Monday, 30 April 2018

Stock and bond markets may have entered bear markets

Clem Chambers, CEO of investment website ADVFN, thinks that the stock market has entered a bear market.

Chambers wrote that “we are in bear market territory now”, although he did not think that there will be a sharp crash.

Chambers said that the Federal Reserve has been supporting the stock market since the dotcom crash.

“My money is still on a crash, but in a world where markets are caged by regulators regulating, those regulators are not going to let go of their control without a hard fight or a sudden fright,” he wrote.

Meanwhile, the bond market may also have entered a bear market.

“I think we’re in the early stages of a bond bear market,” said Bob Michele, head of global fixed income for JP Morgan’s investment arm, in an interview with Reuters.

Michele said that central bank asset purchases are falling and their assets will start shrinking in the fourth quarter of this year.

“That becomes more problematic for the markets to digest,” said Michele.

Saturday, 28 April 2018

Markets rise, US GDP and corporate earnings better than expected

Markets mostly rose on Friday.

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

A report on Friday showed that the US economy grew at a 2.3 percent annual rate in the first quarter, slower than in the previous quarter but faster than expected.

Corporate earnings were mostly positive, with about 80 percent of S&P 500 companies having beaten forecasts so far.

“What we can say with fair conviction today is that earnings season so far...has not served to brighten investor moods,” said James Meyer, chief investment officer at Tower Bridge Advisors.

Nevertheless, Jack de Gan, chief investment officer at Harbor Advisory Corp, said that tech stocks “continue to post extremely fast growth, and I think the story of the market being led by tech names is still intact”.

Friday, 27 April 2018

Tech leads market rally, ECB sees “solid” growth

Markets rose on Thursday.

The S&P 500 rose 1.0 percent, the STOXX Europe 600 rose 0.9 percent and the Nikkei 225 rose 0.5 percent.

Tech stocks led the market rally in the US on Thursday, with the S&P 500 tech sector surging 2.3 percent.

“While I’m not comfortable with market valuations overall, tech still looks relatively inexpensive,” said Paul Nolte, portfolio manager at Kingsview Asset Management.

The ECB left interest rates unchanged at its monetary policy meeting on Thursday.

ECB president Mario Draghi told a news conference after the meeting that “growth is expected to remain solid and broad-based”.

Indeed, Richard Bernstein, CEO of Richard Bernstein Advisors, told CNBC that investors should position themselves for rising inflation.

However, Bernstein did not see a reason to be bearish yet.

“We're not at the point where the number of bad things overwhelms the number of good things” he said. “For now, I think it'll pay to stay bullish.”

Thursday, 26 April 2018

Markets mixed, “lasting and painful downtrend” may have begun

Markets were mixed on Wednesday.

The STOXX Europe 600 fell 0.8 percent and the Nikkei 225 fell 0.3 percent but the S&P 500 recovered from early losses to end the day up 0.2 percent.

The US 10-year Treasury yield climbed above 3 percent to hit its highest level since December 2013.

“Earnings have been coming in very strong, but companies aren’t getting rewarded,” said Michael Mullaney, director of global market research at Boston Partners. Nevertheless, he said that earnings growth “is something that we should expect to resume showing up in share prices”.

In contrast, Tomi Kilgore at MarketWatch noted that Tom McClellan, publisher of the McClellan Market Report, has declared that a bear market has begun.

McClellan was quoted as saying in his report that a downturn has begun and that “it should be a lasting and painful downtrend, heading down toward a bottom due in late August”.

Wednesday, 25 April 2018

US stocks fall but analysts see no collapse from higher Treasury yields

Markets were mixed on Tuesday.

The Nikkei 225 rose 0.9 percent while the STOXX Europe 600 was flat.

However, US stocks plunged. The Dow Jones Industrial Average fell 1.7 percent, the S&P 500 fell 1.3 percent and the Nasdaq Composite fell 1.7 percent.

Stock markets were shaken by a rise in the US 10-year Treasury yield. The latter briefly touched 3 percent before falling back.

However, analysts generally do not seem too concerned.

“Will U.S. 10-year Treasurys yielding 3% bring about an immediate collapse in equity markets? The answer from today was an unequivocal no,” said Jasper Lawler, head of research at London Capital Group.

“10-year yields at 3% or even 3.5% is not that terrible since it’s a reflection of growing economy,” said Maris Ogg, president at Tower Bridge Advisors.

“Crossing 3% on the 10-year is something that will certainly raise concerns, but at this stage of the cycle, higher yields aren’t antithetical to rising stock prices,” said Bruce McCain, chief investment strategist at Key Private Bank.

Less confident is Andrew Lapthorne, head of global quantitative research at Société Générale.

Lapthorne said that US corporate debt is at a high level, so rising bond yields could diminish the pace of buybacks as “most companies simply cannot afford them”.

Lapthorne also said that “as bond yields head higher, the valuation headwind on expensive quality stocks overwhelms the cyclical EPS growth required to push value factors forward”.

Tuesday, 24 April 2018

Markets mixed as 10-year Treasuries near 3 percent

Markets were mixed on Monday.

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

“The recent rally in metal prices, and oil prices hitting fresh four-year highs have stoked fears that inflation in the U.S. will pick up sharply, raising interest rate-hike expectations,” said Fiona Cincotta, senior market analyst at City Index.

Mark Kepner, managing director of sales and trading at Themis Trading, said that stocks were given “a slight reprieve” after the US 10-year Treasury yield backed away from the 3 percent level, but added that “we are watching these levels closely”.

“Even a small deterioration in sentiment could trigger a selloff for global equities as yields threaten the upside potential,” said Konstantinos Anthis, head of research at ADS Securities.

Still, Mark DeCambre at MarketWatch questioned whether investors should be so concerned about interest rates.

DeCambre quoted Raymond James analyst Andrew Adams as saying that a “yield curve as flat as it is now does not always lead to an inverted yield curve” and that “some of the best stock market returns in history have come after the yield curve became flatter than it is now”.

Monday, 23 April 2018

Stocks not rewarded by good earnings as interest rates rise

While the S&P 500 rose 0.4 percent last week, a Bloomberg report last week noted that investors' reaction to earnings results in the US have actually been “muted”.

“At first glance, it’s been one of the best earnings quarters of the bull market,” the report said. “The results aren’t being rewarded. Stocks have risen less than 0.1 percent on average on the day after results.”

“As we get further into the bull market cycle, U.S. companies have to try harder and harder to make investors happy, and that’s tough,” said Frank Ingarra, the head trader at NorthCoast Asset Management LLC.

Indeed, Bloomberg said that “investors are noticing interest rates again, with the 10-year Treasury yield again approaching 3 percent”.

Cresset Wealth's Jack Ablin is one of those more concerned about rising interest rates than good earnings.

Ablin told CNBC last week that not even a “fantastic” earnings season will prevent stock market troubles as Treasury yields rise.

Saturday, 21 April 2018

Markets fall amid inflation concerns

Markets fell on Friday.

The S&P 500 fell 0.9 percent, the Nikkei 225 fell 0.1 percent and the STOXX Europe 600 fell marginally.

The US 10-year Treasury note yield rose 4.4 basis points to 2.956 percent, the highest since January 2014.

Kristina Hooper, chief global market strategist at Invesco, said that “Friday’s weakness in stocks suggests that investors sold Treasurys because they are concerned that wage pressures and protectionist policies of the White House administration would send inflation higher”.

“The inflation the Fed so desperately sought for so long has arrived,” said David Rosenberg, chief economist for Gluskin Sheff.

Friday, 20 April 2018

Markets mixed as some see turn in cycle

Markets were mixed on Thursday.

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

While earnings have propped up markets recently, some investors are beginning to anticipate a turn in the business cycle.

“There’s a growing fear that the good news we’ve seen over the past years is coming to an end, that we’re closer to a meaningful downturn in the economy than we had previously been expecting,” said Peter Kenny, senior market strategist at Global Markets Advisory Group.

Thursday, 19 April 2018

Markets rise on earnings but some investors think stocks have peaked

Markets rose on Wednesday.

The S&P 500 rose 0.1 percent, the STOXX Europe 600 rose 0.3 percent and the Nikkei 225 jumped 1.4 percent.

Naeem Aslam, chief market analyst at Think Markets UK, wrote in anote that fears around a potential trade war and geopolitical concerns “have faded very much”.

“Earnings season in the U.S. has started well,” noted Richard Perry, market analyst at Hantec Markets.

However, findings from Bank of America Merrill Lynch’s monthly survey of fund managers released on Tuesday showed that earnings expectations may have peaked, with a net 8 percent of respondents looking for earnings per share to substantially rise in the next 12 months, down from 35 percent in February.

With the decline in earnings expectations, the amount of cash held by funds jumped to 5 percent in April from 4.6 percent while 18 percent of managers think the stock market has peaked.

Wednesday, 18 April 2018

Markets rise as China growth and US earnings beat expectations

Markets rose on Tuesday.

The S&P 500 rose 1.1 percent, the STOXX Europe 600 rose 0.8 percent and the Nikkei 225 rose 0.1 percent.

Boosting markets was a report showing that China's economy grew 6.8 percent in the first quarter of 2018, beating expectations.

In the US, Mark Luschini, chief investment strategist at Janney Montgomery Scott, noted that corporate reports are showing that “both earnings and revenue are coming in ahead of expectations”.

Still, Wharton finance professor and long-term bull Jeremy Siegel told CNBC on Monday that the “market is going to struggle this year”.

“It's going to be a flat to slightly upward tilting year as good earnings collide with what I think will be higher interest rates both by the Fed and in the Treasury market,” he said.

Tuesday, 17 April 2018

Markets mixed as investors turn attention to earnings

Markets were mixed on Monday.

The S&P 500 rose 0.8 percent but the STOXX Europe 600 fell 0.4 percent. In Asia, the Nikkei 225 rose 0.3 percent but the Shanghai Composite plunged 1.5 percent.

US stocks were supported by good earnings expectations.

“Investors already know that earning will be good and at this point looking at guidance from companies,” said Quincy Krosby, chief market strategist, at Prudential Financial.

Michael Wilson, chief US equity strategist at Morgan Stanley, wrote: “We think first-quarter earnings season should deliver on high expectations and help the market move higher toward a cyclical top in equities we expect to occur later this year.”

Also, a report on Monday showed that US retail sales rose 0.6 percent in March after declining in the previous three months.

Monday, 16 April 2018

Stocks may see more volatility but correction may be nearing end

Nicholas Colas, cofounder of DataTrek Research, thinks that there will be “more volatility ahead” for the stock market.

Using the Dow Theory but focusing more on trade-related stocks, Colas noted in a Bloomberg article that the “trend is not positive”.

Colas wrote that while the Dow Jones Industrial Average is down 1 percent for the year, the S&P 500 is down only 0.4 percent and large-cap technology stocks are up 4.1 percent.

“The Dow is telling us that we’re not out of the woods yet,” he wrote. Stocks that are highly exposed to trade are all “still under pressure” and these, he claimed are the leading indicators of investor confidence.

In contrast, Simon Maierhofer, founder of iSPYETF and publisher of the Profit Radar Report, thinks that the stock market has bottomed.

“In general, big daily swings are always seen near bottoms,” he wrote on MarketWatch.

Maierhofer sees the likelihood of one more new low.

However, he added: “With or without the new low, the weight of evidence suggests this correction is nearing its end.”

Saturday, 14 April 2018

Markets mixed but may be “nearing a bottom”

Markets were mixed on Friday.

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

“Geopolitical tensions have subsided a little, but confidence hasn’t been fully restored,” said David Madden, market analyst at CMC Markets UK, in a note.

Indeed, the latest sentiment survey from the American Association of Individual Investors showed a 6.1 percentage point jump in bearish sentiment.

However, David Templeton, portfolio manager and principal at Horan Capital Advisors, saw that as a reason for optimism.

“With much of the sentiment now decidedly bearish, just possibly the market is nearing a bottom,” he wrote.

Friday, 13 April 2018

Stocks could see "terrific buying opportunity"

Markets mostly rose on Thursday.

The S&P 500 rose 0.8 percent, the STOXX Europe 600 rose 0.7 percent but the Nikkei 225 slipped 0.1 percent.

Blackstone vice chairman Byron Wien told CNBC on Thursday that the market is likely to retest the lows seen in February but thinks that "that's going to be a terrific buying opportunity".

Thursday, 12 April 2018

Stocks fall, oil rises as US considers military strike in Mideast

Markets mostly fell on Wednesday.

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

Tension in the Middle East weighed down stocks as the US government looks for international support for a possible military strike against Syrian President Bashar al-Assad for an alleged chemical-weapons attack.

However, oil rose. West Texas Intermediate crude rose 2 percent while Brent rose 1.4 percent.

“Volatility does not seem to be slowing down—in either direction—regardless of solid economic numbers,” said Mike Loewengart, vice president of investment strategy at E*Trade. “There are much bigger issues at stake—namely escalating tensions with Russia and China.”

Wednesday, 11 April 2018

Stocks rise as Xi gives markets “shot of adrenaline”

Markets rose on Tuesday.

The S&P 500 surged 1.7 percent, the STOXX Europe 600 rose 0.8 percent and the Nikkei 225 rose 0.5 percent.

Markets were encouraged by Chinese President Xi Jinping's announcement at the Boao Forum that he plans to give foreign companies greater access to financial and manufacturing sectors.

Chad Morganlander, senior portfolio manager at Washington Crossing Advisors, said that Xi's comment was “a shot of adrenaline”.

Tuesday, 10 April 2018

Markets rise amid “bad omen”

Markets rose on Monday.

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

Vishnu Varathan, head of economics and strategy at Mizuho Bank, noted that “trade war fears are not as intense as they were last week”.

However, Sam Stovall, chief investment strategist of US equity strategy at CFRA, warned: “There’s no clear-cut signal for when we actually enter a trade war, and markets could still be disappointed about what could happen.”

In the meantime, investors may have other things to be concerned about.

A report late on Monday that the Federal Bureau of Investigation had raided the office of Michael Cohen, President Donald Trump’s personal lawyer, caused US stocks to give up earlier gains towards the end of the session.

And last week Friday, JPMorgan Chase & Co noted that the one-month US overnight indexed swap rate has slightly inverted, indicating that investors are either pricing in a mistake from central bankers or end-of-cycle dynamics.

The bank also noted that this “is a significant market development, not least because it occurs rather rarely” and that it is “generally perceived as a bad omen for risky markets”.

Monday, 9 April 2018

Central bank tightening could lead to “market panic”

The S&P 500 fell 1.4 percent last week.

In a volatile week, the S&P 500 rose for three consecutive days but still ended the week down as a result of 2.2 percent declines on Monday and Friday.

Much of the attention last week was on a simmering trade war between the US and China after the former announced tariffs on the latter and China responded with retaliatory tariffs.

However, James Dimon, the chief executive officer of JPMorgan Chase & Co, reminded readers in his annual letter to shareholders on Thursday that markets were also facing the reversal of quantitative easing by the world's central banks.

“Since QE has never been done on this scale and we don’t completely know the myriad effects it has had on asset prices, confidence, capital expenditures and other factors, we cannot possibly know all of the effects of its reversal,” he wrote. “I believe that many people underestimate the possibility of higher inflation and wages, which means they might be underestimating the chance that the Federal Reserve may have to raise rates faster than we all think.”

Faster-than-expected Fed tightening “could lead to more uncertainty and market volatility”, which in turn could “create market panic”.

Dimon did add that he thought the odds of such a panic are low.

Not so Guggenheim Investments' global chief investment officer Scott Minerd.

“As interest rates keep ratcheting higher, with record levels of corporate debt it's going to be harder and harder to service,” Minerd told CNBC.

“Ultimately, when the chickens come home to roost and we have a recession, we're going to see a lot of pressure on equities especially as defaults rise, and I think once we reach a peak that we'll probably see a 40 percent retracement in equities,” he warned.

Saturday, 7 April 2018

Markets fall amid renewed worries of trade war

Markets fell on Friday.

The S&P 500 plunged 2.2 percent, the STOXX Europe 600 fell 0.4 percent and the Nikkei 225 fell 0.4 percent.

Markets fell after the White House released a statement late on Thursday saying that President Donald Trump had asked the US Trade Representative to consider additional tariffs on Chinese products. China’s commerce ministry responded by saying that it will respond with countermeasures if needed.

“Today’s market reaction is a reflection of investor fears that the trade rhetoric will get a lot tougher before any negotiations between U.S. and China get going,” said Ryan Larson, head of equity trading at RBC Global Asset Management.

Still, some analysts remain hopeful that a trade war will be averted.

Richard Grace, chief currency strategist and head of international economics at Commonwealth Bank of Australia, said that “most of the tough trade tariff talk is unlikely to result in action that will upset global growth or even come to fruition”.

Similarly, Neil Wilson, senior market analyst at ETX Capital, said: “Both sides would prefer to negotiate a settlement.” However, Wilson added that “a full-blown trade war could result if the two camps back themselves into a corner”.

Friday, 6 April 2018

Markets rise amid lessening of trade tensions

Markets rose on Thursday.

The S&P 500 rose 0.7 percent, the STOXX Europe 600 surged 2.4 percent and the Nikkei 225 jumped 1.5 percent.

“We continue to see a lessening of tensions over the possibility of a trade war,” said Peter Tuz, president of the Chase Investment Counsel.

However, Chris Beauchamp, chief market analyst at IG, warned: “Sharp rallies over the past two months have been the excuse for more selling, and there is still a lot of work to do before we can be sure that the bears have been sent back into hibernation.”

Indeed, Paul Gambles, the managing director at advisory firm MBMG Group, told CNBC on Thursday that “we're in epic bubble proportions, probably the biggest bubble of all time” and that “there are conditions out there that are prime for that bubble to actually be pricked”.

DoubleLine Capital founder Jeffrey Gundlach told CNBC that the stock market “can't take higher bond yields” and that after an easy investment time in 2017, it is “payback time”.

Other analysts remain optimistic.

Oppenheimer Asset Management's John Stoltzfus told CNBC: “We think stocks will work their way to 3,000 by the end of the year.”

Grace Peters, a global investment strategist at JP Morgan Private Bank, told CNBC: “Our central case is that stocks move higher, because we think corporate profits really are the key driver of equity markets, and we see corporate profits looking pretty strong.”

Thursday, 5 April 2018

Markets mixed, “trade war here”

Markets were mixed on Wednesday.

The S&P 500 rose 1.2 percent after opening sharply lower, the STOXX Europe 600 fell 0.5 percent and Asian markets were mixed.

Markets were initially weighed down by news of China's plan to impose new tariffs on US goods.

“China has taken out big guns to answer Trump’s tariff—the trade war is here,” said Naeem Aslam, chief market analyst at Think Markets UK, in a note.

However, Michael O’Rourke, chief market strategist at JonesTrading, said that “investors are just not sure how to assess the impact that could come” but that because “recent lows in the market have held, people may feel a bit more comfortable buying the dip, even though nothing has changed or been resolved”.

Wednesday, 4 April 2018

US stocks rebound but market still “trading on fear”

Markets were mixed on Tuesday.

The STOXX Europe 600 fell 0.5 percent and the Nikkei 225 fell 0.5 percent, tracking the US market's Monday decline.

However, the S&P 500 jumped 1.3 percent.

“This is still a market trading on fear instead of fundamentals and on tweets instead of technicals, which has made it frustratingly difficult to figure out where we’re headed in the near term,” said Andrew Adams, an investment strategist at Raymond James.

However, Chris Beachamp, chief market analyst at IG, said in a note: “In truth the market was merely overexposed and primed for a drop.”

Tuesday, 3 April 2018

Markets plunge as China announces retaliatory tariffs

Markets mostly fell on Monday.

In the US, the Dow Jones Industrial Average tumbled 1.9 percent, the S&P 500 plunged 2.2 percent and the Nasdaq Composite plunged 2.7 percent.

Elsewhere, the Nikkei 225 fell 0.3 percent while European markets were closed.

Oil also fell. West Texas Intermediate crude plunged 3 percent while Brent fell 2.5 percent.

The market falls come after China announced retaliatory tariffs on US goods.

Hank Smith, chief investment officer at Haverford Trust Co, remarked that “it seems like the trade issue is escalating into bite and not just bark”.

Also weighing on stocks was the view that the market is still too expensive.

At the release of RBC Capital’s latest investor survey, Lori Calvasina, the firm’s head of equity strategy, reported that just 16 percent of respondents saw stocks as attractive while 43 percent saw them as expensive/very expensive. “Investors don’t see attractive valuations,” said Calvasina.

Monday, 2 April 2018

After March fall, analysts hoping for better April

Stock markets rose last week but ended the month and quarter with losses.

The S&P 500 rose 2.1 percent last week but fell 2.7 percent for March as a whole and 1.2 percent for the first quarter.

The STOXX Europe 600 rose 1.4 percent but fell 2.3 percent for March and 4.7 percent for the first quarter.

Some analysts expect better performances for stocks in April.

Ryan Detrick, senior market strategist at LPL Financial told CNBC last week: "From a purely seasonality point of view, April is a pretty good month and we think with this little bounce we got right at the end of March, here we think you have a good chance of it continuing."

"April is actually the second-best month of the year, and it has risen 69 percent of the time," said Samuel Stovall, chief investment strategist at CFRA. "The average price gain is 1.4 percent, versus 0.67 percent for all months."

However, Stovall also noted that the market is "down an average 2.2 percent during midterm election years, and it doesn't get much better in the third quarter".

On the other hand, stock market valuations have come down. The S&P 500 is now trading at 16.1 times projected earnings for the next year, according to FactSet, down from 18.6 in late January. Corporate profits are projected to jump 18.5 percent this year.

Mary Ann Bartels, head of portfolio strategy at Merrill Lynch Wealth Management, said that if earnings turn out as strong as expected, "we can finally recover from this correction".

Indeed, Detrick said that if the earnings hit the expected numbers, "this could really be a buying opportunity and we'll have significant, potentially double-digit, gains before the year is over".