Markets mixed as China slowdown seen impacting corporate earnings

Markets were mixed on Tuesday.

The S&P 500 fell 0.2 percent but the STOXX Europe 600 rose 0.8 percent and the Nikkei 225 rose 0.1 percent.

US investors were concerned about corporate earnings.

“Earnings numbers are showing definitively that the China slowdown is having an impact on U.S. companies,” said Mark Esposito, president of Esposito Securities.

“We're still overweight stocks. But I think you have to really to temper that enthusiasm with that kind of deceleration in corporate profits,” said Richard Bernstein, CEO of Richard Bernstein Advisors.

Markets fall but triple put may keep rally going

Markets fell on Monday.

The S&P 500 fell 0.8 percent, the STOXX Europe 600 fell 1.0 percent and the Nikkei 225 fell 0.6 percent.

The end of the partial US government shutdown agreed to on Friday provided little boost to markets.

Dave Lutz, head of ETFs at JonesTrading, wrote in a note that US stocks are “starting this week under some pressure as Trump throws cold water on the chances of a shutdown deal” while a Mizuho Bank commentary noted that “it is the U.S.-China trade talks that will be in the limelight”.

Also, Caterpillar reported disappointing fourth-quarter earnings while Nvidia lowered its fiscal fourth-quarter revenue outlook.

“Slowing demand in China hit them hard,” said Larry Benedict, chief executive of the Opportunistic Trader.

Morgan Stanley’s chief equity strategist Mike Wilson sugggested that investors should get out of stocks right now.

“We struggle to see the upside in hanging on just to see how long we can. We think it is better to hop off now and rest up for the next rodeo,” said Wilson.

Other strategists think that a more dovish Federal Reserve could keep the rally going.

“Inflation is probably low enough to justify keeping rates on hold, and we expect only one hike in 2019,” he said. “If this plays out, versus the Fed’s own forecast of two hikes, it should be positive for risk assets.”

Furthermore, Deutsche Bank macro strategist Alan Ruskin noted after discussions with investors in Hong Kong and Singapore that while there is a “strong consensus about a newfound Powell put”, there is also “a widely perceived” President Trump put and a “commonly perceived” President Xi put.

US stock market at “risk of correction” but emerging markets may lead the way back up

The S&P 500 fell 0.2 percent last week, ending a four-week winning streak.

Lakshman Achuthan, co-founder of the Economic Cycle Research Institute, thinks that the stock market may be on the brink of another correction.

“We're still in this slowdown. There is more to come. It is not over,” he told CNBC on Friday.

Achuthan said that as long as there is a slowdown, “the risk of a correction remains”.

On the other hand, stock buybacks could help support the market.

JP Morgan's chief US equity strategist, Dubravko Lakos-Bujas, wrote on Friday: “Despite the recent market volatility, buyback activity has been very strong during the fourth quarter and we expect it to remain robust in 2019 given profit growth, lower valuation, and a record high $700 billion available to execute under existing authorizations.”

Also, Achuthan said that the global economy may be “where we need to see the bottoming first” and that may well be happening.

Reuters reported: “This weekend marks a year since the start of one of most comprehensive global bear markets on record, but just as the developing world’s equity indexes were first to fold last year, now they are leading the charge back up.”

According to Reuters, many global stock market indices began to rout “within hours of each other” last year but the MSCI's emerging markets index began to rise at the end of October, two months earlier than the world index.

Since then, the Turkish stock market has risen 20 percent from its low and the Brazilian market is up 40 percent and at an all-time high.

Markets rise as US government shutdown ends

Markets rose on Friday.

The S&P 500 rose 0.9 percent, the STOXX Europe 600 rose 0.6 percent and the Nikkei 225 rose 1.0 percent.

President Donald Trump and Democratic congressional leaders came to an agreement to reopen the government until 15 February, temporarily ending the US government partial shutdown.

Optimistic outlooks also boosted some stocks. Western Digitial Corp surged 6 percent after its management said it expected revenue to rise in the second half of 2019.

Markets mixed amid concerning news on trade and growth

Markets were mixed on Thursday.

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

Fears over the US-China trade war were reignited after US Commerce Secretary Wilbur Ross told CNBC that a trade deal with China is “miles and miles” away.

Adding to investors' concerns were comments by European Central Bank President Mario Draghi that the balance of risks surrounding the eurozone economic outlook have shifted to the downside. The comments were made in a news conference following the ECB's decision at its monetary policy meeting to leave interest rates unchanged.

However, Ryan Nauman, market strategist at Informa Financial Intelligence, said that “good news on the earnings front” are “helping to counteract a lot of concerning news out this morning on global growth and trade”.

Still, Raymond James chief investment strategist Jeffrey Saut thinks that stocks are “a little overextended in the short-term” and could see a pullback.

Longer-term though, Saut is bullish and said: “The pullback is for buying.”

Markets mixed despite “solid earnings” amid trade and economic growth concerns

Markets were mixed on Wednesday.

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

US investors were encouraged by corporate results, with IBM, for example, surging 8.5 percent after it announced a bullish outlook for profits.

“Bellwether S&P 500 companies are posting solid earnings, and the outlooks have been good,” said Jeffrey Kravetz, regional investment director at US Bank Private Client Reserve.

However, the trade tension between the US and China remained a concern amid reports that the US cancelled a trade planning meeting with China.

“The U.S. strategy might be to raise pressure on the Chinese ahead of the hard deadline in March, but this makes for uncomfortable interpretation by markets, and could potentially induce excessive volatility in the interim,” Chang Wei Liang of Mizuho Bank said in a commentary.

Michael Arone, chief investment strategist at State Street Global Advisors suggested that the “market is reluctant to overcome fears of slowing global growth, China-U.S. trade relations, and the government shutdown”, all of which “suggests challenges for stocks to move higher, despite earnings that have been better than expected”.

Meanwhile, Barry Bannister, head of institutional equity strategy at Stifel, thinks that US stocks face a “deep EPS ‘valley’ ahead” while Morgan Creek Capital founder and chief investment officer Mark Yusko said that US stocks must drop nearly 50 percent to reach fair value.

Markets mixed as China reports slowest growth rate since 1990

Markets were mixed on Monday.

The US stock market was closed for a holiday but S&P 500 futures fell 0.6 percent. The STOXX Europe 600 fell 0.2 percent but Asian stocks were higher even as China reported that its economy grew 6.6 percent in 2018, the slowest rate since 1990.

In a report on Monday, the International Monetary Fund reduced its global growth forecast for this year to 3.5 percent from 3.7 percent in October.

Michael Hewson, chief market analyst at CMC Markets UK, wrote in a note that the Chinese GDP report “reinforces the concerns of a slowdown that has prompted a series of measures by Chinese authorities this month to try to manage the worst effects of some sharp economic weakness that has spooked global investors”.

Bear market may be over but stocks could retest low

The S&P 500 rose 2.9 percent to 2,670.71 last week, extending its winning streak to four.

Edward Yardeni, president of Yardeni Research, told CNBC on Friday that the market's win streak may be just beginning.

“At the end of last year the bull-bear ratio, which is something we watch from Investors Intelligence, fell below one,” the Yardeni Research president told CNBC's "Trading Nation" on Friday. “It's got an awfully good track record as a contrary indicator.”

Yardeni sees the S&P 500 hitting 3,100 by the end of the year.

Simon Maierhofer, founder of iSPYETF and publisher of the Profit Radar Report, also thinks that the bear market is over.

However, Maierhofer also noted that the recent recovery in the S&P 500 is one of the fastest in history and that this “generally leads to some short-term weakness”.

“Since there was no bullish divergence at the December low, stocks could retest that low (like in 2016), to carve out a bullish divergence before moving higher,” he said.

Markets jump on trade optimism, December decline seen as overreaction

Markets rose on Friday.

The S&P 500 rose 1.3 percent, the STOXX Europe 600 surged 1.8 percent and the Shanghai Composite jumped 1.4 percent.

Optimism was boosted by a report that China has offered to increase imports from the US by US$1 trillion over the next six years.

Some analysts now think that investors overreacted when they dumped stocks in December.

“December was out of line with fundamentals,” said Richard Bernstein, CEO of Richard Bernstein Advisors.

Still, others think that the rally may be getting ahead of itself.

“The market is rallying like we are going to get both a trade deal and a dovish Fed, but if you take away trade risks, there's a good chance the Fed will get more hawkish,” said Alec Young, managing director of Global Markets Research at FTSE Russell.

US stocks rise amid hopes of reduced trade tension

Markets were mixed on Thursday.

The S&P 500 rose 0.8 percent but the STOXX Europe 600 was flat and the Nikkei 225 fell 0.2 percent.

US stocks rose after a report suggesting that the US government was debating whether to ease tariffs on Chinese imports in a bid to calm markets and ease tensions with China.

However, weighing on bank stocks was Morgan Stanley's announcement that fourth quarter earnings and revenue had fallen short of analyst expectations.

Still, Tom Essaye, president of the Sevens Report, said in a note that commentary from banks executives has been “better than feared” and may be “helping markets rally”.

Bill Stone, Avalon Advisors' chief investment officer, told CNBC that “stocks are cheap” relative to bonds and sees the S&P 500 surging to at least 3,000 by the end of the year.

In contrast, Andrew Garthwaite and other Credit Suisse analysts said in a report that there is “around 5% upside for the key global markets, but advise selling developed markets into the rally rather than continuing to build positions”.

Markets rise but “easy money is in the rearview mirror”

Markets were mostly higher on Wednesday.

The S&P 500 rose 0.2 percent and the STOXX Europe 600 rose 0.5 percent but Asian markets were mixed.

Despite two consecutive days of gains, some analysts remain cautious.

Bob Doll, senior equity strategist and portfolio manager at Nuveen, said that “the easy money is in the rearview mirror”.

Mark Newton, independent market analyst at Newton Advisors, wrote: “Reversals of trend look likely technically, and one should consider using strength Wednesday to flatten out and/or adopt hedges for an above-average chance of a drawdown into next week.”

“The average bear rally in history is approximately 11%,” noted Gary Gordon, president of Pacific Park Financial. “We stand at roughly 11.5% off of the correction lows right now.”

“If you missed an opportunity to lighten your allocation to risk assets like stock and high yield bonds when the S&P 500 was peaking near 2930-2940, you might want to tactically lower some risk during the current rally,” suggested Gordon.

In contrast, JP Morgan strategist Marko Kolanovic thinks that the stock market is “drifting higher”. The firm has a 3,000 target for the S&P 500 for the end of the year.

Markets rise, UK Parliament rejects Brexit deal

Markets rose on Tuesday.

The S&P 500 jumped 1.1 percent, the STOXX Europe 600 rose 0.3 percent and the Nikkei 225 rose 1.0 percent.

Markets largely shrugged off the uncertainty associated with the UK's departure from the European Union as the UK Parliament voted against Prime Minister Theresa May's Brexit deal on Tuesday.

Christopher Smart, head of macroeconomic and geopolitical research at Barings, said that the impact of Brexit “will be minimal” and that “Britain will remain deeply integrated with the EU”.

Markets fall on concerns over trade and corporate earnings

Markets fell on Monday.

The S&P 500 declined 0.5 percent, the STOXX Europe 600 fell 0.5 percent and the Shanghai Composite fell 0.7 percent.

Market sentiment was hit by weak Chinese trade data released early on Monday. Imports dropped by 7.6 percent in December while exports fell 4.4 percent.

Also possibly weighing on markets are concerns for corporate earnings. S&P 500 earnings are estimated to have grown 14.5 percent in the final quarter of 2018, the slowest since the third quarter of 2017, and sharply lower than the 28.4 percent rise in the third quarter.

“Analysts have been backpedaling earnings expectations faster than usual in the run-up to the Q4 releases,” said Jasper Lawler, head of research at London Capital Group, in a note.

After third weekly rise, S&P 500 may be at critical juncture

The S&P 500 rose 2.5 percent last week for its third consecutive weekly advance.

According to a stock market checklist from Citi, the bull market is alive and well.

Of the 18 factors tracked by Citi, only 3.5 are flashing sell versus previous bear markets such as 17.5 in 2000 and 13 in 2007.

“The checklist is telling us to buy this dip,” said Robert Buckland, chief global equity strategist at Citi, in a report.

Some technical analysts think that the S&P 500 is at a critical level as it approaches 2,600.

Instinet's Frank Cappelleri noted that the violent swings of recent weeks has subsided as the S&P 500 approached 2,600.

“The most surprising move could be that the last few days developed into a potential bullish flag, and you have another move before there's a decline,” he said.

In contrast, Julian Emanuel, BTIG chief equity and derivatives strategist thinks the level is a “wall of resistance”.

“This is where the bulls and bears come together, and you're going to start to see this tussle,” said Robert Sluymer, a technical analyst at Fundstrat.

US stocks rise as Fed chairman reiterates monetary policy flexibility and patience

Markets were mostly higher on Thursday.

The S&P 500 rose 0.5 percent and the STOXX Europe 600 rose 0.3 percent.

However, earlier in the day, the Nikkei 225 fell 1.3 percent.

Marko Kolanovic, global head of quantitative and derivatives strategy at JP Morgan, told CNBC that “both mutual fund and pension flows suggest positive market performance in the future”.

Investors may also have been encouraged by remarks by Federal Reserve Chairman Jerome Powell during a discussion at the Economic Club of Washington that the central bank will be “flexible” and “patient” on monetary policy as inflation is “under control”.

Still, Powell also did warn that the “long-run fiscal, nonsustainability of the U.S. federal government” is something that he is “very worried about”.

Continuation of market rally evokes comparison with 2016 rebound

Markets rose on Wednesday.

The S&P 500 rose 0.4 percent, the STOXX Europe 600 rose 0.5 percent and the Nikkei 225 rose 1.1 percent.

Emmanuel Cau, head of European equity strategy at Barclays, said that investors may be buying stocks now because the market had become “very very oversold as of two weeks ago”.

Trade talks between the US and China ended on Wednesday. US Under Secretary of Agriculture for Trade and Foreign Agricultural Affairs Ted McKinney said that he thought negotiations “went just fine”. However, Vishnu Varathan, head of economics and strategy at Mizuho Bank, wrote in a morning note: “It is not over until the fat lady has sung.”

Some analysts noted that there are some similarities between the 2018 pullback and the one that bottomed in early 2016, which eventually proved to be merely a pause before a series of all-time highs.

However, other analysts thinks that the stock market is too damaged for a sustained rally.

Samsung issues profit warning, Gundlach says rising yields will hurt stocks

Markets rose on Tuesday.

The S&P 500 rose 1.0 percent, the STOXX Europe 600 rose 0.9 percent and the Nikkei 225 rise 0.8 percent.

“Markets are riding the wave of improved sentiment as well as seeing some glimmer of progress regarding Chinese trade negotiations,” suggested Eric Wiegand, senior portfolio manager at US Bank.

Investors shrugged off a warning by Samsung of a 29 percent drop in operating profit for the fourth quarter amid “mounting macro uncertainties”.

“These Samsung results are quite damning, suggesting there are a broader-based retail and manufacturer slowdown afoot,” Stephen Innes, head of Asia Pacific trading at Oanda, said in a Tuesday research note.

Indeed, DoubleLine Capital CEO Jeffrey Gundlach thinks that 2019 will continue to be a volatile year, with rising yields hurting stocks amid increasing deterioration in corporate credit.

While investors watch US-China trade talks, rising defaults in China raises hard landing risk

Markets were mixed on Monday.

The S&P 500 rose 0.7 percent and the Nikkei 225 surged 2.4 percent but the STOXX Europe 600 fell 0.15 percent.

“The backdrop for stocks is positive, with earnings growth still projected to be healthy, while the Fed looks like it is pausing,” said Michael Arone, chief investment strategist for State Street Global Advisors.

Investors also kept an eye on the latest round of trade talks between the US and China, with some noting that the presence of senior officials from China like Vice Premier Liu He could be an optimistic sign.

However, Cliff Tan, East Asian head of global markets research at MUFG Bank, warned that China's economy already faces serious problems.

“Defaults in China in 2018 tripled,” he said. “Now we're seeing that credit itself is growing so fast it may not be possible to engineer a soft landing.”

S&P 500 may be near bottom as Fed chairman signals flexibility on interest rates

Despite a sharp drop on Thursday, the S&P 500 finished last week with a 1.9 percent gain, thanks to a 3.4 percent surge on Friday. It was its second consecutive weekly gain.

Ari Wald, a technical analyst at Oppenheimer & Co, thinks that the worst of the selloff is behind the market.

“We expect a bear market rally to develop over the coming weeks, and we expect a new bull market to develop over the coming months to quarters,” he said.

Based on past bear markets, he thinks that “the S&P 500 has endured the bulk of the magnitude and now requires time to base”.

Similarly, Tobias Levkovich, chief US equity strategist at Citi, said that “the data suggest that we should be buying into current weakness”.

Meanwhile, analysts at Bank of America Merrill Lynch noted that its Bull & Bear indicator is indicating “extreme bear”, which could be a buy signal for stocks.

And what has been driving the bull market, its recent decline and latest recovery? According to Sven Henrich, founder and the lead market strategist of NorthmanTrader.com, it is central bank policy.

“Stock-market advances remain a game of artificial liquidity and central-bank jawboning, not organic growth,” he wrote on MarketWatch.

“When did global central-bank balance sheets peak? Early 2018. When did global markets peak? January 2018.”

Henrich said that the market surge on Friday was triggered by remarks by Federal Reserve Chairman Jerome Powell that he is flexible on interest rates.

However, Henrich warned that for central banks to keep the bull market alive requires ever-lower rates, which would enable debt to keep expanding, while each recovery produces less and less organically driven growth and ever-higher wealth inequality.

Markets rise as strong US jobs growth shows rate hikes “not such a scary thing”

Markets were mostly sharply higher on Friday.

The S&P 500 soared 3.4 percent, the STOXX Europe 600 surged 2.8 percent and the Shanghai Composite jumped 2.0 percent.

The Nikkei 225 was an exception, falling 2.3 percent after the Japanese stock market opened its first trading session of 2019.

Markets in the US and Europe were boosted by a report on Friday that the US economy added 312,000 jobs in December, well above expectations.

Federal Reserve Chairman Jerome Powell said on Friday morning that the jobs report did not materially increase concerns over rising inflation.

Willie Delwiche, investment strategist with RW Baird, said that “if the Fed is positioned to continue to raise rates in 2019 because the data warrants it, it’s not such a scary thing for the stock market”.

China also provided positive news on Friday. China’s central bank announced a cut in the ratio of cash that banks must hold as reserves by 100 basis points while a report showed that the Caixin/Markit services purchasing managers' index rose to a six-month high of 53.9 in December from 53.8 in the previous month.

Stefan Hofer, a managing director and chief investment strategist at LGT Bank Asia, said that if the US and China can reach a trade deal, then Asia “will be the place to be in terms of equities”.

Markets mixed as Chinese manufacturing shrinks

Markets were mixed on Wednesday.

The S&P 500 edged up 0.1 percent but the STOXX Europe 600 fell 0.1 percent and the Shanghai Composite fell 1.1 percent.

Chinese stocks were hit by a report showing that the Caixin/Markit Manufacturing Purchasing Managers' index fell to 49.7 in December from 50.2 in November.

Gareth Nicholson, head of fixed income at Bank of Singapore, suggested that the data confirmed that the US-China "trade war has had an impact”.

Meanwhile, Joel Kulina, analyst at Wedbush Securities, noted that the post-Christmas “melt-up” markets experienced in recent days is being “unwound a bit” and suggested that “investors will adopt a more cautious approach to 2019”.

Still, many analysts remain optimistic for 2019 because negative years for stocks, as in 2018, “are usually followed by a strong bounce the next year”.

Markets rise on last day of 2018

Markets rose on the last day of 2018.

The S&P 500 rose 0.9 percent and the STOXX Europe 600 rose 0.4 percent.

Some optimism came after US President Donald Trump tweeted on Saturday that he and Chinese leader Xi Jinping had made “big progress” in a telephone discussion about trade.

Still, the trade tension between the US and China is likely to remain a source of concern for investors, especially after a report on Monday showed that China's manufacturing purchasing managers' index dropped to 49.4 in December, the lowest since February 2016, from 50.0 in November.

The S&P 500 ended the year down 6.2 percent after a 14 percent decline in the fourth quarter but some analysts see the recent rally continuing, at least for a while longer.

“Looking ahead into the first few weeks of the new year, we continue to believe the market will climb higher as tactical internal and sentiment extremes moderate, while sucking the optimists back in, before ultimately taking the next leg down in this bear market,” said Jeff deGraaf, chairman of Renaissance Macro Research, in a note.