Markets mixed, face another “abrupt” downward leg

Markets were mixed on Wednesday.

The S&P 500 dipped less than 0.1 percent and the STOXX Europe 600 fell 0.3 percent.

However, earlier earlier in Asia, the Nikkei 225 rose 0.5 percent and the Shanghai Composite rose 0.4 percent.

Markets were little-moved by US Trade Representative Robert Lighthizer's testimony to Congress that the US plans to officially abandon an increase in tariffs on Chinese goods.

“Trade policy, for better or worse, is what traders are paying attention to,” said Willie Delwiche, investment strategist at RW Baird.

However, Octavio ‘Tavi’ Costa, Crescat Capital global macro analyst, thinks that a bear market for stocks has already started.

“In our view, September of 2018 marked the peak of the U.S. economic cycle. We are now seeing a typical bear market rally, and the next downward leg is likely to be just as abrupt as the first one,” said Costa.

European investors are not much more optimistic. According to a survey of over 30 brokers, fund managers and analysts taken 12-25 February, the STOXX Europe 600 is expected to end the year at 371, or nearly unchanged from current levels.

US housing data weak, sub-prime mortgages “still dangerous”

Markets were mixed on Tuesday.

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

In testimony before the Senate Banking Committee on Tuesday, Federal Reserve Chairman Jerome Powell said that “some [economic] data have softened” of late but “the job market remains strong”.

Among US economic reports released on Tuesday, the Conference Board’s consumer confidence index jumped to 131.4 in February from 121.7 in January.

However, housing data were weak. The number of new homes under construction fell to an annual rate of 1.08 million in December from 1.21 million rate in November while home price growth according to the S&P CoreLogic Case-Shiller US National Home Price Index slowed to 4.7 percent in December from 5.1 percent in November.

While US housing stocks took a knock from those data on Tuesday, they have actually been doing very well so far in 2019.

Still, real-estate analyst Keith Jurow warned that bubble-era home mortgages are a disaster waiting to happen.

Jurow wrote that sub-prime mortgages that had fed the housing bubble that blew up in 2007 “are still dangerous and could soon undermine the housing recovery”.

US to delay new tariffs on China

The S&P 500 rose 0.6 percent last week for its fourth consecutive weekly gain.

The Dow Jones Industrial Average also rose 0.6 percent last week for its ninth consecutive weekly gain, its longest such run since May 1995.

The Nasdaq Composite rose 0.7 percent, also a ninth consecutive weekly gain.

Stocks could gain further at the start of this week on prospects of a resolution to the US-China trade war.

In a series of posts on Twitter on Sunday, US President Donald Trump cited "substantial progress" in bilateral talks between the US and China as a reason to delay new tariffs on Chinese goods that were scheduled to begin on 1 March.

Trump also confirmed that he was planning a meeting with Chinese President Xi Jinping.

Markets rise as Trump sees “very good chance” of trade deal

Markets were mostly higher on Friday.

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

“There’s a slew of China related headlines bouncing around the market right now,” said Mike Antonelli, an equity sales trader at Robert W. Baird & Co, after US President Donald Trump said on Friday there was “a very good chance” the US would strike a deal with China to end their trade war.

Mary Ryan, senior equity options strategist at E-Trade Financial Corp., said that the “market is in a precarious position, bumping up against highs not seen since last fall”, with trade a “likely catalyst to tip the scales in either direction”.

She added that “an uptick in volatility could be in the cards”.

Markets fall amid “intensifying recession fears”

Markets mostly fell on Thursday. The S&P 500 fell 0.4 percent and the STOXX Europe 600 fell 0.3 percent.

Earlier in Asia, markets were mixed. The Nikkei 225 rose 0.2 percent but the Shanghai Composite fell 0.3 percent.

Sentiment was dampened by weak US economic data.

“Mainly it’s about the bad economic reports and intensifying recession fears,” said Jim Paulsen, chief investment strategist at The Leuthold Group.

A report from the US Commerce Department showed that orders for non-defense capital goods excluding aircraft dropped 0.7 percent in December.

Another report from the Philadelphia Federal Reserve showed that its manufacturing activity index dropped to -4.1 in February from 17.0 in January.

A third report from the National Association of Realtors showed that existing home sales dropped 1.2 percent last month to the lowest level since November 2015.

A fourth report from the Conference Board showed that its index of US leading economic indicators dropped 0.1 percent in January.

Markets rise as investors doubt further Fed rate hikes

Markets rose on Wednesday. The S&P 500 rose 0.2 percent and the STOXX Europe 600 rose 0.7 percent.

Investors were encouraged by the minutes of the January Federal Reserve monetary policy meeting released on Wednesday, which showed that Fed officials were divided over future interest rate hikes.

Paul Ashworth, chief US economist at Capital Economics, said that “we now expect the Fed to leave rates unchanged throughout this year, before a further deterioration in economic growth forces it to cut rates by a total of 75 basis points in 2020”.

Meanwhile, there were no new developments on the US-China trade negotiations, but Neil Dutta, head of economics at Renaissance Macro Research, thinks that a deal could drive stocks up further.

Dutta estimated that “trade tensions have shaved a cumulative total of 300 points off the S&P 500” and that “if not for all the negative trade news over the last 14 months, the S&P 500 would be about 11% higher”.

US stocks rise in sign of possible "panic buying"

Markets were mixed on Tuesday.

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

Even as the US market continues to rally, Bob Pisani at CNBC noted that some strategists are "sounding cautious". He quoted John Stoltzfus at Oppenheimer as saying that "investors should leave the party hats in the box".

Others, like NYSE floor veteran Peter Tuchman of QMS Directex, thinks there is more of the rally to come. "A lot of people who got out during the market downturn in December are now notably underperforming the markets," Tuchman said.

Indeed, Nomura cross-asset strategist Masanari Takada said that recent gains indicate "panic buying" and suggested "buying on dips from end-February to beginning-March".

Markets rise but remain “risky”

Markets rose on Monday.

The STOXX Europe 600 rose 0.2 percent, the Nikkei 225 jumped 1.8 percent and the Shanghai Composite surged 2.7 percent. The US stock market was closed for a holiday.

Despite the recent gains, Mark Jolley, global strategist at CCB International Securities, said that the ongoing volatility reflects uncertainty and that the markets are “risky”.

Similarly, Michael Hewson, chief market analyst at CMC Markets, thinks that investors remain “reluctant to pile back in en masse”.

Gundlach says big drop at end of last year just a taste of things to come

The S&P 500 rose 2.5 percent last week, its third consecutive week of gain.

The Nasdaq Composite rose 2.4 percent and is now over 20 percent above its December low, thus exiting its bear market.

Then again, Jeffrey Gundlach, CEO of DoubleLine Capital, does not appear to think too much of the 20 percent threshold.

“A bear market has nothing to do with this 20% arbitrary thing,” Gundlach told Yahoo Finance.

“It has to do with something crazy happening first, and then the crazy thing gives it up. And yet more traditional things continue to march on. But one by one they give it up,” he said.

“Bitcoin going from zero to 20,000 in a straight line,” Gundlach said. “It was crazy.”

Gundlach also pointed out that there was a moment that CryptoKitties, collectible cartoon drawings of cats, sold for over $100,000 each. “Of course, they're worth zero today,” he said

Gundlach noted that the global stock market peaked and turned soon after.

Gundlach remarked that from 3 October until Christmas Eve, “there was a pretty big drop.”

“I think that that's just a taste of things to come," he said.

Markets mixed as US and China talk up progress in trade negotiation

Markets were mixed on Friday.

The S&P 500 rose 1.1 percent and the STOXX Europe 600 jumped 1.4 percent but the Nikkei 225 fell 1.1 percent.

Investor sentiment was kept up by talk of progress in the trade negotiation between the US and China.

“Trade has been the biggest weight on markets of late, and so it’s good to see both sides talking up progress,” said Chris Gaffney, president of world markets at TIAA Bank.

Chris Zaccarelli, chief investment officer at Independent Advisor Alliance, said that “trade talks with China will continue to dominate the narrative and markets will move higher on increased optimism for an ultimate deal”.

Markets fall as decline in US retail sales raises question on growth

Markets fell on Thursday.

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

Investor sentiment was dampened by a report on Thursday showing that US retail sales fell 1.2 percent in December, the largest decline since September 2009.

“The decline in retail sales calls into question the domestic growth assumption,” said Andrew Hollenhorst, an economist at Citigroup.

Another report showed that initial claims for state unemployment benefits in the US increased 4,000 in the week ended 9 February.

Adding to signs of a cooling economy was another report on Thursday showing that producer prices rose 2.0 percent in the 12 months through January, the smallest gain since July 2017.

A report on Wednesday had shown that consumer prices were unchanged in January for a third straight month.

“This further corroborates our view that a well-behaved inflationary environment gives the Fed room to remain patient, hiking only once in 2019 and only after a pause in the first half,” said Jake McRobie, a US economist at Oxford Economics.

Markets rise amid bullish technical signs

Markets rose on Wednesday.

The S&P 500 rose 0.3 percent, the STOXX Europe 600 rose 0.6 percent and the Nikkei 225 jumped 1.3 percent.

“Developments that show progress on U.S-China trade have proven enough to sustain positive momentum,” said Eric Weigand, senior portfolio manager at US Bank Wealth Management.

Meanwhile, technical analysts say more bullish signs for stocks are showing up in the charts.

“It does feel like the advance/decline line is really strong,” said Scott Redler, partner with T3Live.com.

“All the stuff that rolled over at the beginning of 2018, one by one, are showing evidence of bottoming,” said Robert Sluymer, technical analyst at Fundstrat.

“Semis were one of the first groups to top last year, now they're one of the first groups to bottom,” said Strategas Research technical analyst Todd Sohn.

Markets rise amid recession warnings

Markets rose on Tuesday.

The S&P 500 jumped 1.3 percent, the STOXX Europe 600 rose 0.5 percent and the Nikkei 225 soared 2.6 percent.

In the US, Democratic and Republican lawmakers reached a deal on the budget late on Monday to help boost investors' sentiment but some remain cautious on the market.

Mike Wilson, chief equity strategist at Morgan Stanley, on Monday downgraded S&P 500’s earnings-per-share growth target for the year to 1 percent from 4.3 percent and warned of a looming earnings recession.

“Our earnings recession call is playing out even faster than we expected,” said Wilson.

Hayman Capital Management founder Kyle Bass thinks that “by the end of the year the US market will be lower than it is today”.

Bass thinks that the US economy “will begin to wane in the back half of 2019, and by the middle of 2020 we’ll most likely be in recession”.

Markets rise amid continuing uncertainty

Markets were mostly higher on Monday. While the S&P 500 gained less than 0.1 percent, Chinese stocks jumped over 1 percent on the first trading after a week-long Lunar New Year holiday.

“The risk remains that investors are unwilling to commit to a breakout until we see what emerges from U.S.-China trade negotiations and Brexit,” said John Hardy, head of FX strategy at Saxo Bank.

“We don’t see any major movements because of the general and global uncertainty,” said Sebastian Fellechner, rates strategist at DZ Bank.

Indeed, analysts appear divided over the market's direction.

“The opportunity has been to sell into this rally, or if you're aggressive, short,” said Joule Financial's Quint Tatro.

However, Piper Jaffray's Craig Johnson said it's safe to “buy the dip” as long as the S&P 500 stays above 2,615, although he is expecting a “market that will be largely range bound for the year”.

More bullish is hedge-fund manager Paul Tudor Jones.

“The S&P 500 will outperform its peers, it will outperform emerging markets,” he said. “I'm very bullish in the U.S. stock market.”

Is a global economic recession coming?

Most economists do not expect a global economic recession soon.

Nouriel Roubini, a professor at NYU’s Stern School of Business and CEO of Roubini Macro Associates, wrote in an article in The Guardian that there “may be enough positive factors to make this a relatively decent, if mediocre, year for the global economy”.

Still, he thinks that there are risks that “the synchronised slowdown of 2019 could lead to a global growth stall and sharp market downturn in 2020”.

Similarly, Peter Hooper, chief economist at Deustche Bank Securities, thinks that if a “significant escalation of trade tensions” between the US and China, a hard Brexit, in which the UK leaves the European Union with no trade deal in place, and a “sharp slowdown” in Chinese economic growth all occur together, “the world economy could face a downturn rivaling that which occurred during the great recession a decade ago”.

However, Hooper only places a 5 to 10 percent chance of any of these scenarios occurring by themselves, and the chance of all of them occurring together at less than 1 percent.

Markets mixed as rally shows “evidence of fatigue”

Markets were mixed on Friday.

The S&P 500 rose less than 0.1 percent but the STOXX Europe 600 fell 0.4 percent and the Nikkei 225 plunged 2.0 percent.

Investors were disappointed after US President Donald Trump confirmed reports that he had no plans to meet China’s President Xi Jinping before a 1 March trade-deal deadline.

“Trump’s stance is now rattling investor nerves just weeks before the deadline,” said Jasper Lawler, head of research at London Capital Group, in a note.

Jeff deGraaf, chairman of Renaissance Macro Research, wrote in a note that the market rally “was starting to show evidence of fatigue” and “suggests a pause for equity performance”.

In contrast, Mott Capital’s Michael Kramer said trading action of the past two days has demonstrated the stock market’s resilience.

“If the market opens and test these level again today and then holds, I think we are off to the races and on pace for 2,800,” Kramer wrote.

Markets fall amid concerns over slowing economic growth

Markets fell on Thursday.

The S&P 500 fell 0.9 percent, the STOXX Europe 600 plunged 1.5 percent and the Nikkei 225 fell 0.6 percent.

Colin Cieszynski, chief market strategist at SIA Wealth Management, noted that US-China trade tensions appear to be the “excuse for today’s correction” after a report that National Economic Council Director Larry Kudlow had said that a deal was a long way away.

However, Cieszynski suggested that “the bigger factor is that many of the forces which have been driving the market rebound in recent weeks — investors getting back on the bandwagon, the Fed shift from hawkish to neutral, and the adjustment of expectations following the initial wave of earnings reports — have run their course and investors appear to be waiting for the next big mover”.

Matthew Forester, chief investment officer of BNY Mellon’s Lockwood Advisors, said that the “overwhelming risk concern is slowing global economic growth”.

On Thursday, a report showed that German industrial production fell by 0.4 percent in December from the month before while the European Commission released its growth forecast for the euro area this year, lowering it to 1.3 percent from the 1.9 percent forecast in November.

Doug Kass, President of Seabreeze Partners Management, said that bull market complacency is back.

He said that at the core of his market concerns is the diminished outlook for economic and profit growth in 2019-2020 “and there was nothing in the recent high-frequency data or earnings reports that changes this outlook”.

Time to be “aggressive buyers” of stocks again

Markets were mixed on Wednesday.

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

While the S&P 500 snapped a five-day winning streak, Tony Dwyer, analyst at Canaccord Genuity, thinks it is time for investors to become “aggressive buyers” once again.

“Investors suffered through the third ‘recession’ scare this cycle, and while all three major corrections have been larger than anticipated, absent an inversion of the yield curve that shuts down credit, the market pessimism following a non-recession crash should set the stage for new highs in 2019,” wrote Dwyer in a Tuesday note.

Investors “comfortable” with stock prices but further returns likely “modest”

Markets were mostly higher on Tuesday.

The S&P 500 rose 0.5 percent and the STOXX Europe 600 jumped 1.4 percent. However, the Nikkei 225 fell 0.2 percent.

“The main focus of the market has just been that people are getting more comfortable that the prices for stocks are reasonable,” said Rick Meckler, partner at Cherry Lane Investments.

That said, Goldman Sachs thinks there is little scope for further gains for the rest of the year.

“The rally we expected has happened swiftly, and given this we see relatively modest returns on equities from here,” Goldman said in a research report.

Markets rise, “impressively resilient”

Markets rose on Monday.

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

Alec Young, managing director of global markets research at FTSE Russell, said that the “market has been impressively resilient” but added that “stocks are no bargain right now, and for it to go higher we need some assurance that headwinds from China will be less than expected”.

However, James Berman, president and founder of JBGlobal.com, thinks that emerging market stocks are “dirt cheap”.

Stock rally driven by Fed reversal but will it last?

The stock market has had a good start to 2019. The S&P 500 rose 7.9 percent in January, its best January since 1987, and edged up another 0.1 percent on the first day of February.

According to CNBC's Jim Cramer, the reason for the strong performance was Federal Reserve chairman Jerome Powell.

Cramer pointed out that in October 2018, Powell had suggested that interest rate hikes still had some way to go.

However, on 4 January, Powell announced a reversal, telling the American Economic Association that the Fed “will be patient” with its rate increases and take a more data-dependent approach.

John Hussman, president of Hussman Investment Trust, suggested in his latest commentary that Powell's reversal actually occurred on 28 November, when he described the position of rates as “just below” neutral.

In any case, Hussman thinks that investors may have overreacted to the reversal.

“As I’ve demonstrated previously, even a shift to Fed easing typically has no benefit for stocks, aside from a short-lived knee-jerk reaction, unless market internals indicate that investors are inclined toward speculation,” he wrote.

Hussman noted that “the Fed eased persistently and aggressively throughout the entire 2000-2002 and 2007-2009 market collapses, to no avail”.

Hussman added that “with valuations that continue to rival the 2000 and 1929 peaks” and measures of market internals that “remain unfavorable”, the market faces a potential “trap door” situation and “an environment that’s permissive of steep losses”.

Markets rise but “not a lot of upside”

Markets rose on Friday.

The S&P 500 rose 0.1 percent, the STOXX Europe 600 rose 0.3 percent and the Shanghai Composite jumped 1.3 percent.

Economic data on Friday werer mixed. A report showed that the US economy added 304,000 jobs in January but the Caixin/Markit manufacturing PMI for China fell to 48.3 in January from 49.7 in December. Another report showed that eurozone inflation fell to 1.4 percent in January from 1.6 percent a month earlier.

Earnings reports were mostly positive, with Kate Warne, investment strategist at Edward Jones, describing this earnings season as “reassuring”.

However, Barry Bannister, head of US equity strategy at Stifel, said that there is “not a lot of upside at this point” as “earnings growth is not that much this year, so the market is fairly valued”.

US stocks rise but European and Asian stocks weighed down by economic data

Markets were mostly up on Thursday.

The S&P 500 rose 0.9 percent and the Nikkei 225 jumped 1.1 percent but the STOXX Europe 600 was little-changed.

Investors were encouraged by the Federal Reserve's remark at the conclusion of its two-day monetary policy meeting on Wednesday that it would be “patient” with interest rate hikes. The S&P 500 had surged 1.6 percent on Wednesday.

Economic news, however, weighed on markets in Europe and Asia.

The European Statistics Office reported that the euro area grew 0.2 percent in the fourth quarter and 1.2 percent from the fourth quarter of the previous year. This means that the region stuck to its lowest pace of growth in four years in the final quarter of 2018.

In China, the National Bureau of Statistics reported that its manufacturing purchasing managers' index for January was 49.5, suggesting a contraction in the sector for the second consecutive month.

Still, some analysts are optimistic.

“I think it's going to continue to be a fairly good year, and I think we probably go up and get close to the highs or 3,000 on the S&P,” said James Paulsen, chief investment strategist at Leuthhold Group.