Italy leads stock market rebound

Markets rebounded on Wednesday.

Asian stocks fell sharply early in the session, with the Nikkei 225 tumbling 1.5 percent, following Tuesday's losses in the US and Europe.

However, later on, Italy's FTSE MIB surged 2.1 percent to pull the STOXX Europe 600 up 0.3 percent and the S&P 500 jumped 1.3 percent.

“Markets were much calmer today after yesterday’s volatility in response to growing political uncertainty in Italy,” said analysts at Daiwa Capital Markets in a note.

However, Michael Antonelli, equity sales trader at Robert W. Baird & Co, said: “Anything coming from the left field can shatter markets nowadays, so we have to brace for a long summer grind.”

Italy leads markets down

Markets fell on Tuesday.

The S&P 500 fell 1.2 percent, the STOXX Europe 600 fell 1.4 percent and the Nikkei 225 fell 0.5 percent.

Investors' concerns were focussed on Italy, where the FTSE MIB plunged 2.7 percent after the populist 5 Star Movement and League parties called for new elections following President Sergio Mattarella's rejection of their choice for economy minister.

“Today’s selling is happening on a larger volume, which is concerning. It means that investors are now worried about contagion from the fallout in Italy,” said Joe Saluzzi, partner and co-head of equity trading at Themis Trading.

While investors may be getting uneasy, consumer confidence, at least in the US, remains solid. The Conference Board's consumer confidence index rose to 128 in May, near an 18-year high, from 125.6 in April.

Italian stocks plunge amid political turmoil

Markets were mixed on Monday.

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

The US and UK markets were closed for holidays.

European stocks were dragged down by a 2.1 percent plunge in the FTSE MIB after Italian President Sergio Mattarella asked former International Monetary Fund official Carlo Cottarelli to try to form a new government.

On Sunday, Mattarella had blocked the ascent to power of a government supported by the maverick 5 Star Movement and the hard-right League after they proposed a euroskeptic figure as economy minister.

Market may be more vulnerable to tightening than realised

The US economy may not be as robust as the Federal Reserve thinks.

Bianco Research President James Bianco told CNBC on Friday that most economists mistakenly believe that leading indicators are signaling an "A+" economy that can withstand rising interest rates.

Bianco said social media is creating a bandwagon effect among survey respondents that is distorting the view of the economy.

"It's more like a B- economy," he said. "It's not this screaming home run that everybody thinks it is based on the survey data."

That could mean that Fed monetary tightening could derail the stock bull market.

Oil plunges but stocks look a good bet

Markets were mixed on Friday.

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

Crude-oil futures plunged 4 percent following reports that the Organization of the Petroleum Exporting Countries and other major producers may lift production by as many as 1 million barrels a day.

John Augustine, chief investment officer at Huntington Private Bank, said that higher oil production “may result in a weak patch for the energy sector, but for the broader market that could be offset by a rise in sentiment if it results in gas prices falling going into the summer driving season”.

Indeed, Credit Suisse analyst Andrew Garthwaite thinks stocks are a good bet.

“We conclude that a US recession is unlikely until Q3 2020,” Garthwaite wrote in a note to clients Friday. “Remain overweight equities.”

Higher interest rates may be good for stocks but some economists see rate cuts in 2020

Markets fell on Thursday.

The S&P 500 fell 0.2 percent, the STOXX Europe 600 fell 0.5 percent and the Nikkei 225 fell 1.1 percent.

News that US President Donald Trump was cancelling a planned summit with North Korean leader Kim Jong Un had little impact on markets.

However, European and Asian stocks were hit by an announcement by the US government on Wednesday that it was investigating whether new tariffs against imported autos are called for based on national security grounds.

The US 10-year Treasury yield fell 2.2 basis points to 2.981 percent, slightly easing fears of higher interest rates.

On the other hand, a CNBC report has highlighted an analysis by Bill Miller showing that higher interest rates may actually be good for the stock market.

"Looking at the last 20 years — all cases of higher interest rates have been met with a market that's gone higher," Miller said.

Indeed, concerns may soon shift from higher interest rates to weaker economic growth.

A poll of over 100 economists taken 16-24 May showed that US economic growth was forecast to average 2.8 percent in 2018, its fastest pace in three years, but slow to 2.5 percent next year and 1.8 percent in 2020.

The likelihood of a US recession in the next 12 months was seen as 15 percent, around where it has been over the last few years, but that probability doubled to 31 percent over the next two years.

An increasing number of economists expect the Federal Reserve to start cutting interest rates sometime in 2020 compared with previous polls.

US stocks rise as Fed indicates willingness to keep rates low

Markets were mixed on Wednesday.

The S&P 500 rose 0.3 percent but the STOXX Europe 600 fell 1.1 percent and the Nikkei 225 plunged 1.2 percent.

Markets were initially shaken by US President Donald Trump's remark that he was not really happy with the progress of US-China trade talks and that his summit with North Korean leader Kim Jong Un may not go ahead as planned.

However, the release of the minutes of the last Federal Reserve monetary policy meeting later on Wednesday showed that officials were sanguine about the inflation outlook.

“The minutes from the Fed suggest they are willing to keep rates lower for longer to allow the economy to recover,” said Quincy Krosby, chief market strategist at Prudential Financial.

Are stocks “a buy” or “cruising for a bruising”?

Markets were mixed on Tuesday.

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

The US 10-year Treasury yield hovered around 3.07 percent, gold inched up 0.1 percent while US crude oil futures fell modestly.

Over the medium term, however, gold has been falling while crude oil has rallied to its highest level in years as the US dollar rallied.

Oppenheimer's head of technical analysis Ari Wald said that this could be a sign of “bullish risk appetite”.

Dennis Davitt, partner at Harvest Volatility Management, said: “Equities are a buy here because they're good hedges against inflation, so the inflationary aspects of oil outside of the dollar are what you should really look towards.”

However, Economic Cycle Research Institute co-founder Lakshman Achuthan was less optimistic.

“Since late last year, consumer spending growth has been easing, as has personal income growth,” he told CNBC. He said that “the risk is rising” and that stocks are “cruising for a bruising”.

Markets rise after Mnuchin declares “trade war on hold”, Goldman says interest rates not a problem

Markets rose on Monday.

The S&P 500 rose 0.7 percent, the STOXX Europe 600 rose 0.3 percent and the Nikkei 225 rose 0.3 percent.

Markets were boosted after US Treasury Secretary Steven Mnuchin said over the weekend that the US would delay implementation of tariffs on Chinese goods and “put the trade war on hold” while working out details of a deal between the countries.

Then on Monday, Mnuchin told CNBC that he is “very bullish on stocks”.

“We are well on our way to 3 percent or higher sustained growth,” he said.

While higher growth could put upward pressure on interest rates, the US 10-year Treasury yield was muted on Monday, hovering just above 3 percent.

Goldman Sachs thinks that interest rates are not yet a problem for stocks.

“We expect negative valuation changes if the level of rates approaches 4%, or if the monthly pace of increase exceeds 1 standard deviation (currently 20 bp),” it said in a note.

Goldman economists currently expect the 10-year Treasury yield to hit 3.6 percent by the end of 2019.

US and China avert trade war for now

Markets have one less worry for the time being after the US and China backed away from a trade war.

US Treasury Secretary Steven Mnuchin said on Sunday that the two countries "have made very meaningful progress" and "have agreed to put the tariffs on hold".

China's Vice Premier Liu He confirmed that "the two sides reached a consensus, will not fight a trade war, and will stop increasing tariffs on each other".

Early market reaction was positive. Asian stock markets rose on Monday, as did European stock markets in early trading.

Markets fall as concerns shift away from bonds

Markets mostly fell on Friday.

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

The 10-year US Treasury yield remained at a near seven-year high of 3.1 percent as analysts expressed mixed views about its future direction. TradingAnalysis.com founder Todd Gordon thinks that the bond market breakdown is about to get worse but editor of the Bear Traps Report Larry McDonald thinks that bonds are way oversold.

In any case, Lance James, a senior portfolio manager of US equities at RBC Global Asset Management, said he is not concerned about the bond market’s impact as “the rising yield reflects an improving economy”.

However, James is concerned about tariffs and trade policy. “To me, that’s the biggest risk, and we need to see whether the negotiation process results in fairer policy,” he said.

In Europe, the FTSE MIB Index plunged 1.5 percent as the Italian political situation weighed on markets. Credit-ratings firm DBRS warned on Thursday that the economic proposals from the 5 Star Movement and League coalition that included tax cuts and increased fiscal spending could threaten Italy’s credit rating.

Markets mixed as 10-year Treasury yield hits 7-year high

Markets were mixed on Thursday.

The S&P 500 fell 0.1 percent but the STOXX Europe 600 rose 0.7 percent and the Nikkei 225 rose 0.5 percent.

US stocks were weighed down by a rise in US Treasury yields. The 10-year yield rose 1.7 basis points to 3.109 percent, its highest level since July 2011, and the 30-year yield rose 3.1 basis points to 3.245 percent, the highest since June 2015.

Bill Kornitzer, portfolio manager at Buffalo Funds, said that as bond yields move higher, “equities will become increasingly volatile, especially since valuations are stretched and on the high side”.

However, some analysts remain sanguine.

Samantha Azzarello, global market strategist at JP Morgan Asset Management, said that the 10-year Treasury yield can get to 3.5 percent with “no trouble at all” for stocks.

Michael Yoshikami, founder and CEO of Destination Wealth Management, said that because the economy is still growing, higher rates are “OK”.

“At this point it's nothing to be concerned about, but certainly something to monitor,” he said.

Stock valuations “about right”, may see summer rally

Markets were mostly higher on Wednesday.

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

Anthony Saglimbene, global market strategist at Ameriprise, said that “we think stock valuations are about right”. However, he added: “Investors seem less willing to push valuations higher than they used to be.”

Lisa Erickson, head of the traditional investments group at US Bank Wealth Management, said that while growth momentum and earnings have been positive for the market, “these are counterbalanced with risks on policy issues, trade talks and geopolitics like North Korea.”

Still, Mark Kolakowski thinks that stocks may stage a summer rally.

He quoted Ari Wald, technical analyst at Oppenheimer, as saying that “the correction that began in January is coming to an end”.

Quickened pace of Fed rate hikes could leave investors with “nowhere to run to”

Markets were mostly lower on Tuesday.

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

“Fundamentals aren’t improving enough to justify valuations, and when one considers that with the backdrop of a Fed that’s raising interest rates, the market will start re-rating its risk profile,” said Stephen Wood, chief market strategist for Russell Investments.

Mark DeCambre at MarketWatch noted that there was “nearly nowhere to run or hide to for investors on Tuesday” as US Treasuries and gold also fell.

DeCambre said that some market participants are seeing “a quickened pace of moves by the Federal Reserve to raise interest rates”.

Ryan Vlastelica at MarketWatch quoted Morgan Stanley as saying: “Decelerating growth, rising inflation and tightening policy leave us with below-consensus 12-month return forecasts for most risk assets. After nine years of markets outperforming the real economy, we think the opposite now applies as policy tightens.”

Markets mixed as Trump offers help to ZTE

Markets were mixed on Monday.

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

Political issues played a part in Monday's trading.

US President Donald Trump had said in a tweet on Sunday that he was working with Chinese President Xi Jinping to keep struggling Chinese telecom giant ZTE in business after the latter was hit by sanctions imposed by Trump. This comes ahead of the trade talks tentatively scheduled for this week between the US and China.

“We’re getting a bump higher on this trade news, since it seems like Trump is backing off his rhetoric with China,” said Paul Nolte, portfolio manager at Kingsview Asset Management.

In Europe, Italy's FTSE MIB rose 0.3 percent after 5 Star Movement and hard-right League party over the weekend reportedly reached a deal on forming a governing coalition.

In Asia, the FTSE Bursa Malaysia KLCI ended 0.2 percent higher after opening nearly 3 percent lower following the surprise election victory of former prime minister Mahathir Mohamad's opposition coalition.

Stocks rise as US economy “not overheating” yet

US stocks rose last week, with the Dow Jones Industrial Average rising 2.3 percent to mark its longest winning streak in 6 months.

The rally in stocks has taken place despite geopolitical and inflation concerns.

However, Peter Coy at Bloomberg wrote that the US economy is not yet overheating.

Is the U.S. economy overheating? Yes and no. There are plenty of inflationary bottlenecks, and not only in the labor market...

On the other hand, the bottlenecks aren’t yet causing high inflation across the economy, which would require the Federal Reserve to speed up its interest rate hikes...

Markets rise amid “multiple signs of strength”

Markets rose on Friday.

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

Donald Selkin, chief market strategist at Newbridge Securities, noted that “we’ve broken out of the downtrend that we had been seeing, thanks to some strong earnings and bond yields that have remained stable below 3%”.

“Investors should take heart from the resilience equities have shown as geopolitical tensions rise,” said Chris Beauchamp, chief market analyst at IG, in a note.

Indeed, Ryan Vlastelica at MarketWatch wrote that there are “multiple signs of equity strength going on below the surface of the major indexes, which could be a signal that the recent uptrend in stocks is justified and could continue”.

Markets mixed, volatility falls but “inflation headed higher”

Markets were mixed on Thursday.

The S&P 500 rose 0.9 percent and the Nikkei 225 rose 0.4 percent but the STOXX Europe 600 fell 0.1 percent.

The CBOE VIX fell for a sixth straight session and is trading at levels last seen since before the Dow and S&P fell into correction territory.

Indeed, Mark DeCambre at MarketWatch said that the stock market has regained its swagger.

“The bears need to hibernate for a while because it looks like most of the geopolitical news has been priced in as well,” he quoted Karyn Cavanaugh, senior market strategist at Voya Financial, as saying.

However, Leuthold Group's Jim Paulsen told CNBC that “inflation has changed its stripes and is headed higher”.

“You're going to see more companies experiencing erosion of margins, which could force Wall Street to lower estimates,” he added.

Energy leads stock rally as oil surges, economics and earnings to lead next leg up

Most markets rose on Wednesday.

The S&P 500 jumped 1.0 percent, the STOXX Europe 600 rose 0.6 percent but the Nikkei 225 fell 0.4 percent.

Energy stocks led gains as oil rose 3 percent following the US decision to pull out of the Iran nuclear deal and reimpose sanctions.

Even as investors focus on geopolitics, Kate Warne, investment strategist at Edward Jones, thinks that economics and earnings will give stocks their next leg up this year.

“We think first investors really aren't paying attention to the fact that the budget deal that went through Congress earlier this year adds government spending as a pillar for economic growth,” Warne told CNBC on Tuesday.

“Investors haven't paid enough attention to the really stellar first-quarter earnings we've seen,” added Warne.

Stocks flat, oil falls after US ends Iran deal

Markets were little changed on Tuesday.

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

US stocks managed to recover from early losses after President Donald Trump announced that the US would pull out of a multilateral nuclear deal with Iran but oil fell sharply, West Texas Intermediate crude losing 2.4 percent. Brent fell 1.7 percent.

“It appears that this period of malaise in the market is not going to end until after midterm elections. There is just not enough good news to move the market higher,” said Maris Ogg, president at Tower Bridge Advisors.

Markets rise, oil traders await Trump decision on Iran

Markets rose on Monday.

The S&P 500 rose 0.4 percent, the STOXX Europe 600 rose 0.6 percent and the Shanghai Composite surged 1.5 percent.

Oil prices rose, with West Texas Intermediate settling above US$70 a barrel for the first time since late 2014.

However, oil fell back in electronic trading after US President Donald Trump indicated that a decision was imminent on whether he would decertify a 2015 Iran nuclear pact.

“We’re waiting on more clarity about the Iran deal,” said Mark Martiak, senior wealth strategist at Premier Wealth/First Allied. “But even beyond that, we’re entering the summer driving season and the energy sector has been down for so long that it looks poised for a rebound.”

“I think valuations are fair, but I also expect we’ll see a lot more volatility going forward,” Martiak added.

Bulls may be regaining control of stock and bond markets

While the S&P 500 fell 0.2 percent last week and some analysts think that stocks and bonds have entered bear markets, others remain bullish.

Bob Pisani at CNBC wrote that the US employment report on Friday “was perfect for bulls”.

He said that the 163,000 jobs created in April was “not too strong to allow bears to claim the Fed was going to get more aggressive raising rates” but “also not too weak to add to the bear argument that growth is slowing”.

He also suggested that wage growth at 2.6 percent year-over-year should not have the inflation hawks worried.

“Bulls have regained some control of the narrative — for the moment,” he said.

Meanwhile, US bonds may also have hit a low, according to Bill Baruch, president of Blue Line Futures.

“The Federal Reserve's message was relatively dovish on Wednesday, more or less signaling they're willing to allow inflation to run hot and above its 2 percent target,” he said. “I view this as bullish for the futures contract.”

Baruch also noted that “traders have amassed a record net short position in the 10-year futures”, raising the possibility of a rally from short-covering.

US stocks surge as unemployment falls to 3.9 percent

Markets were mixed on Friday.

The S&P 500 surged 1.3 percent and the STOXX Europe 600 rose 0.6 percent but Asian stocks fell, with the Hang Seng plunging 1.3 percent.

A report on Friday showed that the US economy created 164,000 new jobs in April, below the 188,000 that had been expected. However, the unemployment rate fell to 3.9 percent from 4.1 percent, the first time the jobless rate has dropped below 4 percent since the end of 2000.

Art Hogan, chief market strategist at Wunderlich Securities, said that “there was as much good news as bad news in the jobs report, with the good news being no wage pressure to add to inflation fears, and an unemployment rate with a three-handle. It’s really the best-case scenario”.

US stocks could surge in coming months but “recession coming in 2020”

Markets fell on Thursday.

The S&P 500 fell 0.2 percent, the STOXX Europe 600 fell 0.7 percent and the Hang Seng plunged 1.3 percent.

Meanwhile, LPL Financial strategists John Lynch and Jeffrey Buchbinder think that there is scope for further gains for stocks.

“We believe the S&P 500 is fairly valued at a forward PE ratio of slightly over 16,” the analysts said. They said that adjusted for inflation and interest rates, stocks are trading only slightly above historical averages.

LPL has a year-end price target of 2,950-3,000 for the S&P 500.

Credit Suisse chief US equity strategist Jonathan Golub also sees the S&P 500 hitting 3,000 by year-end.

“We're seeing the best earnings season maybe ever,” he told CNBC on Wednesday. “Stocks, if they don't rally, are going to get cheaper and cheaper.”

Scott Minerd of Guggenheim Partners also expects a surge in stocks over the next 12 to 18 months.

“I think stocks will go up another 15 to 20 percent,” Minerd told CNBC on Tuesday.

However, Minerd also thinks that “a recession is coming in 2020” and sees a 40 to 45 percent drop in stocks starting in late 2019 and into 2020.

Markets mixed as Fed leaves interest rates unchanged

Markets were mixed on Wednesday.

The S&P 500 fell 0.7 percent and the Nikkei 225 fell 0.2 percent but the STOXX Europe 600 rose 0.6 percent.

A Federal Reserve monetary policy meeting on Wednesday left interest rates unchanged but said it expected further interest rate hikes will be needed in coming months.

“There are concerns in the market that rising inflation will prompt the Fed to hike more than three times this year, but the Fed statement was reassuring as it did not hint of faster pace of hikes,” said Kate Warne, investment strategist at Edward Jones.

Investors see higher interest rates and inflation, lower gains for stocks

The results of the latest CNBC Fed Survey has been released.

The survey results showed that there is an 86 percent chance that the Fed will hike interest rates in June as respondents raised their inflation forecast for this year to 2.45 percent.

Also, respondents see the S&P 500 rising to 2,787 by the end of this year and to 2,879 by the end of 2019. This, though, was the second survey in a row that respondents lowered their outlook for stocks for both this year and next.

Indeed, Mark Mobius, founding partner at Mobius Capital Partners, thinks there could be "a substantial correction in the markets".

A 30 to 40 percent adjustment is "not unreasonable," Mobius told CNBC, although he added that that was not a prediction, only that "we've got to be ready for that".

"The catalyst I believe will come from continuing increases in interest rates," he said.

Stocks enter historically-weak midterm May with lowest expected return since 2007

The US stock market ended the month of April on a weak note, with the S&P 500 falling 0.8 percent on Monday.

For April, however, the S&P 500 rose 0.3 percent.

A repeat of the gain is unlikely in May, according to Ryan Vlastelica at MarketWatch.

Citing Jeffrey Hirsch, chief executive officer of Hirsch Holdings and editor of the Stock Trader’s Almanac, Vlastelica wrote that during past midterm election years, the Dow Jones Industrial Average fell 0.7 percent in May compared to the overall May average of 0.02 percent decline.

The S&P 500 declined 0.9 percent in midterm Mays while the Nasdaq Composite lost 1.2 percent compared to overall average May gains of 0.2 percent and 0.9 percent respectively.

Meanwhile, expectations for stock returns have fallen to their lowest point since before the financial crisis.

Another report by Vlastelica, citing Morgan Stanley, noted that as of the end of March, the expected return for the S&P 500 is 10.4 percent over the coming 12 months, the lowest expected rate since January 2007.