the negative market scenarios—priced in over recent weeks—will recede between now and the runoff,” said Timothy Graf, head of macro strategy for Europe, the Middle East and Africa at State Street Global Markets.

Monday, 24 April 2017

Markets relieved as Macron wins first round in France

Investors heaved a sigh of relief at the end of the weekend as centrist Emmanuel Macron won the first round of voting in the French presidential election on Sunday.

Macron will face far-right leader Marine Le Pen in the final voting on 7 May.

Following the Sunday vote, the euro jumped the most in a month and the yen retreated. US stock-index futures and Japanese shares also rose.

Jordan Rochester, a foreign exchange strategist at Nomura Holdings Inc, said that the market “will likely fully price in the outcome of the second round today in favor of Mr Macron”, adding that Macron as the next president of France “should be positive for the French economy and for broader European economic stability”.

Chris Weston, chief market strategist at IG Ltd, said he expects the CAC 40 Index to open about 140 points higher when trading begins in Paris, signaling gains of almost 3 percent. “There’s going to be some relief coming through.”

Saturday, 22 April 2017

Markets mixed after Paris attack

Markets were mixed on Friday.

The S&P 500 fell 0.3 percent, the STOXX Europe 600 was flat and the MSCI Asia Pacific Index rose 0.7 percent.

Oil fell. West Texas Intermediate crude fell 2.2 percent while Brent fell 1.9 percent.

Markets generally held up well on Friday after an attack in Paris on Thursday night that left a police officer as well as the assailant dead.

Nevertheless, Michael Hewson, chief market analyst at CMC Markets, noted that the attack could influence France's presidential election, increasing the likelihood “of a face-off between Marine Le Pen on the right and Melenchon on the left”, which “is unlikely to be well received by the markets”.

Markets were also possibly supported by an announcement by US President Donald Trump that he would be releasing a “massive tax cut” package next week.

Friday, 21 April 2017

Markets rise as politics dominate trading

Markets mostly rose on Thursday.

The S&P 500 rose 0.8 percent and the STOXX Europe 600 rose 0.2 percent. Asian stocks were little-changed though.

US stocks were boosted by some better-than-expected corporate earnings reports as well as comments by Treasury Secretary Steven Mnuchin that a tax bill is likely to be unveiled very soon.

European stocks were boosted by a 1.5 percent jump in the CAC 40 after a poll showed centrist candidate Emmanuel Macron coming out ahead of far-right candidate Marine Le Pen in France's presidential election.

With markets becoming increasingly focused on political developments, Boris Schlossberg, managing director of foreign exchange strategy at BK Asset Management, said on CNBC on Wednesday that “all trades are purely political” and “all economic data is irrelevant”.

Schlossberg added that if the Trump administration fails to get tax reform and infrastructure spending done in the summertime, then “a huge part of the 'Trump rally' just simply dies on the vine”.

Schlossberg also said that the progress of far-right and far-left candidates to the next round in the French presidential election would be the “absolute worst-case scenario for the market”.

Thursday, 20 April 2017

Markets mixed as investors move out of expensive US stocks

Markets were mixed on Wednesday.

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

Earlier in Asia, the Shanghai Composite Index fell 0.9 percent but the Nikkei 225 rose 0.1 percent.

US stocks were dragged down by oil. West Texas Intermediate crude fell 3.8 percent on Wednesday while Brent fell 3.6 percent.

US stocks also fell amid the reallocation of funds away from them towards other markets, according to Bank of America Merrill Lynch's latest global fund manager survey.

“A net 83% of investors think [the] U.S. is the most overvalued region, the highest response on record,” said BAML strategists Michael Hartnett and Jared Woodard in a note.

Wednesday, 19 April 2017

Markets fall, UK stocks plunge on election announcement

Markets fell on Tuesday.

The S&P 500 fell 0.3 percent, the STOXX Europe 600 fell 1.1 percent and the MSCI Asia Pacific Index fell 0.5 percent.

Tepid corporate earnings weighed on stocks in the US while a surprise announcement of an early UK general election pulled the FTSE 100 down 2.5 percent.

“The market is very fragile,” said Nicholas Teo, a trading strategist at KGI Securities in Singapore. “The strategy seems to be that investors are selling when the market is up.”

Tuesday, 18 April 2017

Markets mixed but stocks “only game in town”

Markets were mixed on Monday.

The S&P 500 rose 0.9 percent, the Nikkei 225 rose 0.1 percent but the Shanghai Composite Index fell 0.7 percent. European markets were closed.

Paul Nolte, portfolio manager at Kingsview Asset Management, said that “while valuations are still way too high, stocks remain the only game in town if you’re looking at them versus bonds”.

However, in China, stocks fell over an escalating regulatory crackdown on stock manipulation, and despite a report on Monday showing that the economy grew 6.9 percent in the first quarter from a year earlier, accelerating for the second consecutive quarter.

Monday, 17 April 2017

US stocks expensive but Japan “too cheap to ignore”

With US stocks expensive, John Hussman thinks that investors should keep their powder dry.

“Based on current valuation extremes, the outlook for prospective 12-year S&P 500 total returns remains dismal, likely averaging less than 1% annually by our estimates,” he wrote in his latest article. “Dry powder has considerable value here, not because of the return it currently generates, but because of the opportunity it may afford to establish constructive and even aggressive market exposure over the completion of this cycle, at higher prospective returns than are currently available.”

Alternatively, investors may want to consider the Japanese stock market. According to a Bloomberg report, Japanese stocks have become “too cheap to ignore”.

“It’s a buying opportunity,” Hiroshi Matsumoto, head of Japan investment at Pictet Asset Management, was quoted as saying.

Braver investors could consider emerging stock markets. A New York Times article noted that emerging market stocks have risen almost 17 percent in the 12 months through March.

“What has been driving emerging market returns in the last year was the recovery in commodity prices, which led to a number of commodity producers’ doing well,” said Arjun Divecha, head of the emerging markets equity team at GMO.

Saturday, 15 April 2017

Geopolitical tensions rattle markets but it is China's debt that may explode

Markets have been rattled in recent days by geopolitical tensions in Syria and North Korea.

Then on Thursday, the US used its largest non-nuclear bomb to attack the Islamic State's holdings in Afghanistan.

And on Friday, as the aircraft carrier USS Carl Vinson sailed towards the Korean Peninsula, China's Foreign Minister Wang Yi urged all parties “to stop provoking and threatening each other and not to make the situation irretrievable”.

However, ZeroHedge reminds us that it is China's huge debt that could really threaten global financial markets.

ZeroHedge asserts that “just one number truly matters: that of the global credit impulse, which as we cautioned for the first time two months ago, had recently turned negative, mostly as a result of the recent deceleration in China's credit creation”.

ZeroHedge added that “the reflation trade of the past year was entirely the function of Chinese credit dynamics”, so this deceleration could adversely impact the global credit impulse.

On Friday, Reuters reported that China's banks made 1.02 trillion yuan in new loans in March, down from 1.17 trillion yuan in February.

However, China's total social financing, a broad measure of credit and liquidity in the economy, surged to 2.12 trillion yuan in March from 1.15 trillion yuan in February, reflecting probably a surge in off-balance sheet lending.

Wendy Chen, an economist at Nomura, said: “We don't think the strength in shadow banking activity will continue.”

Indeed, the concern is that bad loans may already be at destabilising levels, with Reuters noting that “some China watchers warn a debt crisis may be inevitable if loan and money supply growth continues to sharply outpace the rate of economic expansion”.

Friday, 14 April 2017

Stock markets fall but gold rises

Markets fell on Thursday.

The S&P 500 fell 0.7 percent, the STOXX Europe 600 fell 0.4 percent and the Nikkei 225 fell 0.7 percent.

Stock markets fell as fear appears to be creeping back into markets, with the Credit Suisse Fear Barometer, which measures the cost of buying protection against declines in the S&P 500 Index, nearing an all-time high this week.

However, gold rose 0.8 percent on Thursday and the US dollar fell after US President Donald Trump said the currency “is getting too strong”.

Brien Lundin, editor of Gold Newsletter, said that gold “seems likely to build upon its gains in the weeks ahead”.

Thursday, 13 April 2017

Markets mixed, volatility rises

Markets were mixed on Wednesday.

The S&P 500 fell 0.4 percent and the Nikkei 225 fell 1.0 percent but the STOXX Europe 600 rose 0.2 percent.

“We think the rally driven by hope of faster growth was overdone and there is a potential for disappointment,” said Wouter Sturkenboom, senior investment strategist at Russell Investments.

Indeed, the US 10-year Treasury yield fell three basis points to 2.27 percent while the CBOE Volatility Index rose to a five-month high.

Bloomberg reports that investors such as Rick Rieder at BlackRock Inc. and Bob Michele at J.P. Morgan Asset Management say they have been betting that price swings will grow more dramatic in the days and months ahead.

Wednesday, 12 April 2017

Markets fall amid geopolitical concerns

Markets were mostly lower on Tuesday.

The S&P 500 fell 0.1 percent, the Nikkei 225 fell 0.3 percent, the DAX 30 fell 0.5 percent but the FTSE 100 rose 0.2 percent.

Ongoing geopolitical concerns over Syria and North Korea kept safe haven assets supported. The US 10-year Treasury yield fell six basis points to 2.30 percent while gold rose 1.6 percent.

Richard Perry, market analyst with Hantec Markets, wrote in a note that “there has been a negative shift in risk sentiment as safe haven assets outperform” and as a result, “equities will tend to suffer”.

Oil rose though amid talk of a possible extension to the OPEC-led production cut agreement. West Texas Intermediate crude rose 0.6 percent and Brent rose 0.5 percent.

Tuesday, 11 April 2017

Markets mixed as investors look to earnings for further gains

Markets were mixed on Monday.

The S&P 500 edged up 0.1 percent, the STOXX Europe 600 was flat and the Nikkei 225 rose 0.7 percent.

“Stocks are not cheap, and it’s tough to find something that looks inexpensive, but we’ve seen them much more expensive and we should continue to grind higher as we get into earnings,” said John Brady, managing director at RJ O’Brien & Associates.

Phil Orlando, chief equity market strategist at Federated Investors, agrees. “We’re expecting good numbers and I think we’ll break to the upside if the numbers come in positive, but markets are always vulnerable to any kind of disappointment,” he said.

However, Avi Gilburt wrote that while he is “still looking for a much higher U.S. stock market in 2017”, he expects further weakness until May.

This decline represents a buying opportunity, he wrote, as he expects the S&P 500 to “rally to the 2,500 region into the summer”.

Monday, 10 April 2017

Markets likely to shrug off Syria strike

US stocks fell last week, with the S&P 500 declining 0.3 percent.

The S&P 500 ended the week with a slight 0.1 percent dip on Friday. A US military strike on a Syrian airbase initially provoked selling but the market recovered later in the day.

Reactions among analysts to the attack on Syria were mixed.

Sean Callow, senior strategist at Westpac Banking Corp, said that “there is likely to be a lingering sense of unease”.

However, Shane Oliver, head of investment strategy at AMP Capital Investors, said that the strike is “unlikely to have a lasting impact in markets”, an opinion shared by Jim McCaughan, CEO of Principal Global Investors.

Indeed, Kevin Marder said that “the market has bullishly become more of an earnings-driven affair”, while geopolitical incidents may “provide a buying opportunity”.

Saturday, 8 April 2017

Markets mixed after weak US jobs report and military strike on Syria

Markets were mixed on Friday.

The S&P 500 dipped less than 0.1 percent but the STOXX Europe 600 rose 0.1 percent and the Nikkei 225 rose 0.4 percent.

US stocks were held back by a weak employment report. A Labor Department report showed that the US economy created just 98,000 new jobs in March, the smallest gain in almost a year.

Some analysts see a silver lining though.

“It wasn’t exactly a disaster, maybe it backs off some of the ultrahawks [on the Fed] and we only get two rate hikes this year,” said Bill Stone, chief investment strategist at PNC Asset Management Group.

A US military strike against a Syrian airbase on Friday helped boost stocks of defence contractors but Nigam Arora thinks that apart from very mild boosts to gold and oil, markets will not be significantly affected in the long term.

Friday, 7 April 2017

US and European stocks rebound as Trump-Xi meeting begins

Markets were mixed on Thursday.

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

However, the MSCI Asia Pacific Index fell 0.8 percent as the Nikkei 225 plunged 1.4 percent.

“We are seeing a short-term snap back from yesterday’s sharp selloff with the hardest-hit sectors recovering,” said Frank Cappelleri, chartered market technician at Instinet.

“Every time the market dips, investors come back,” said Paul Nolte, portfolio manager at Kingsview Asset Management.

Investors will be keeping an eye on the two-day meeting between US President Donald and Chinese President Xi Jinping that began on Thursday.

Connor Campbell, financial analyst at Spreadex, wrote in a note that “there is the chance for fireworks in the next 24 hours”.

However, Julian Evans-Pritchard, China economist at Capital Economics, said “we don’t expect any major policy announcements to come out of the meeting”.

Thursday, 6 April 2017

US stocks reverse sharply after Fed releases minutes

Markets were mixed on Wednesday.

The S&P 500 fell 0.3 percent, the STOXX Europe 600 was flat and the Nikkei 225 rose 0.3 percent.

The US 10-year Treasury yield fell after the minutes of the last Federal Reserve monetary policy meeting showed that it would not substantially shrink its bond holdings.

The Fed minutes also showed that some officials thought that stock prices were “quite high relative to standard valuation measures”.

Perhaps investors think so too.

Mark DeCambre at MarketWatch noted: “After staging what was shaping up to be a healthy stock-market surge, equity-index benchmarks buckled Wednesday, ending squarely in the red and registering their worst reversal since February 2016.”

Wednesday, 5 April 2017

Markets mixed amid tension over Trump/Xi meeting

Markets were mixed on Tuesday.

The S&P 500 rose 0.1 percent and the STOXX Europe 600 rose 0.2 percent but the Nikkei 225 fell 0.9 percent.

Oil rose. West Texas Intermediate crude oil rose 1.6 percent while Brent rose 2.0 percent.

“Markets are trading in a very tight wait-and-see range,” said Jeff Kravetz, regional investment strategist at the Private Client Reserve at U.S. Bank.

“There is justifiable tension/apprehension building over the meeting between Presidents Trump and Xi this week as the former's China bashing over alleged mercantilist policies presumably sets the stage for what could be testy talks,” said Vishnu Varathan, an economist at Mizuho Bank.

“There is an undercurrent of worries that the economy is losing momentum,” said Quincy Krosby, a market strategist, at Prudential Financial.

And while Mark Kepner, managing director of sales and trading at Themis Trading, thinks that the “price action in the stock market suggests there is still a ‘buy the dip’ mentality”, Nicholas Colas, chief market strategist at Convergex, wrote in a note that “with equity valuations high and volatility low, time isn't necessarily our friend”.

Tuesday, 4 April 2017

Markets mostly fall but Nikkei 225 rises on improved business sentiment

Markets mostly fell on Monday.

The S&P 500 fell 0.2 percent and the STOXX Europe 600 fell 0.5 percent.

The yield on the US 10-year Treasury note fell 5 basis points to 2.335 percent.

“I expect we’ll see some softness until earnings start to come in,” said Wayne Kaufman, chief market analyst at Phoenix Financial Services.

Earlier on Monday, however, the Nikkei 225 rose 0.4 percent after the Bank of Japan's quarterly survey showed that the diffusion index of large manufacturers’ views on their current business conditions improved for the second consecutive quarter.

Indeed, Goldman Sachs strategists wrote in a report that now could be the time for foreign investors to return to Japanese equities.

Or braver investors could move into emerging markets. A Bloomberg report suggested that a widened growth gap, improving earnings outlooks and a greater valuation discount support a bullish outlook for emerging equity markets.

Monday, 3 April 2017

US corporate profitability at turning point?

The S&P 500 rose 0.8 percent last week. While it was flat for March, it rose 5.5 percent for the first quarter as a whole.

The sustained rally in the US stock market has made stocks expensive, but Michael Batnick at Yahoo Finance pointed to a Credit Suisse paper that noted that US companies have become more profitable in recent decades, which might justify their higher valuations.

However, John Hussman wrote that going forward, US economic growth is likely to be constrained by slowing labour force and productivity growth. Slowing economic growth and a tighter laboor market will in turn widen the wage share of GDP and narrow corporate profit margins.

Saturday, 1 April 2017

Markets fall as positive fundamentals offset by stretched valuations

Markets mostly fell on Friday.

The MSCI World Index fell 0.4 percent, the S&P 500 fell 0.2 percent and the Nikkei 225 fell 0.8 percent.

However, the STOXX Europe 600 rose 0.2 percent.

Despite the dip on Friday, the S&P 500 ended the week up 0.8 percent. It was flat for March but up 5.5 percent for the first quarter.

“The reflation trade certainly lost some steam this month, but overall fundamentals are still positive, especially considering that earnings outlook for the first quarter is great,” said Quincy Krosby, market strategist at Prudential Financial.

Some analysts are not so sure about the outlook, however.

“Valuations are as stretched as they ever get,” said Bruce Bittles, chief investment strategist at Robert W. Baird & Co. “Certainly that's cause for concern if earnings don't grow the way they are anticipated to grow.”

Friday, 31 March 2017

Markets rise as US economy shows momentum

Markets mostly rose on Thursday.

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

Earlier in Asia, however, stocks fell. The Nikkei 225 fell 0.8 percent and the Shanghai Composite fell 0.9 percent.

Economic data helped prop up markets in the West.

In the US, a report showed that the economy expanded at a 2.1 percent annualised rate in the fourth quarter, slightly faster than the previously-reported 1.9 percent rate, while another report showed that jobless claims fell by 3,000 to 258,000 in the latest week, near their lowest level in decades.

“This is a market that looks like it may be gaining some traction as we go into the end of the month. The upward revision to GDP suggests economic momentum, and that’s providing some lift,” said Alan Gayle, senior investment strategist at RidgeWorth Investments.

In Germany, inflation fell to 1.5 percent in March from 2.2 percent in February, which helped ease expectations of a rate hike by the European Central Bank.

Thursday, 30 March 2017

Markets rise amid optimism, UK triggers Brexit

Markets rose on Wednesday.

The S&P 500 rose 0.1 percent, the STOXX Europe 600 rose 0.3 percent and the Nikkei 225 rose less than 0.1 percent.

Oil rose. West Texas Intermediate crude rose 2.4 percent while Brent rose 2.1 percent.

Analysts are optimistic on stocks.

Randy Frederick, vice president of trading and derivatives for Charles Schwab, said that “economic data remains strong and markets are optimistic that we’ll see progress on tax reform out of Washington”.

“We’re probably going to get double-digit earnings growth this quarter, showing that things are getting better even without Administration changes,” said Karyn Cavanaugh, senior market strategist at Voya Financial.

In Europe, stocks rose as investors largely ignored the UK's official notification of its decision to leave the European Union.

Wednesday, 29 March 2017

Markets rebound amid positive economic data

Markets rose on Tuesday.

The S&P 500 rose 0.7 percent, the STOXX Europe 600 rose 0.6 percent and the Nikkei 225 jumped 1.1 percent.

Positive economic data on Tuesday in the form of a jump in consumer confidence and rising house prices helped boost investor sentiment.

Mark Kepner, managing director of sales and trading at Themis Trading, said the “markets have fared pretty well with a little consolidation going on”.

However, Peter Cardillo, chief market economist at First Standard Financial, warned that the “Trump setback on health-care reform will likely spell trouble for equities in the days ahead”.

Tuesday, 28 March 2017

Markets fall but S&P 500's long-term momentum “still very solid”

Markets fell on Monday.

The S&P 500 fell 0.1 percent, the STOXX Europe 600 fell 0.4 percent and the Nikkei 225 plunged 1.4 percent.

“Equity valuations have been underpinned by the Trump reflation trade since November, but the failure of the health-care bill raises major doubts about the strength of the administration and risks unwinding all the gains that the market has seen over the past five months,” said Rebecca O’Keeffe, head of investment at stockbroker Interactive Investor.

The S&P 500 did recover from a much deeper decline on Monday, with Patti Domm at CNBC attributing it to end-of-quarter buying.

Domm also reported that according to Sam Stovall, chief investment strategist at CFRA, April is on average the second best month of the year for the S&P 500.

Beyond that, technical analyst Katie Stockton said on CNBC on Monday that the long-term momentum of the market “is still very solid”.

Monday, 27 March 2017

S&P 500 expected to survive Trump's health-care failure

The S&P 500 fell 1.4 percent last week. It slipped 0.1 percent on Friday after President Donald Trump failed to secure enough votes to pass his health-care bill.

However, Patti Domm at CNBC wrote on Friday that the market is likely to shrug off the health-care debacle.

“The market is expected to quickly move past the fallout from the House's failure to vote on a plan to replace Obamacare, and watch the play by play on President Donald Trump's promise to start work on reducing corporate and individual taxes,” she wrote.

“If they can get past this and move on to Trump's other programs, the market will breathe a sigh of relief,” Art Hogan, chief market strategist with Wunderlich Securities, was quoted as saying.

“I don't think it necessarily spells doom and gloom for the rest of the pro-growth agenda,” said Tom Simons, money market economist at Jefferies.

“If the president didn't deliver 100 percent, you were bound to get some kind of insecurity in the stock market, but I think what people are forgetting is the underlying fundamentals are still there, and that's what's going to drive the stock market,” said Richard Bernstein, CEO of Richard Bernstein Capital Management.

Writing at Forbes, Tom Aspray agrees.

Aspray said that “the stock market is not on ice that is thin enough to indicate a new bear market” and “I expect stocks to survive Trump's big legislative failure”, but added that “a further correction is now more likely”.

Saturday, 25 March 2017

US stocks fall with Trump's health-care bill

Markets were mixed on Friday.

The S&P 500 slipped 0.1 percent, the STOXX Europe 600 fell 0.2 percent but the Nikkei 225 rose 0.6 percent.

US stocks fell after President Donald Trump failed to secure enough votes to pass his health-care bill.

Kate Warne, investment strategist at Edward Jones, said the “inability of the Congress to pass the health-care bill would send a signal that other policies, such as tax reforms may be delayed too.”

Friday, 24 March 2017

Markets mixed, US stocks in “consolidation phase”

Markets were mixed on Thursday.

The S&P 500 slipped 0.1 percent but the STOXX Europe 600 rose 0.9 percent and the Nikkei 225 rose 0.2 percent.

“We think this is a normal pullback and consolidation phase after everything that's happened over the past six months,” said Lisa Kopp, head of traditional investments at US Bank Wealth Management. “The economic data seems to be positive; that's why we are still positive on stocks for the year.”

However, Canaccord Genuity chief market strategist Tony Dwyer thinks that it is not time to buy.

Speaking to CNBC on Wednesday, Dwyer said that “we just want to be market neutral until those things get oversold enough”.

And on Thursday, Todd Gordon of TradingAnalysis.com told CNBC: “The underperformance of the small caps over the last two months coupled with a significant reversal in the Nasdaq makes me very cautious of this market going forward.”

Thursday, 23 March 2017

Markets mixed as US stocks rebound

Markets were mixed on Wednesday.

The S&P 500 rose 0.2 percent but the STOXX Europe 600 fell 0.4 percent and the Nikkei 225 plunged 2.1 percent.

“My feeling is we are running into a period of risk-off sentiment,” said Christoffer Moltke-Leth, director of global sales trading at Saxo Capital Markets.

Nevertheless, the rebound in the US kept some analysts optimistic.

“The market’s decline was relatively short-lived and economic data are amazingly strong, so we are still in a bull market and view this as a buying opportunity,” said Randy Frederick, managing director of Trading & Derivatives at Schwab Center for Financial Research.

In contrast, Kathleen Brooks, research director at City Index, wrote in a note that “the market is sending us some signals that could suggest a deeper pullback is on its way”.

Wednesday, 22 March 2017

Markets fall but investors “not throwing in the towel”

Markets fell on Tuesday.

The S&P 500 fell 1.2 percent, its steepest fall since 11 October. The Dow Jones Industrial Average and Nasdaq Composite fell 1.1 percent and 1.8 percent respectively, their worst declines since September.

Elsewhere, the STOXX Europe 600 fell 0.5 percent and the Nikkei 225 fell 0.3 percent although most other Asian markets rose.

Jack Ablin, chief investment officer at BMO Private Bank, said that investors have lost some of their enthusiasm over President Donald Trump as “a lot of his policies got mired in the legislative process”.

Nevertheless, analysts appear to remain sanguine about stocks.

“Investors are not throwing in the towel but they are resetting their expectations,” said Ablin.

“This doesn’t feel like a selloff, though, at least not at this point,” said Steve Sosnick, equity-risk manager at Timber Hill/Interactive Brokers Group.

A recent survey of global fund managers by Bank of America Merrill Lynch showed that most respondents thought that higher interest rates will be the most likely catalyst to end the bull market but for now, Treasury yields remain too low to hurt stocks.

Tuesday, 21 March 2017

Markets fall as protectionism risk rises

Markets mostly fell on Monday.

The S&P 500 fell 0.2 percent, as did the STOXX Europe 600.

In Asia, the Shanghai Composite rose 0.4 percent but stocks were mixed elsewhere in the region while the Japanese market was closed.

Over the weekend, finance ministers and central bankers at a G-20 meeting had dropped a pledge against protectionism in a policy statement, a move pushed by the US.

Citigroup economist Ebrahim Rahbari wrote in a research note. “Our base case is still cautiously benign, but we see a major rise in protectionism as one of the main risks to the global outlook.”

Analysts mostly appear to remain sanguine about market prospects though.

“At this stage, sideways or a move lower on the S&P 500 would make sense and perhaps that’s what we are seeing after gains in February,” said Michael Antonelli, equity sales trader at Robert W. Baird & Co.

“We have one of the most business-friendly administrations, which we expect to spur capital spending by companies, leading to better earnings growth,” said Maris Ogg, president at Tower Bridge Advisors.

Monday, 20 March 2017

Oil turns down even as stocks hold up

Notwithstanding a small gain last week, oil has been selling off in recently. From Bloomberg:

The exodus of oil-price optimists has begun.

Money managers cut bets on rising West Texas Intermediate crude by a record amount during the week ended March 14, while wagers on a further price drop doubled as oil remained below $50 a barrel.

In contrast, investors are still waiting for a sell-off in stocks. From MarketWatch:

Investors who have been looking for a big pullback in stocks to scoop up some bargains have been waiting a long time, and they may be waiting even longer to jump into that opportunistic drop if the current trend holds.

Saturday, 18 March 2017

Markets mixed

Markets were mixed on Friday.

The S&P 500 fell 0.1 percent but the STOXX Europe 600 rose 0.2 percent while Asian markets were mixed.

Despite the decline on Friday, the S&P 500 finished the week with a 0.2 percent gain.

Karyn Cavanaugh, senior market strategist at Voya Financial, said that “investors are content to just sit tight” but Adam Sarhan, chief executive officer at 50 Park Investments, said that “there’s no question that we’re in a period with lofty valuations and stretched positive sentiment”.

Friday, 17 March 2017

Markets mixed but analysts remain optimistic

Markets were mixed on Thursday.

The S&P 500 fell 0.2 percent but the STOXX Europe 600 rose 0.7 percent and the Nikkei 225 rose 0.1 percent.

Oil fell. West Texas Intermediate crude fell 0.2 percent while Brent fell 0.1 percent.

Nevertheless, analysts remain optimistic.

Bloomberg reports that Credit Suisse Group AG and UBS Group AG have told their clients that now is the time for them to jump back into stocks.

Indeed, market technician Michael Kahn thinks that “the bull market has years to run”.

In the meantime, Shelley Goldberg thinks that any further drop in oil from current levels will likely be “short-lived”.

Thursday, 16 March 2017

Markets rise as Fed raises rates

Markets mostly rose on Wednesday.

The S&P 500 rose 0.8 percent and the STOXX Europe 600 rose 0.4 percent. However, the MSCI Asia Pacific Index finished little-changed.

The Federal Reserve raised its benchmark rate by 25 basis points on Wednesday, a move that failed to dampen investor sentiment.

Indeed, Tomi Kilgore at MarketWatch wrote that investors should celebrate as “interest rates and the stock market usually trend in the same direction over the long term”.

Nevertheless, Goldman Sachs has downgraded its outlook on equities to neutral from overweight over the next three months.

“The asymmetry for equities is turning increasingly negative,” Christian Mueller-Glissmann, an equity strategist at Goldman Sachs, said in a report. “High equity valuations alone are not a reason for drawdowns in the short term, if they reflect stable or improving macro conditions; but they indicate elevated drawdown risk,” he added.

Wednesday, 15 March 2017

Markets fall with oil as Fed rate hike looms

Markets fell on Tuesday.

The S&P 500 fell 0.3 percent, the STOXX Europe 600 fell 0.3 percent and the Nikkei 225 fell 0.1 percent.

Stocks were dragged down by falling oil prices. West Texas Intermediate crude fell 1.4 percent while Brent fell 0.8 percent after a report showed that oil production from Saudi Arabia is increasing.

Also possibly weighing on investors' minds was Federal Reserve monetary policy tightening as the Federal Open Market Committee kicked off its two-day meeting on Tuesday.

However, while a rate hike on Wednesday is considered likely and would be the Fed's third increase since December 2015, analysts remain mostly sanguine.

Neil Staines, head of trading at The ECU Group, noted that “when the real fed-funds rate is negative, as it is now, equities have gone up an average of 3.6% over the next three months” following a third rate rise.

Sam Stovall, chief investment strategist at CFRA, thinks that the Fed’s tightening schedule is probably already “baked into” stock prices.

Tuesday, 14 March 2017

Markets mixed as US stocks seen overvalued

Markets were mixed on Monday.

The MSCI Asia Pacific Index rose 0.8 percent and the STOXX Europe 600 rose 0.4 percent but the Dow Jones Industrial Average fell 0.1 percent while the S&P 500 was little-changed.

Investors in the US may be getting nervous at the extreme valuations of US stocks.

Brett Arends at MarketWatch wrote on Monday: “This is the most dangerous and overvalued stock market on record.”

Arends quoted John Hussman as saying: “Presently, we observe the broadest market valuation extreme in history.”

He also cited the World Bank in saying that the US stock market is now valued at more than 150 percent of annual gross domestic product, way above historic norms and about the same as it was at the market extreme of 2000.

However, John Bollinger, creator of Bollinger Bands, thinks that the charts are pointing to even more highs for stocks.

Monday, 13 March 2017

US stock market “not a bubble” but weakness in small caps “disturbing”

The US stock market is not in a bubble, so stay invested.

At least, that is what Eddy Elfenbein said at the Crossing Wall Street blog.

“If the Street’s estimate for 2018 is accurate, that means the S&P 500 is currently going for 16 times next year’s earnings,” he wrote. “To my mind, that’s a bit above average, but it’s hardly excessive.”

Elfenbein also said that a recession “doesn’t appear to be on the horizon”.

He concluded that while the market will “see some ups and downs”, he sees “no reason for us to expect any severe troubles for the next several months”.

However, Art Cashin, a market veteran and director at UBS, commented on CNBC last week that a “counter-intuitive” trend is appearing in the market with small-cap stocks. The IWM, the small-caps stock tracking ETF, has lost almost all of its gains year to date.

Cashin calls the trend “slightly disturbing” as “one of the Trump initiatives would be in international trade, therefore the multinationals might be under some stress, and the small caps should be fine”.

Cashin also thinks that problems could emerge as “the Trump agenda will be far later in being implemented than people thought”, as well as from geopolitical events like tensions in North Korea and the upcoming French elections.

Saturday, 11 March 2017

Stocks rise to “rare state” as US rate hike next week “a near certainty”

Markets rose on Friday.

The S&P 500 rose 0.3 percent, the STOXX Europe 600 rose 0.1 percent and the Nikkei 225 jumped 1.5 percent.

A report on Friday showed that the US economy added 235,000 jobs in February.

Karyn Cavanaugh, senior market strategist at Voya Financial, said that the “jobs report is an affirmation of everything else we’ve been seeing on the data front” while Jasper Lawler, senior market analyst at London Capital Group, said that it “makes a rate hike at next week’s meeting of the Federal Reserve a near certainty”.

Meanwhile, Business Insider quoted CNBC's Michael Santoli as saying: “Stocks in a rare state, crossing above 20x P/E w/ 20% gain over the past year.”

That is based on a chart from Brian Belski, chief investment strategist at BMO Capital Markets, who also said in a note: “U.S. stocks remain in the midst of a secular bull market with many years of life left to it.”

Friday, 10 March 2017

Stocks rise, oil falls, Eurozone rates unchanged

Markets were mostly up on Thursday.

The S&P 500 rose 0.1 percent, the STOXX Europe 600 rose 0.1 percent and the Nikkei 225 rose 0.2 percent.

“The sharp decline the last two days may have left room for a short technical rebound,” said Bruce McCain, chief investment strategist at Key Private Bank.

However, oil prices continued to fall. West Texas Intermediate crude fell 2.0 percent while Brent fell 1.7 percent.

At its monetary policy meeting on Thursday, the European Central Bank decided to leave interest rates unchanged.

Thursday, 9 March 2017

Oil plunge drags stocks down

Markets mostly fell on Wednesday.

Oil led markets lower after the US Energy Information Administration reported that domestic crude supplies rose last week to lift total commercial inventories to a record weekly level. West Texas Intermediate crude plunged 5.4 percent and Brent fell 5.0 percent.

The S&P 500 fell 0.2 percent as energy stocks plunged 2.5 percent.

In Asia, the Nikkei 225 fell 0.5 percent and the Shanghai Composite fell 0.1 percent after China reported a trade deficit for February.

However, the STOXX Europe 600 rose 0.1 percent.

While US stocks fell for the third consecutive day on Wednesday, they remain in a relatively calm period.

CNBC reports that the S&P 500 has posted its 100th consecutive trading day without a decline of 1 percent or more, its longest such run since 1994.

Wednesday, 8 March 2017

Markets fall, triggering warning signal

Markets fell on Tuesday.

The S&P 500 fell 0.3 percent for the second consecutive day, the STOXX Europe 600 fell 0.3 percent, its fourth consecutive decline, and the Nikkei 225 fell 0.1 percent.

Analysts mostly remain sanguine about the market.

“We had a very good run-up, especially last week, so the market is in consolidation at the moment,” said Mark Kepner, managing director of sales and trading at Themis Trading.

However, a warning sign did flash on Tuesday, being the second consecutive day that the number of New York Stock Exchange-traded stocks hitting 52-week lows exceeded those that hit 52-week highs.

Chart specialist Tom McClellan said on Tuesday that lows surpassing highs within seven trading days of a 1-year high for the S&P 500 is an Ohama Titanic Syndrome, a preliminary sell signal. The S&P 500 put in a high on 1 March.

Tuesday, 7 March 2017

Stocks fall after entering “danger zone”

Markets were mostly lower on Monday.

The S&P 500 fell 0.3 percent, the STOXX Europe 600 fell 0.5 percent and the Nikkei 225 fell 0.5 percent.

Markets fell as Business Insider noted that stocks have entered the “danger zone” according to Jeff Saut of Raymond James.

Indeed, a report from CNBC said that in order to make the case for buying stocks based on valuation, one has to believe that earnings will “truly shoot skyward”, a prospect that Matt Maley, equity strategist with Miller Tabak, sees as “far-fetched”.

Monday, 6 March 2017

With no historic metrics to prove bullish case, is stock market in new era?

In an article today titled “The Most Broadly Overvalued Moment in Market History”, John Hussman wrote:

On Wednesday, the consensus of the most reliable equity market valuation measures we identify (those most tightly correlated with actual subsequent S&P 500 total returns in market cycles across history) advanced within 5% of the extreme registered in March 2000. Recall that following that peak, the S&P 500 did indeed lose half of its value, the Nasdaq Composite lost 80% of its value, and the tech-heavy Nasdaq 100 Index lost an oddly precise 83% of its value. With historically reliable valuation measures beyond those of 1929 and lesser peaks, capitalization-weighted measures are essentially tied with the most offensive levels in history. Meanwhile, the valuation of the median component of the S&P 500 is already far beyond the median valuations observed at the peaks of 2000, 2007 and prior market cycles, while our estimate for 10-12 year returns on a conventional 60/30/10 mix of stocks, bonds, and T-bills fell to a record low last week, making this the most broadly overvalued instant in market history.

However, if history does not support the bullish case, one can always ignore history.

Long-time bull Laszlo Birinyi, president of Birinyi Associates, was quoted by the New York Times over the weekend as saying: “My attitude is, the market is likely to continue to do better, though I can’t point to historic metrics to prove my case the way I usually can.”

In other words, it is a new era.

Saturday, 4 March 2017

S&P 500 rises, “to continue on to higher levels”

Markets were mixed on Friday.

The S&P 500 rose less than 0.1 percent but the STOXX Europe 600 fell 0.1 percent and the Nikkei 225 fell 0.5 percent.

For the S&P 500, the gain on Friday helped the index finish the week up 0.7 percent, its sixth consecutive weekly rise.

Jim Paulsen, Wells Capital Management's chief investment strategist, told CNBC that stocks are likely to rise further. “I think this is going to continue on to higher levels and yields are going to move higher ... before we get a significant correction,” he said.

Paulsen pointed out that the correlation between stocks and bonds is positive right now. “Once that turns negative again, then I think I'm going to turn more negative on the stock market overall,” he said.

Friday, 3 March 2017

US stocks take a breather amid persistent optimism

Markets were mixed on Thursday.

The S&P 500 fell 0.6 percent, the STOXX Europe 600 was flat and the Nikkei 225 rose 0.9 percent.

“It’s not surprising to see the market take a breather today, but there’s still a lot of optimism,” said Jimmy Chang, chief investment strategist at Rockefeller & Co.

Indeed, Deutsche Bank strategist Jim Reid thinks that recent global manufacturing data supports the rally in stocks, iSPYETF founder Simon Maierhofer thinks that the risk of a bear market in stocks in 2017 is close to zero and Commonwealth Financial Network chief investment officer Brad McMillan thinks that there is quite a bit of upside left to go.

However, Fundstrat's Tom Lee, a long-time bull, warned on CNBC on Thursday that the yield curve is flattening and that “has almost always presaged weakness in equities”.

Thursday, 2 March 2017

Dow breaks 21,000 as investors like Trump Congress speech

Markets jumped on Wednesday after a well-received address to Congress by US President Donald Trump on Tuesday.

In the US, the Dow Jones Industrial Average surged 1.5 percent to close above 21,000 for the first time ever. The S&P 500 also hit a record high after jumping 1.4 percent.

Earlier, the STOXX Europe 600 jumped 1.5 percent to its highest close this year while the Nikkei 225 rose 1.4 percent.

After the string of record highs in US stock indices, Quincy Krosby, market strategist at Prudential Financial, is concerned that “markets are extended and overbought”.

“But for now, it seems that investors are content with the reasonable tone of the president, while impending rate hikes are seen in the context of an improving economy,” he said.

Wednesday, 1 March 2017

After record-breaking run, are US stocks cheap or ripe for correction?

Markets were mixed on Tuesday.

The S&P 500 fell 0.3 percent but the STOXX Europe 600 rose 0.2 percent and the Nikkei 225 rose 0.1 percent.

US stocks fell after hitting record highs on Monday.

Despite its record-breaking run, Peter Morici, economist and professor at the Smith School of Business of the University of Maryland, thinks that the US stock market is cheap.

Morici said that while the market P/E ratio is approaching 27, “factoring in expected profit growth over the next 12 months, the P/E ratio falls to about 18”.

Morici thinks that a P/E ratio approaching 35 is “reasonable” and that the S&P 500 could hit “3200 over the next two or three years”.

Indeed, Thomas Kee Jr at MarketWatch noted that when the stock market hit record highs on Monday, it “broke above near-term, mid-term and longer-term resistance levels”. As a result, “there are no resistance levels at this particular time”.

Kee also noted that despite the break-out, the market is not signalling an overbought condition as some stocks have been left out of the rally.

On the other hand, a report from Vickers Weekly Insider showed that insider selling in US corporations have jumped “to levels rarely seen” which would, according to Vickers analyst David Coleman, “seem to imply that equities might be ripe for some level of correction”.

Tuesday, 28 February 2017

US stocks at new highs, Buffett says stocks cheap

Markets were mixed on Monday.

In the US, the S&P 500 rose 0.1 percent to a record high while the Dow Jones Industrial Average edged up to a 12th consecutive record close.

However, earlier in the day, the STOXX Europe 600 fell 0.1 percent while the Nikkei 225 fell 0.9 percent.

Investors remain bullish on the US market though.

Warren Buffett told CNBC on Monday that US stocks are “on the cheap side”.

David Tepper told CNBC also on Monday that he is still long stocks and short bonds.

Monday, 27 February 2017

US stocks at record high, “virtually certain to be worth far more in the years ahead”

US stocks rose last week. The S&P 500 rose 0.7 percent for its fifth consecutive weekly gain and ending the week on a record high.

Despite the record-breaking run, some analysts remain sanguine about US stocks.

“The market is in a definite uptrend and there is not a lot of volatility,“ said Frank Cappelleri, executive director at Instinet LLC.

“Overall, I can’t think of anything that is a worry,” said Karyn Cavanaugh, senior market strategist at Voya Financial. “The Trump administration is likely to sweeten any negative policy or any vinegar with a teaspoon of sugar.”

While Ethan Harris, global economist at Bank of America Merrill Lynch, wrote in a note that with “potential big policy changes in Washington, political risk in Europe and geopolitical concerns, there are plenty of reasons to be uncertain now,” he thinks that “the markets and economy have learned to live with high uncertainty”.

Finally, Warren Buffett said in his annual letter to Berkshire Hathaway shareholders that while large market declines may happen, “no one can tell you when these traumas occur”.

In the meantime, with innovation, productivity gains, entrepreneurial spirit and an abundance of capital, US stocks are “virtually certain to be worth far more in the years ahead”.

Saturday, 25 February 2017

Markets mixed but Dow hits another record high

Markets ended mixed again on Friday.

US stocks rose, with the S&P 500 gaining 0.2 percent and the Dow Jones Industrial Average closing at a record high for the 11th consecutive day.

However, the STOXX Europe 600 fell 0.8 percent and the Nikkei 225 fell 0.45 percent.

“Markets are reacting to the risk of delay in fiscal stimulus and unwinding some of the recent optimism that followed President Trump's phenomenal tax package remarks,” said Ric Spooner, chief market analyst at CMC Markets.

Nevertheless, Lawrence Glazer, managing partner at Mayflower Advisors noted that “there are still significant inflows, because now even the pessimists want a piece of the action”.

“It’s momentum driven, not fundamentally driven,” he added.

Friday, 24 February 2017

Dow ekes out 10th straight record but Europe looks more affordable

Markets were mixed on Thursday.

In the US, the Dow Jones Industrial Average rose 0.2 percent to a tenth consecutive record close but the S&P 500 was flat.

Elsewhere, the STOXX Europe 600 fell 0.1 percent and the Nikkei 225 fell 0.4 percent.

“It would appear investors are unwilling to go against the rally, but at the same time, there’s little conviction in it either,” said Craig Erlam, senior market analyst at Oanda. “At some point, in the absence of details on Trump’s tax and stimulus plans, the rally may run out of steam.”

However, Kevin Marder at MarketWatch said that the rally “will likely continue until higher-volume selling comes into the averages or leading stocks come undone technically”.

In the meantime, he suggested: “Don't fight the tape.”

For investors nervous about the US market, Jeff Reeves at MarketWatch suggested investing in Europe instead.

Reeves noted that “many European stocks are doing great in 2017” while “trading for much more affordable valuations than stocks elsewhere in the developed world”.

Thursday, 23 February 2017

Markets mixed as Fed seen ready to raise brick wall

Markets were mixed on Wednesday.

The S&P 500 slipped 0.1 percent but the Dow Jones Industrial Average rose 0.2 percent to hit another record high.

Elsewhere, both the STOXX Europe 600 and the Nikkei 225 were flat.

Stocks were held back by concerns that US interest rates will rise after minutes of the Federal Reserve meeting earlier this month showed that many Fed officials indicated support for higher rates if the economy strengthened.

“A rate increase in March is most likely on the table even though the minutes don’t necessarily indicate that and it seems the Fed is prepping the market for it,” said Bob Pavlik, chief market strategist at Boston Private Wealth.

“Although we recognize that rates are below normal, the fact is that when the tightening process begins, the ‘full speed ahead’ of climbing stocks will run into a brick wall,” said Peter Cardillo, chief market economist at First Standard Financial.

Wednesday, 22 February 2017

US stocks hit record high again

Markets rose on Tuesday.

The S&P 500 rose 0.6 percent to close at another record high.

The STOXX Europe 600 rose 0.6 percent to its highest since 2 December 2015.

Asian markets were also mostly higher, with the Nikkei 225 rising 0.7 percent.

Analysts have mixed views on whether the rally in stocks will be sustained.

“The rally is getting long in the tooth, and once the euphoria wears off we will need to know when we’ll get policies and how they will impact corporate profits,” said Katrina Lamb, head of investment strategy and research at MV Financial.

“Those waiting for the other shoe to drop can be waiting for a long time,” said Karyn Cavanaugh, senior market strategist at Voya Financial. “Economic data is coming in on the upside, global growth is accelerating, there’s an increase in M&A, and optimism is higher, so the good outweighs the bad until we get anything that changes that scenario.”

Tuesday, 21 February 2017

Japanese stocks flat but increased disbursment of cash may benefit investors

Markets rose on Monday.

The STOXX Europe 600 rose 0.2 percent while the Shanghai Composite rose 1.2 percent.

The Nikkei 225 was flat though after Japan reported a bigger-than-expected trade deficit in January.

However, Bloomberg reported that a quiet revolution may be underway in the Japanese stock market.

Japan’s companies have for years sat on record piles of cash... The issue has been deploying those funds for shareholder benefit.

A key part of Abenomics has been sharpening the focus on return on equity, and now --through a mix of carrots and sticks -- some investors see change on the horizon...

“I have been in this industry 25 years but I have never seen this kind of approach before,” Yasunori Iwanaga, the Tokyo-based chief investment officer at the Japan unit of Amundi, which manages more than $1 trillion globally, said in an interview this month. “Reactions we have seen over the last few years are increasing dividend payouts or buybacks. This trend should continue over time.”

Monday, 20 February 2017

S&P 500 at new high but may be facing more risk

The S&P 500 rose 1.5 percent last week to end at another record high.

Indeed, a Bloomberg report early in the week had noted: “Investors haven’t been this optimistic on the global economy since 2011.” It cited a survey from Bank of America Merrill Lynch that showed that 23 percent of investors expect an outright “boom” while the number predicting negligible growth over the next 12 months has fallen by more than half to 43 percent.

“Macro optimism is surging,” wrote the team.

However, in his latest article today, John Hussman reminds us: “It’s precisely when economic optimism is strongest, when caution is seen as misguided, and when bullish enthusiasm is most exuberant, that the stock market reaches its speculative apex and becomes most vulnerable to collapse.”

Hussman added that with the degree of overvaluation in the market, a mere retreat to historical levels would mean a market loss of 60 percent.

Robert Naess, portfolio manager at Nordea Bank, is similarly cautious.

“There’s too much optimism,” he said in an interview with Bloomberg last week.

Naess said that companies missing earnings growth estimates pose the biggest risk to stock markets.

Naess also said that investors are putting “too little weight” on potential risks from US President Donald Trump's policies. “There’s more risk now than before.”

Saturday, 18 February 2017

US stocks resume rally, Dow 30,000 next?

Markets were mixed on Friday.

The S&P 500 rose 0.2 percent, the STOXX Europe 600 was little-changed and the Nikkei 225 fell 0.6 percent.

With the S&P 500 finishing up 1.5 percent for the week, analysts continue to be optimistic on stocks.

Richard Hastings, a macro strategist at Seaport Global Securities LLC, said that “the bias higher seems intact”.

“I still remain optimistic on the market going forward,” said Gary Anetsberger, chief executive officer at Millennium Trust Co.

“The broader uptrend is intact thanks to renewed optimism about the global growth outlook and supportive bottom-up corporate earnings,” Ian Williams, a Peel Hunt strategist, wrote in a note.

Indeed, while the Dow Jones Industrial Average closed little-changed at 20,624.05 on Friday, Nigam Arora at MarketWatch wrote that the “fundamental case for Dow 30,000 during Donald Trump's first term has strengthened”.

“The biggest single factor in the long-term direction of stocks is earnings growth,” Arora wrote.

While the current consensus for S&P 500 operating earnings is $133 per share, Arora said that tax cuts could add about $13 while deregulation could add another $7.

“If gross domestic product growth were to accelerate to 4%, S&P 500 earnings could reach as high as $190 by the end of Trump's first term,” he said.

Friday, 17 February 2017

Stocks fall but gold preparing for “healthy rally”

Stocks mostly fell on Thursday.

The S&P 500 fell 0.1 percent, ending its record-breaking run. However, the Dow Jones Industrial Average rose less than 0.1 percent to close at another record high.

The STOXX Europe 600 fell 0.4 percent, ending its seven-day winning streak.

Asian stocks were mixed. The Nikkei 225 fell 0.5 percent but the Shanghai Composite and Hang Seng indices rose 0.5 percent.

Some analysts are unperturned by the end of the S&P 500's record-breaking streak.

“We’ve had a big run in the near term, so some weakness is normal especially if you want the bull run to continue,” said Ryan Detrick, senior market strategist for LPL Financial.

Others are less sanguine.

“This rally may come to a quick end if expectations for a March rate hike begin increasing,” warned ADS Securities researcher Konstantinos Anthis in a note on Thursday.

While stocks fell on Thursday, oil rose 0.5 percent and gold rose 0.7 percent to its highest finish in more than three months.

“The dollar is weaker, Treasury yields are down and stocks are lower,” said Michael Armbruster, principal and co-founder at Altavest. “That is a nice trifecta for gold.”

Ned Schmidt, editor of The Value View Gold Report, said that the “odds still favor gold and silver beating the U.S. equity market in 2017”.

And in an article at ValueWalk, Jeffrey Nichols, Senior Economic Advisor to Rosland Capital, thinks that gold is “preparing for a healthy rally into higher territory”.

Thursday, 16 February 2017

US stocks at record high again, becoming extremely overbought but no sell signals

Stock markets rose on Wednesday.

The S&P 500 rose 0.5 percent to close at a record high for the fifth consecutive day.

The STOXX Europe 600 rose 0.3 percent to close at its highest since December 2015.

The Nikkei 225 rose 1.0 percent, reversing Tuesday afternoon's sell-off.

Lawrence McMillan at MarketWatch wrote that the US stock market “is becoming extremely overbought, but no sell signals have appeared yet”.

Indeed, Jeff Cox at CNBC concluded that despite all the uncertainties associated with President Donald Trump and his administration, “Wall Street believes one thing above all — that the Trump administration will survive and the U.S. economy will thrive”.

Wednesday, 15 February 2017

S&P 500 at another record high but Treasuries stuck in trading range

Markets were mixed on Tuesday.

The S&P 500 rose 0.4 percent to a record high for a fourth consecutive day.

However, the STOXX Europe 600 rose less than 0.1 percent and the Nikkei 225 fell 1.1 percent.

US Treasuries also fell after Federal Reserve Chair Janet Yellen said waiting too long to raise interest rates “would be unwise”. Yields across the curve rose by 3-5 basis points, with the 10-year settling around 2.47 percent.

Still, a Bloomberg article points out that the 10-year Treasury yield “have been stuck in a 25-basis-point range this year”.

“It’s possible we get to a 3.5 percent 10-year yield,” Rick Rieder, chief investment officer of global fixed-income at BlackRock Inc., was quoted as saying. “But it’s hard to envision it getting much higher than that, particularly with the aging population, demographics and the potential for growth in the rest of the developed world.”

Indeed, Rieder warned that “if there is disappointment on the fiscal front and a view that we’re not going to get progress on fiscal initiatives, there’s no doubt we can trend to lower yields, even approaching 2 percent”.

Tuesday, 14 February 2017

Stocks rise, time for bears to throw in the towel?

Stocks rose on Monday.

The S&P 500 rose 0.5 percent to close at a record high for the third consecutive day.

The STOXX Europe 600 rose 0.8 percent, rising for a fifth day and hitting its highest close since 7 December 2015.

Asian stocks also rose. The Nikkei 225 rose 0.6 percent while the Shanghai Composite Index rose 0.4 percent.

“The combination of proposed regulatory and tax reform, stronger than expected earnings amplified by growing consumer sentiment that President Trump will accomplish a large portion of his agenda has permitted stock to rise to valuations not experienced since 2004,” said Kent Engelke, chief economic strategist at Capitol Securities Management Inc.

Indeed, Mark DeCambre at MarketWatch said: “It may be high time for stock-market bears to throw in the towel.”

DeCambre noted that despite “suspiciously low fear gauge” and “heady stock valuations”, global stocks have been rallying.

DeCambre quoted Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, as saying: “Usually you have some pull back. We really didn’t have that pull back, we held those gains, which is major.”

Oil did not join the rally on Monday though. West Texas Intermediate crude fell 1.7 percent while Brent fell 2 percent.

Monday, 13 February 2017

S&P 500 rally may have further to go

The S&P 500 rose 0.8 percent to a new record high last week. It was its third consecutive weekly gain.

Some analysts think that the rally will continue.

Sue Chang at MarketWatch wrote: “The juggernaut of optimism unleashed by President Donald Trump’s presidency will continue to steamroll its way through the market, paving the way for stocks to carve out new highs and keep hungry bears at bay.”

“The case for U.S. equities is strong,” Binky Chadha, chief strategist at Deutsche Bank, wote in a report. “A V-shaped recovery in gross domestic product and earnings growth, unfolding for a year now, has further to go.”

Dubravko Lakos-Bujas, head of US equity strategy at JP Morgan Chase & Co., expects corporate tax cuts to boost S&P 500’s earnings per share by $8 while David Kostin, chief US strategist at Goldman Sachs, projected adjusted earnings per share among S&P 500 companies will rise 5 percent.

However, Jeffrey Saut, chief investment strategist at Raymond James, thinks stocks will not be able to rise further without a near-term correction.

Indeed, NorthmanTrader.com founder Sven Henrich told CNBC that fewer and fewer stocks are moving above their 50-day moving averages. “So, that shows underlying weakness as we are stretching to go to higher prices.”

Saturday, 11 February 2017

US stocks at new high, may see more gains despite Trump worries

Markets rose on Friday.

The S&P 500 rose 0.4 percent to a second consecutive record close.

The STOXX Europe 600 rose 0.2 percent for its fourth consecutive gain.

The Nikkei 225 surged 2.5 percent, leading other Asian stock markets higher.

Despite the record-breaking streak, Quincy Krosby, market strategist at Prudential Financial, noted that the “breadth of the market is very narrow”.

“Historically, a situation when valuations are stretched, breadth is narrow and complacency high, it sets a stage for pullbacks,” he said.

On the other hand, worries over President Donald Trump's policies may actually prove no impediment to a strong stock market performance.

While Trump has an approval rating of 45 percent according to the 3 February Gallup Poll, analysis from Ned Davis Research found that historically, a rating between 35 and 50 percent has been associated with an S&P 500 gain for the year of 12.4 percent.

Friday, 10 February 2017

US stocks at record high as investor sentiment rises

Markets mostly rose on Thursday.

The S&P 500 rose 0.6 percent to a record high after President Donald Trump hinted of a tax cut announcement in the coming weeks. The Dow Jones Industrial Average and Nasdaq Composite also closed at all-time highs.

Elsewhere, the STOXX Europe 600 rose 0.8 percent and the Shanghai Composite Index rose 0.5 percent but the Nikkei 225 fell 0.5 percent.

Walter Todd, chief investment officer at Greenwood Capital Associates, noted that the S&P 500 has “broken through overhead resistance at the 2,300 level” and “could continue to grind higher from here”.

Indeed, the American Association of Individual Investors reported that its sentiment survey this week showed that the percentage of bullish respondents rose 3.0 percentage points to 35.8 percent while bearish sentiment fell 6.5 percentage points to 27.7 percent.

Thursday, 9 February 2017

Markets rise as sentiment hits bullish extreme

Markets were mostly higher on Wednesday.

The S&P 500 rose less than 0.1 percent, the STOXX Europe 600 rose 0.3 percent and the Nikkei 225 rose 0.5 percent.

“The market is on a pause,” said Karyn Cavanaugh, senior market strategist at Voya Financial, but “is likely to continue to grind higher because the economic background is good and earnings are growing, regardless of whether we will get any fiscal stimulus or not.”

However, MarketWatch reports that according to the latest weekly survey by Investors Intelligence, US advisors are at their most bullish on the stock market since 2004.

“Judging by record stock prices, low volatility and extremely bullish sentiment, investors are ignoring a significant rise in the riskiness of their portfolios, leaving them vulnerable to major drawdowns,” said Anora Mahmudova in another MarketWatch report.

Wednesday, 8 February 2017

Markets mixed amid increased risk aversion and overvaluation

Markets were mixed on Tuesday.

The S&P 500 was flat, the STOXX Europe 600 rose 0.3 percent and the Nikkei 225 fell 0.4 percent.

Peter Andersen, chief investment officer at Fiduciary Trust Co, thinks that “if you set aside the political aspects, we’re very positive on the health of U.S. companies, with corporate earnings, and with U.S. equities in general”.

However, Karyn Cavanaugh, senior market strategist at Voya Financial, sees “a more risk-averse market”.

Indeed, Ernesto Ramos, head of equities at BMO Global Asset Management, told CNBC that the market is in a “fragile spot”, with all the potential positives from a Trump administration already priced in but very little of the potential negatives.

Meanwhile, another report by CNBC reminded us that the US stock market is overvalued.

The report noted that the total market cap of the Wilshire 5000 index as a percentage of US gross domestic product is about 120 percent, far above the 45-year average of 75 percent.

Mark Tepper, president of Strategic Wealth Partners, pointed out that “even if we were to see exceptionally fast growth over the course of the next eight years to the tune of 8 percent nominal GDP growth per year, we would still be at 80 percent market cap to GDP, which still puts us above that long-term average”.

Tuesday, 7 February 2017

US stocks fall as Hussman warns of additional signs of risk

Markets were mostly lower on Monday.

The S&P 500 fell 0.2 percent and the STOXX Europe 600 fell 0.7 percent.

However, earlier on Monday, the Nikkei 225 rose 0.3 percent.

“Last year, a lot of expectations were priced into U.S. markets, those expectations are being weakened,” said Herald van der Linde, head of Asia equity strategy with HSBC in Hong Kong. “There is doubt about the amount of growth it can generate. That allows some of the money to come back to emerging markets.”

However, John Hussman is seeing something more sinister for the US market.

In his latest article, he wrote that “an additional class of risk signatures, typically active in only a small percentage of historical data, shifted to warning mode” last week. According to Hussman, these signatures have in the past been associated with events such as air-pockets, panics and crashes.

Monday, 6 February 2017

Will Trump take on China?

During his election campaign, Donald Trump accused China of being responsible for the loss of American jobs. Some doubt, however, that as president, Trump will be willing or able to take action against China.

Komal Sri-Kumar, president and founder of Sri-Kumar Global Strategies, wrote in a Bloomberg article that Trump’s tangle with Mexico may dissuade him from taking on China.

Sri-Kumar argued that limiting Mexican imports with tariffs would actually also affect US jobs and raise prices for US consumers.

“Such considerations probably explain why Trump’s initial focus has been Mexico rather than China,” he wrote. “Action on his part could be met by Chinese retaliation limiting access by U.S. multinationals to the country's estimated 300 million middle- and upper-income consumers, which would significantly affect the companies’ growth prospects.”

Jeffrey Sachs, University Professor and director of the Center for Sustainable Development at Columbia University, made a similar argument in an article for The Boston Globe.

Sachs said that the idea of cornering China is unwise.

“Trump blames China for the plight of American workers left unemployed by China’s exports to the United States, but he fails to understand or acknowledge the many gains to the United States from our trade with China, including the higher profits and wages of US companies exporting to China and the lower costs enjoyed by US consumers of China’s exports,” he wrote.

Sachs also thinks that restraining China is unachievable.

“China,” he pointed out, “has a larger economy, is four times more populous, and is America’s creditor, not its debtor. China has strong and growing trade, investment, and diplomatic relations with other countries all over the world that would likely be strengthened, not weakened, by US belligerence.