Thursday, 30 November 2017

Nasdaq plunges, Dow hits record high

Markets were mixed on Wednesday.

In the US, the S&P 500 was flat while the Nasdaq Composite fell 1.3 percent but the Dow Jones Industrial Average rose 0.4 percent to a record high.

In Europe, most markets rose but the FTSE 100 fell 0.9 percent.

Asian stocks were also mostly higher. The Nikkei 225 rose 0.5 percent.

Regarding the sell-off on the Nasdaq, Frank Cappelleri, a technical strategist at Instinet LLC, said the tech rally had gotten “long in the tooth”.

Ian Winer, head of the equities division at Wedbush Securities, saw the sell-off as a “mini unwind of momentum stocks” and would not rule out a “spill over to the rest of the market at some point”.

Wednesday, 29 November 2017

Markets rise, rally to “continue into year-end” but risk of correction also higher

Markets were mostly higher on Tuesday.

The S&P 500 rose 1.0 percent to close at another record high after the Senate Budget Committee voted in favour of a Republican tax bill.

Elsewhere, the STOXX Europe 600 rose 0.6 percent and the Shanghai Composite rose 0.3 percent but the Nikkei 225 was flat.

Markets shrugged off another North Korean missile launch.

“This is a strong market that continues to grind up, and I expect the market will continue to move higher throughout the end of the year,” said Wayne Kaufman, chief market analyst at Phoenix Financial Services.

Patti Domm at CNBC said that the stock market rally “could well continue into the year-end and beyond” but also noted that Todd Sohn, technical analysts with Strategas Research, has warned that “years where there are very shallow sell-offs are usually followed by years with deeper sell-offs and more volatility”.

Indeed, Vanguard now says that there is a 70 percent chance of a US stock market correction, 30 percent higher than what has been typical over the past six decades.

Tuesday, 28 November 2017

Markets fall, may be entering late stage of cycle

Markets were mostly lower on Monday.

The S&P 500 was flat but the STOXX Europe 600 fell 0.5 percent, the Nikkei 225 fell 0.2 percent and the CSI 300 index fell 1.3 percent.

While the US stock market proved relatively resilient on Monday, Michael Santoli at CNBC noted that strategists generally think that “we are late in this economic and market cycle”.

Still, Bob Pisani at CNBC thinks that current conditions for the market are “pretty close to a perfect scenario” and that technicals suggest that “we're at least several months from a market top”.

Monday, 27 November 2017

US bull market to continue into 2018

Analysts remain bullish on the US stock market.

Bank of America Merrill Lynch sees the current bull market continuing into 2018.

In a report to clients, Michael Hartnett, chief investment strategist at BofAML, said that he expected “full investor capitulation into risk assets” on better-than-expected corporate earnings, pushing the S&P 500 to a peak of around 2,863 next year.

Similarly, Goldman Sachs sees the the S&P 500 closing next year at 2,850.

“Our 'rational exuberance' rests on a combination of above-trend US and global economic growth, low albeit slowly rising interest rates, and profit growth aided by corporate tax reform likely to be adopted by early next year,” wrote David Kostin in a report to clients.

Saturday, 25 November 2017

S&P 500 hits record high but valuations “stretched”

Markets were mixed on Friday.

The S&P 500 rose 0.2 percent to another record high but the STOXX Europe 600 slipped 0.1 percent.

“The reason stocks are rising is because of earnings. The beat rates so far have been so high suggesting that corporate profits across sectors have been growing so quickly, even analysts can’t keep up,” said Crista Huff, chief analyst at Cabot Undervalued Stocks Advisor.

However, strategists at Société Générale “expect stretched valuations and rising bond yields to limit equity index performances in 2018 and the prospect of a U.S. economic slowdown in 2020 to further cramp returns in 2019”.

While US stocks have continued to make new highs despite overvaluation concerns, new research reported by Bloomberg suggests that stock prices often miss true value by a “significant margin” but that over the longer term, “reversion dominates”.

Friday, 24 November 2017

Asian markets mixed as China steadies after Thursday plunge

Asian markets were mixed on Friday.

The Nikkei 225 reversed early losses to close up 0.12 percent while the Shanghai Composite rose 0.06 percent.

On Thursday, the Shanghai Composite had plunged 2.3 percent while the Shenzhen Composite fell 2.9 percent after the Chinese government took steps to stop the proliferation of small online lenders following an earlier announcement that it planned to streamline oversight of asset-management products sold by financial instutitions.

Thursday, 23 November 2017

Markets mixed, Fed seen dovish

Markets were mixed on Wednesday.

The S&P 500 fell less than 0.1 percent while the STOXX Europe 600 fell 0.3 percent but the Nikkei 225 rose 0.5 percent.

Market mood was kept subdued as the Federal Reserve released minutes on Wednesday of its last monetary policy meeting, which showed that the Fed viewed a “near-term” increase in interest rates as possible but that officials were concerned about persistently low inflation.

“Overall, we read the November minutes as dovish,” said a team of BNP Paribas economists led by Paul Mortimer-Lee.

Wednesday, 22 November 2017

Markets rise, US stocks hit record highs

Markets rose on Tuesday.

The S&P 500 rose 0.7 percent to a record high, the STOXX Europe 600 rose 0.4 percent and the Nikkei 225 rose 0.7 percent.

With the stock market rally resuming, Goldman Sachs sees another strong year in 2018 if the US Congress passes tax reform.

Peter Costa, president of Empire Executions, told CNBC that while stocks are overpriced, “I don't think there's anything within the next couple of months that we're going to see that's going to slow [the market] down”.

However, Vanguard chief economist Joe Davis wrote that the “sky is not falling, but our market outlook has dimmed”. Vanguard expects returns in the medium term of 4 to 6 percent, the most cautious outlook it has had on future stock returns at any time during the post-financial crisis economic recovery.

Tuesday, 21 November 2017

Markets mixed entering favourable season in “dangerous” environment

Markets were mixed on Monday.

The S&P 500 rose 0. percent and the STOXX Europe 600 rose 0.7 percent but the Nikkei 225 fell 0.6 percent.

“Earnings growth, especially revenue growth, continues to support U.S. equities,” said Diane Jaffee, senior portfolio manager at TCW.

Similarly, Robert Doll, chief equity strategist at Nuveen Asset Management LLC, said in his weekly outlook that “the two most important drivers of equity markets — corporate earnings and real growth levels — still support a risk-on investment stance”.

European stocks rose despite the collapse of talks to form a coalition government in Germany, with the DAX 30 closing with a 0.5 percent gain after being down 0.5 percent earlier in the session.

Indeed, Michael Santoli at CNBC wrote that “bears may have missed their last chance to feast on 2017's stock market”.

“Beginning this week, seasonal tendencies start turning in favor of stocks,” he said. “As long as the published projections of 11 percent further profit gains hold up for the first half next year and don't start seeming to need the help of a big, immediate tax-cut effect, it's tough to see the market failing in a dramatic way.”

However, strategists at investment bank Societe Generale think that investors are too optimistic.

Alain Bokobza, head of global asset allocation at Societe Generale, said that “investors continue to push asset prices, volatility and leverage to historical extremes” but that “a low volatility carry environment with rather extreme positioning is a dangerous combination, which we recently likened to dancing on the rim of a volcano”.

Bokobza expects “to enter a bear equity market environment” and for the S&P 500 to fall 22.5 percent from its Monday levels to 2,000 by the end of 2019.

Monday, 20 November 2017

S&P 500 seen rising this week, could finish year strong

The S&P 500 fell 0.1 percent last week, its second consecutive weekly decline.

This week could see a better performance though, according to Patti Domm at CNBC.

“Stocks have a good chance of trading higher in the week ahead, if the typical Thanksgiving holiday week trading patterns take over,” she wrote.

Citing data from Bespoke, she said that the S&P 500 has averaged a gain of 0.6 percent during Thanksgiving week and has been higher 75 percent of the time since 1945.

She also quoted Paul Hickey, co-founder of Bespoke, as saying: “The historical trend is a strong stock market through the year, tends to finish strong.”

Saturday, 18 November 2017

Stocks fall but oil jumps, US housing starts surge

Markets were mixed on Friday.

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

However, oil rose. West Texas Intermediate crude surged 2.6 percent and Brent jumped 2.2 percent.

Also providing positive news for investors on Friday was a report showing that US housing starts surged 13.7 percent in October. Housing starts is a leading indicator of the economy.

Still, Michael Gapen of Barclays said that “we would not expect this type of momentum to persist”.

Meanwhile, European Central Bank President Mario Draghi said in a speech in Frankfurt that the “euro area is in the midst of a solid economic expansion” but with inflation subdued, “we still need a patient and persistent approach to our monetary policy”.

Friday, 17 November 2017

Markets rise, ready for “another assault higher”

Markets rose on Thursday.

The S&P 500 rose 0.8 percent, the STOXX Europe 600 rose 0.8 percent and the Nikkei 225 jumped 1.5 percent.

Investor sentiment was boosted by news that the US House of Representatives passed a bill to overhaul the US tax code.

Neil Wilson, senior market analyst at ETX Capital, wrote in a note that the recent pullback “looks more like a technical correction before another assault higher, rather than the start of a more significant selloff”.

However, Michael Hewson, chief market analyst at CMC Markets UK, wrote that “major indices are starting to show signs of fatigue” and that “it wouldn’t take much more of a push for markets to fall even further”.

Thursday, 16 November 2017

Markets fall with oil, may be “opportunity to buy”

Markets fell on Wednesday.

The S&P 500 fell 0.6 percent, the STOXX Europe 600 fell 0.5 percent and the Nikkei 225 plunged 1.6 percent.

Falling oil prices dragged stock markets down. Energy stocks in the S&P 500 fell 1.2 percent as West Texas Intermediate crude fell 0.8 percent after the US Energy Information Administration on Wednesday reported that domestic crude supplies rose by 1.9 million barrels for the week ended 10 November.

Some analysts remain sanguine.

“Any pullback at this stage should be viewed as an opportunity to buy,” said Karyn Cavanaugh, senior market strategist at Voya Financial.

Still, other analysts expect further declines.

“While this is not a reflection of a sustained downward move, a little pullback is possible given uncertainty about the tax plan and also the Fed policy, which right now differs from market expectation,” said Shannon Saccocia, chief investment strategist at Boston Private.

Wednesday, 15 November 2017

Markets fall amid signs of “irrational exuberance”

Markets fell on Tuesday.

The S&P 500 fell 0.2 percent and the STOXX Europe 600 fell 0.6 percent.

The Nikkei 225 was flat but most other Asian markets fell.

A survey by Bank of America Merrill Lynch showed that a record net 48 percent of investors say stocks are overvalued but a net 16 percent say they are taking on above-normal levels of risk, also an all-time high.

“A record-high percentage of investors say equities are overvalued yet cash levels are simultaneously falling, an indicator of irrational exuberance,” said Michael Hartnett, the bank’s chief investment strategist.

That may be leaving markets vulnerable.

“Overstretched valuations, tighter monetary policies, geopolitical risks, a slowdown and high debt levels in China, and low inflation are some of the factors that could potentially trigger a market correction,” said Hussein Sayed, chief market strategist at FXTM.

Also, Matt Maley, equity strategist with Miller Tabak, told CNBC that the US stock market could be impacted if the “very, very” overbought Japanese stock market declines further.

Tuesday, 14 November 2017

Markets mixed, analysts shrug off “profit-taking”

Markets were mixed on Monday.

The S&P 500 rose 0.1 percent but the STOXX Europe 600 fell 0.7 percent and the Nikkei 225 plunged 1.3 percent.

Kathleen Brooks, research director at City Index, said that volatility is “maybe starting to build again”.

However, most analysts remain optimistic on markets.

Tareck Horchani, global head of sales trading at Saxo Capital Markets, said that recent price action is “just profit-taking”.

Katie Stockton, chief technical strategist at BTIG, wrote: “A pullback in the 2%-3% range might be enough to relieve the market of ‘overly bullish’ sentiment without generating a lot of breakdowns or affecting positive intermediate-term momentum.”

Monday, 13 November 2017

Euro area growth may gain further strength

Last week, the European Commission raised it forecast of economic growth for the euro area in 2017 to 2.2 percent from 1.7 percent in May. That would make it the fastest growth rate in a decade.

Now, private sector economists are adding to the optimism.

“This is euro-area growth at its best,” said Nathan Sheets, a former international economist at the Federal Reserve and US Treasury.

“There’s good cause to think euro-area growth can gather further strength in 2018,” said economists at Credit Suisse.

“Absent an unexpected shock, we should see several more years of economic growth,” said Angel Talavera, an economist at Oxford Economics.

Saturday, 11 November 2017

Markets fall on possible delay in US tax cuts

Markets fell on Friday.

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

The market declines were largely attributed to concerns about a possible delay in the President Donald Trump's much-anticipated corporate tax cuts.

“Markets have had a direct correlation to the tax plan, and have been falling on signs that progress is slowing down, and the idea that corporate taxes will be cut later than we had been expecting,” said Richard Sichel, chief investment officer at Philadelphia Trust Co.

However, Michael McCarthy, chief market strategist at CMC Markets, said in a note: “Safe haven assets were only mildly bid, suggesting this is corrective action rather than an unfolding reversal.”

Friday, 10 November 2017

Stocks fall as junk bonds break down

Markets fell on Thursday.

The S&P 500 fell 0.4 percent, the STOXX Europe 600 fell 1.1 percent and the Nikkei 225 fell 0.2 percent.

The falls on Thursday were mostly attributed to uncertainty over US tax reforms but some analysts are concerned that a leading indicator for stocks is breaking down.

Matt Maley, equity strategist at Miller Tabak, noted that the iShares high-yield corporate bond exchange-traded fund has fallen below its 200-day moving average over the past week, and “this raises some concerns in my mind”.

The SPDR Bloomberg Barclays High Yield Bond ETF also fell below its 200-day moving average early this month, confirming a divergence between junk bonds and stocks, which had been rallying.

Marty Fridson, CIO at Lehmann Livian Fridson Advisors, said: “Can you have a little bit of a correction here just because things have gotten super tight? Yes.”

Still, Fridson said economic fundamentals remain fairly solid and does not expect a major decline for stocks.

Similarly, Maley did not think that the fall in junk bonds signify a major problem for stocks just yet but said he would be watching for further signs of weakness.

Thursday, 9 November 2017

Markets mixed as bank stocks fall

Markets were mixed on Wednesday.

In the US, the S&P 500 rose 0.1 percent but bank stocks fell. The SPDR S&P bank exchange-traded fund fell 0.7 percent, its fourth straight decline, amid growing concerns that recent Republican electoral losses could hinder the party's push to reform the US tax code.

Elsewhere, the STOXX Europe 600 dipped less than 0.1 percent and the Nikkei 225 fell 0.1 percent.

“Most of the earnings are already out,” said Maris Ogg, president at Tower Bridge Advisors. “I wouldn't be surprised if the market holds here for a bit since the news flow is pretty meager.”

Wednesday, 8 November 2017

Nikkei surges but markets subdued elsewhere

Markets were mixed on Tuesday.

The S&P 500 was flat, the STOXX Europe 600 fell 0.5 percent but the Nikkei 225 surged 1.7 percent.

Sandy Villere, a portfolio manager at St. Denis J. Villere & Company, said that “the market is getting stretched on valuations” but added that “if the tax cuts come through, the market will look a lot cheaper than it is”.

Meanwhile, Andrew Bresler, deputy Asia Pacific head of sales trading at Saxo Capital Markets, sees a Goldilocks climate, saying that there are “few risks on the horizon”.

Tuesday, 7 November 2017

Markets rise as they head for “spectacular finale”

Markets rose modestly on Monday.

The S&P 500 and STOXX Europe 600 rose 0.1 percent while the Nikkei 225 was up less than 0.1 percent.

Bonds also rose, with the US 10-year Treasury yield declining two basis points to 2.316 percent.

Oil rose, West Texas Intermediate gaining 3.1 percent to hit its highest level since June 2015.

While the gains on Monday were small, Sue Chang at MarketWatch said that “tax cuts along with robust earnings may be setting stocks up for what could be a truly spectacular finale to a memorable year”.

“This is a very constructive situation for the big picture investment story. We could be going into a brief period of piling up, where sentiment ignores valuation and sticks to momentum,” she quoted Richard Hastings, macro strategist at Seaport Global, as saying.

Indeed, strategists at Academy Securities wrote that the biggest worry on Wall Street right now might be that no one is worried.

Monday, 6 November 2017

S&P 500 on winning streak as it enters strong season

The S&P 500 closed at a record high on Friday after rising 0.3 percent over the week.

The weekly gain was the S&P 500's eighth in a row, its longest weekly winning streak in four years.

Analysts at LPL Research think that stocks will continue to rise after the S&P 500 rose over 6 percent during the May to October period this year.

They noted that in the years when the six-month period from May to October was up at least 5 percent, the historically strong November to April period gained an average 9.2 percent compared to its usual 7 percent gain.

In contrast, Phil Streible, senior market strategist at RJO Futures, thinks that the winning streak may be coming to an end.

“I think you have to watch the retail sector from Black Friday on to the end of the year,” Streible told CNBC on Friday. “That could be what starts to show some of the cracks there in the foundation, and I think markets start to pull back.”

Meanwhile, other analysts are concerned with high market valuations.

Noting that the S&P 500's cyclically adjusted price-earnings ratio has risen above 30, Graham Hacche at the National Institute for Economic and Social ­Research said that “markets may have become increasingly vulnerable to shocks”.

Saturday, 4 November 2017

Markets hit records but at risk from overheating

Markets were mostly up on Friday.

The S&P 500 rose 0.3 percent to close at another record high while the STOXX Europe 600 rose 0.3 percent as the DAX 30 and FTSE 100 closed at record highs.

However, Asian stocks were mixed. The Hang Seng rose 0.3 percent but the Shanghai Composite fell 0.4 percent.

A report on Friday showed that US employment rose 261,000 last month while the unemployment rate fell to 4.1 percent from 4.2 percent the previous month.

“There was a good amount of jobs growth, a notable decline again in the unemployment rate, all of which sends the clear message that the labor market is tight,” said Charles Lieberman, chief investment officer of Advisors Capital Management.

Indeed, Torsten Slok, Deutsche Bank's chief international economist, thinks that global economic growth is strong and that the biggest risk is inflation.

“I think that the irony of all this is that the risks are not so much of a recession; the risk that we are facing in the markets today is there's a significant bigger risk of overheating,” he told CNBC on Thursday.

Friday, 3 November 2017

Markets mixed, BoE raises rates

Markets were mixed on Thursday.

The S&P 500 was flat, the STOXX Europe 600 fell 0.5 percent and Asian stocks were mixed.

The Bank of England decided to raise its benchmark interest rate to 0.5 percent from 0.25 percent at its monetary policy meeting on Thursday.

Thursday, 2 November 2017

Markets rise as Fed leaves rates unchanged and year end beckons

Markets rose on Wednesday.

The S&P 500 rose 0.2 percent, the STOXX Europe 600 rose 0.4 percent and the Nikkei 225 soared 1.9 percent.

The Federal Reserve left interest rates unchanged at its monetary policy meeting on Wednesday but markets are expecting a rate hike in December.

“What they're doing is giving everyone a chance to prepare themselves for a December rate hike,” said Anthony Conroy, president at Abel Noser.

However, Wharton School finance professor Jeremy Siegel told CNBC on Tuesday that tax reform has not been completely priced into the market and could drive the market higher. “I think we're going to get to 24,000” for the Dow Jones Industrial Average, he said.

Indeed, with the year-end season here and market trend strong, many analysts are confident of further gains for stocks, with Strategas technical analyst Todd Sohn seeing a possible market melt-up.

Wednesday, 1 November 2017

Markets rise as impressive earnings lead to bullish outlook

Markets mostly rose on Tuesday.

The S&P 500 rose 0.1 percent and the STOXX Europe 600 rose 0.3 percent.

However, the Nikkei 225 was flat as the Bank of Japan concluded its meeting on Tuesday by leaving monetary policy unchanged.

In the US, consumer stocks led gains after Mondelez and Kellogg reported better-than-expected results.

“You look at the earnings out of these big players and they continue to impress,” said Steve Chiavarone, portfolio manager with Federated Investors in New York. “It strikes me that that leads you to a much more bullish outlook for the fourth quarter.”

Indeed, Charles Dumas, chief economist at Lombard Street Research, suggested that there is a notion among investors that “the chief risk in today’s markets is missing what remains of the cyclical upside”.

“So the big risk is a new bubble, not a near-term bear market,” he wrote.