US stock market volatility at all-time lows amid “melt-up in earnings”

Many analysts are becoming nervous about the US stock market, according to a report by Joe Ciolli at Business Insider.

Ciolli quoted Marko Kolanovic, JPMorgan's global head of quantitative and derivatives strategy, as saying that all-time lows in market volatility “indicates that we may be very close to the turning point”.

Baupost Group was reported to have recently said that the lack of price swings is a possible “accelerant for the next financial crisis”.

Nevertheless, most analysts apparently do not see a major downturn in the market. Ciolli reported that a survey of 20 chief equity strategists conducted by Bloomberg showed an average year-end forecast of 2,439, basically unchanged from Friday's close.

And then, there are the bulls, like Edward Yardeni.

CNBC reported that Yardeni sees the recent record highs for the US stock market as being driven by “a melt-up in earnings”, which should be good for the rally.

“I think by the middle of next year we'll be looking at 2600-2700,” he said.

Markets fall as low volatility seen signalling top

Markets fell on Friday.

The S&P 500 slipped 0.1 percent, the STOXX Euroipe 600 tumbled 1.1 percent and Japan's Topix fell 0.4 percent.

“Investors are becoming increasingly wary over the historically low volatility levels, with a host of key economic data coming out in the U.S.,” said Hideyuki Ishiguro, a senior strategist at Daiwa Securities Co.

Jeffrey Gundlach's DoubleLine Capital purchased some five-month put options on the S&P 500 recently.

Gundlach explained that the CBOE Volatility Index had been “really, really low”, and the trade was “like free money”.

Indeed, CNBC reported there is “more concern that the surge in stocks is running out of steam and a top is near”.

While equity funds took in $9.9 billion over the past week, the seventh straight week of inflows, Michael Hartnett, chief investment strategist at Bank of America Merrill Lynch, suggested that the pattern is now “becoming more consistent with [an] autumn top in risk assets”.

However, some analysts remain bullish.

Andrew Adams, an analyst at Raymond James, said that the current bull market has been relatively “lackluster” compared to bull markets of the past and said that “it's wrong to assume it has to end in spectacular fashion from current levels”.

Markets mixed amid jitters over valuations

Markets were mixed on Thursday.

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

Diane Jaffee, senior portfolio manager at TCW, said that “people are getting jittery about valuations”.

Indeed, CNN reported that the S&P 500 is trading at 2.1 times its trailing revenue. The last time it was higher was in September 2000 when it was at 2.2 as the dot-com bubble was popping.

Peter Boockvar, chief market analyst at The Lindsey Group, said that while valuations are “terrible short term market signals”, they “matter very much” in the long run.

However, Dan Heckman, senior investment strategist at US Bank Wealth Management, said the price-to-sales ratio is a “lagging indicator”, adding that while the market is not cheap, it is “not overly expensive either”.

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

Markets mostly rose on Wednesday.

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

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

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

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

Bears comprised just 16.5 percent of respondents.

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

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

Markets were mostly higher on Tuesday.

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

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

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

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

Markets mixed as IMF leaves growth forecast unchanged

Markets were mixed on Monday.

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

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

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

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

US stock market seen overvalued, may be at inflection point

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

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

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

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

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

Markets fall as euro rises

Markets fell on Friday.

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

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

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

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

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

Markets mixed as markets shrug aside Draghi's dovish message

Markets were mixed on Thursday.

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

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

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

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

US stocks at new record highs, expected to continue to do well

Markets rose on Wednesday.

The S&P 500 rose 0.5 percent to close at an all-time high, the STOXX Europe 600 rose 0.8 percent and the Nikkei 225 rose 0.1 percent.

“Corporate earnings have been fantastic this quarter, which is shaping up to be one of the best we’ve had in a long time,” said John Bailer, senior portfolio manager at the Boston Company.

Jim Paulsen, chief investment strategist at The Leuthold Group, told CNBC that there is a “Goldilocks sort of economy going” and so “stocks will continue to do well”.

Some technical analysts also seem to think so, according to another CNBC report.

Paul LaRosa, chief market technician at Maxim Group, sees “higher prices in the near-term”.

Scott Redler, partner with T3Live.com, said: “The summer time rally might have just gotten new energy, and energy could be the focus.”

Art Hogan, chief market strategist at Wunderlich Securities, said: “If you're looking for positives, some of the key factors have been established, whether it's yields on the 10-year or commodities prices.”

US stocks at new high, other markets fall

Markets were mixed on Tuesday.

The S&P 500 edged up less than 0.1 percent to a new record but the STOXX Europe 600 fell 1.1 percent and the Nikkei 225 fell 0.6 percent.

US stocks managed to shrug off the collapse of President Donald Trump's health-care bill.

Maris Ogg, president at Tower Bridge Advisors, said that “the bigger picture remains positive” for stocks.

Chinese stocks plunge but economy grows more than expected

Markets were mostly flat on Monday, with both the S&P 500 and the STOXX Europe 600 finishing little-changed.

However, Chinese stocks fell sharply. The Shanghai Composite fell 1.4 percent while the Shenzhen Composite plunged 4.3 percent.

At the end of last week, policy makers at the National Financial Work Conference mentioned “risk” 31 times and “regulation” 28 times, noted Jack Siu, an investment strategist for Asia-Pacific at Credit Suisse.

“There’s a couple of small midcap companies that suddenly changed their guidance from profit to significant loss and I don’t think that was expected by the market,” said Caroline Yu Maurer, head of Greater China equities at BNP Paribas Investment Partners.

Chinese stocks pared losses after a report showed that the economy grew 6.9 percent in the second quarter from a year earlier, better than the 6.8 percent consensus estimate from a Bloomberg survey.

Strong earnings growth could push US stock market to new records

US stocks rose last week. Among the major stock indices, the biggest gainer was the Nasdaq Composite, which rose 2.6 percent. The S&P 500 rose 1.4 percent to close at a record high.

Some analysts think that US stock indices could hit new records in coming weeks, propelled by strong earnings growth.

Karyn Cavanaugh, senior market strategist at Voya Financial, predicted earnings growth of 6 to 7 percent for the second quarter.

“The canary in the coal mine is earnings and the canary is singing a very sweet song right now,” said Cavanaugh.

Markets rise as US data point to dovish Fed

Markets were mostly higher on Friday.

The S&P 500 rose 0.5 percent to close at a record high, the STOXX Europe 600 rose 0.2 percent and the Nikkei 225 edged up 0.1 percent.

US economic data released on Friday showed that the consumer price index was unchanged in June, retail sales fell 0.2 percent and industrial production rose 0.4 percent.

“I think this morning’s economic data once again plays into the narrative that the Fed will be more dovish,” said Ian Winer, head of the equities division at Wedbush Securities.

Stocks could crash from Fed liquidity drain

Markets rose on Thursday.

The S&P 500 rose 0.2 percent while the Dow Jones Industrial Average rose 0.1 percent to log its 24th record of 2017.

According to a CNBC report, the US stock market's rally despite political uncertainty is not unusual by historical standards.

However, Nigam Arora thinks that stocks could crash if the Federal Reserve's attempt to drain liquidity from the financial system ends up harming the economy or securities.

Markets rise but dovish Yellen could still prick asset bubble

Markets mostly rose on Wednesday.

The S&P 500 rose 0.7 percent and the STOXX Europe 600 jumped 1.5 percent. However, the Nikkei 225 fell 0.5 percent.

Markets were somewhat buoyed by Federal Reserve Chair Janet Yellen's testimony to the US Congress.

Karyn Cavanaugh, senior market strategist at Voya Financial, noted of her testimony: “She’s back to looking at inflation a little bit more. The market was a little worried but she’s back to the same dovish Yellen.”

Still, Thomas Kee Jr wrote at MarketWatch that with the US stock market already “66% higher than it should be”, Fed monetary tightening could “prick the asset bubble that the market is in today”.

Markets mixed amid renewed US political concerns

Markets were mixed on Tuesday.

The S&P 500 fell less than 0.1 percent but the Nasdaq Composite rose 0.3 percent.

Elsewhere in the world, the STOXX Europe 600 fell 0.7 percent but the Nikkei 225 rose 0.6 percent.

Political concerns over US President Donald Trump's dealings with Russia sent stocks tumbling in late-morning US trading but they recovered later as US Senate Republican leader Mitch McConnell announced a two-week delay in the Senate's August recess to provide more time to work on legislation and approve nominees.

Brad McMillan, chief investment officer for Commonwealth Financial, said that the Senate's delayed break "says to me there's a commitment to make some of the changes that the markets would like to see".

Markets rise but “monetary tightening a threat”

Markets rose on Monday.

The S&P 500 rose 0.1 percent, the STOXX Europe 600 rose 0.4 percent and the Nikkei 225 rose 0.8 percent.

US oil prices edged up and the US 10-year Treasury yield fell one basis point to 2.375 percent.

“Central banks are likely to remain a key focus for investors this week, with the sudden hawkish shift among a number of them in recent weeks pushing bond yields higher and weighing on risk appetite,” said Craig Erlam, senior market analyst at Oanda.

Indeed, CNBC reported that Citigroup strategists have noted that “monetary tightening could be a threat if central banks are perceived to have got ahead of the curve”.

“For now, however, the team believes that there is sufficient earnings momentum to warrant further gains in equity markets, particularly in Europe and Japan,” the strategists added.

JPMorgan strategists, though, warned that the second half of the year “is where the problems could materialize in earnest” if earnings fail to match analysts' elevated expectations.

US stock market set for "big fall in autumn"

Bank of America Merrill Lynch thinks that the US stock market rally may come to an end in the coming months.

Reuters reported last week:

In their weekly round up of global asset flows, BAML said the prospect of more U.S. rate hikes, combined with the ECB readying to scale back its stimulus, meant markets were at a "massive inflection point" in the decade-long easy money trade...

"Next 6 months, higher interest rates likely much more negative for stocks & credit given new central bank policies," its strategists wrote. "Will likely lead to 'Humpty Dumpty' big fall in market in autumn, in our view."

US stocks rise after solid employment report

Markets were mixed on Friday.

The S&P 500 rose 0.6 percent but the STOXX Europe 600 fell 0.1 percent and the Nikkei 225 fell 0.3 percent.

US stocks were boosted by a report showing that the economy added 222,000 jobs in June, better than the forecast of 180,000.

Charlie Ripley, investment strategist at Allianz Investment Management US, said in a note that “the solid employment data should keep the Fed on course for policy normalization”.

However, oil fell. West Texas Intermediate crude fell 2.8 percent while Brent fell 2.9 percent.

Markets fall as central banks shift policies

Markets fell on Thusday.

The S&P 500 fell 0.9 percent, the STOXX Europe 600 fell 0.7 percent and the Nikkei 225 fell 0.4 percent.

“Traders are sensing a shift in central banker’s policies,” said David Madden, market analyst at CMC Markets.

“People are nervous about bond yields going up and you can see that in exaggerated moves in technology stocks and financials,” said Ian Winer, head of the equities division at Wedbush Securities.

Not all analysts are concerned though.

“The market is not getting too panicky just yet,” noted Chris Beauchamp, senior market analyst at IG.

“The Fed has raised rates three times in the last seven months. The markets haven't squeaked,” said Credit Suisse International Wealth Management CIO Michael O'Sullivan.

Mike Antonelli, equity sales trader at Robert W Baird & Co, said: “People should not mistake rotation for volatility, and I am not terribly freaked out as investors are not selling everything equally.”

Stocks rise as oil plunges, tech stocks still at risk

Markets mostly rose on Wednesday.

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

However, oil fell. West Texas Intermediate crude plunged 4.1 percent and Brent tumbled 3.7 percent.

“We’re seeing vicious rotations in certain sectors,” said Wedbush Securities’s head of the equities division Ian Winer. “Oil’s getting killed and there’s a rotation into biotech and semiconductors.”

However, Nigam Arora wrote in MarketWatch that it is still not time to jump back into popular tech stocks while Larry McDonald wrote in The Bear Traps Report that there are signs the tech sector's out-performance may be coming to an end

Markets fall after N Korea missile test but sentiment near euphoria

With the US market closed for a holiday on Tuesday, markets in Europe and Asia fell.

The Nikkei 225 fell 0.1 percent while the STOXX Europe 600 fell 0.3 percent.

Investor sentiment was hurt by a report that North Korea had successfully test-fired an intercontinental ballistic missile.

The missile test damped sentiment that, according to Mark DeCambre at MarketWatch, had just hit a 6-year high.

“Optimism reached its highest level on Wall Street since 2011 in June, according to strategists at BofA Merrill Lynch, including equity and quantitative strategists Savita Subramanian and Dan Suzuki,” he wrote.

“The recent inflection from skepticism to optimism could be the first step toward the market euphoria that we typically see at the end of bull markets and that has been glaringly absent so far in the cycle,” he quoted BofA as saying.

Markets rise, could “scream higher” before “some ugliness” in late 2018

Markets rose on Monday.

The S&P 500 rose 0.2 percent, the STOXX Europe 600 jumped 1.1 percent and the Nikkei 225 rose 0.1 percent.

John Manley, chief equity strategist at Wells Fargo Funds Management, said that the investment environment is “reasonably good” and that while valuations are high, “they are kind of on the low end of high”.

Energy stocks led gains in the US as oil rose for the eighth consecutive session. West Texas Intermediate crude rose 2.2 percent and Brent rose 1.9 percent.

However, US tech stocks fell, with the Nasdaq Composite declining 0.5 percent.

Technical analyst Tom McClellan, though, thinks stocks are set to roar higher.

“We're still in an uptrend,” he told CNBC on Monday.

However, with the spread between the US 10-year Treasury and the 10-year German bund starting to narrow, he sees a likelihood of “some ugliness” starting in late 2018.

US stock gains seen limited in second half

Market strategists appear to be going against history and are calling for minimal gains for the US stock market in the second half of 2017.

Bloomberg reported that after a 8.2 percent rise in the S&P 500 in the first half of the year, strategists see the index rising by just 0.6 percent in the second half, the least bullish forecast for this time of year since 1999.

This is in contrast to the historical performance of the S&P 500. During the years when the S&P 500 went up between 7 percent and 12 percent in the January-June period, stocks went on to rise 87 percent of the time in the next six months, with increases averaging 5.1 percent.

The lack of optimism among strategists does not faze long-time bull Laszlo Birinyi, president of Birinyi Associates.

“New highs are generally greeted with a yawn,” Birinyi wrote to clients last week. “As the year proceeds, we are actually feeling better about the market.”

Markets mixed, US stocks' hot streak at risk

Markets were mixed on Friday.

The S&P 500 rose 0.2 percent but the STOXX Europe 600 fell 0.3 percent and the MSCI Asia Pacific Index fell 0.7 percent.

Oil rose, with WTI crude jumping 2.9 percent.

Bonds fell. The yield on the US 10-year Treasury note rose three basis points to 2.30 percent.

The advance on Friday left the S&P 500 with a 2.6 percent gain for the second quarter.

Alex Rosenberg at CNBC noted that the second quarter was the S&P 500's 16th winning quarter out of the past 18.

He wrote that there have only been six prior four-and-a-half-year periods in which the S&P 500 rose in 16 quarters or more, and all of them came in the periods that ended between the fourth quarter of 1998 and the first quarter of 2000.

“That is to say, the S&P 500 hasn't performed this dependably since the dotcom bubble,” he said.

However, the streak may be about to end.

“The S&P is and has been overbought for a long while. It should slump,” he quoted Max Wolff of 55 Institutional as saying in an email on Thursday.