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-case 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”.