Tuesday, 30 April 2019

US stocks hit another record high “in clear up momentum”

Markets were mostly higher on Monday.

The S&P 500 rose 0.1 percent to another record high and the STOXX Europe 600 rose 0.1 percent. However, the Shanghai Composite fell 0.8 percent.

“The market is in a clear up momentum, and a lack of bad news and upward momentum pushes things higher,” said Randy Frederick, vice president of trading and derivatives at Charles Schwab.

Vishnu Varathan of Mizuho Bank also sees reasons to “maintain optimism through some combination of data buoyancy” but suggested that “equally, there are signs that optimism is stretched”.

Indeed, cautionary data on Monday came from Europe, where the eurozone economic sentiment indicator fell for the tenth consecutive month from 105.6 in March to 104.0 in April, its lowest level in more than two years.

Monday, 29 April 2019

US may avoid earnings recession but concerns remain

The S&P 500 rose 1.2 percent last week to hit a record high, helped by a report on Friday showing that the US economy grew at a faster-than-expected annual rate of 3.2 percent as well as corporate earnings reports that have exceeded expectations.

Indeed, a CNN article suggested that the expected earnings recession is likely to be avoided.

“At the start of first-quarter earnings season, Wall Street analysts expected a decline of 2.5% in per-share profits, according to Credit Suisse. As of Friday morning, that estimate had climbed narrowly into positive territory,” the article said.

The article cited Credit Suisse estimates to say that S&P 500 profits will probably rise by 2.5-3 percent by the end of earnings season.

Nevertheless, the article suggested that “Wall Street isn't out of earnings trouble yet”.

Citing a Bespoke report, the article noted that companies that have beaten earnings estimates have gained less than 1 percent on their earnings reaction days, less than half the average one-day gain of 1.9 percent over the prior two decades, while companies that have missed earnings estimates have declined by an average of 4.6 percent, compared with the historical average of 3.5 percent.

Also, revenue has lagged, with only 54 percent of companies reporting revenues that have beaten estimates.

“That is definitely a concern,” Bespoke wrote.

Saturday, 27 April 2019

US stocks hit new record high after GDP report

Markets were mixed on Friday.

The S&P 500 rose 0.5 percent to a record high while the STOXX Europe 600 rose 0.2 percent.

However, earlier in Asia, the Nikkei 225 fell 0.2 percent and the Shanghai Composite tumbled 1.2 percent.

US stocks were boosted by a report that showed that the US economy grew at an annual rate of 3.2 percent in the first quarter.

Mike Loewengart, vice president of investment strategy at E-Trade Financial Corp, wrote that the GDP report shows that the US economy “shot out of the gate big time” in 2019.

Others were not as thrilled by the GDP report.

“The heart of the real economy — private-sector consumption and investment — slowed sharply in the first quarter to a 1.3% annual rate, the slowest growth in nearly six years,” noted Rex Nutting at MarketWatch.

Jason Furman, former economic adviser for President Obama and a professor at Harvard University, said that the underlying data “is consistent with a slowing economy”.

Nevertheless, Shane Oliver, head of investment strategy and chief economist at AMP Capital, wrote that “global growth is expected to improve into the second half of the year” and expects “decent gains for share markets through 2019 as a whole”.

Friday, 26 April 2019

Markets mixed as South Korean economy shrinks, small caps lag

Markets were mixed on Thursday.

The S&P 500 was flat while the STOXX Europe 600 fell 0.2 percent.

Earlier in Asia, the Nikkei 225 rose 0.5 percent but the Shanghai Composite plunged 2.4 percent. The KOSPI fell 0.5 percent after a report showed that the South Korean economy shrank 0.3 percent in the first quarter.

In the US, a report showed that first-time jobless benefits surged to 230,000 in the week ended 20 April from 193,000 in the previous week but another report showed that orders for durable goods rose by 2.7 percent in March.

Still, a CNBC report noted that small cap stocks have lagged the S&P 500 recently. The Russell 2000 fell roughly 1 percent since late February even as the S&P 500 rose more than 4 percent.

“The small-cap weakness has become a favorite point of emphasis of the bears,” noted Ed Clissold, chief US strategist at Ned David Research. “From a macroeconomic view, small-caps tend to be more economically sensitive, so under-performance can be a recession warning.”

Thursday, 25 April 2019

Markets fall following “rally that no one likes”

Markets fell on Wednesday.

The S&P 500 fell 0.2 percent, the STOXX Europe 600 fell 0.1 percent and the Nikkei 225 fell 0.3 percent.

US 10-year Treasury yields fell 4.9 basis points to 2.522 percent.

The declines came one day after the US stock market hit a new high, which nevertheless failed to provide a significant catalyst for Asian markets on Wednesday.

“Apparently, we are stuck in a stock market rally that no one likes,” said Stephen Innes, head of trading at SPI Asset Management.

And hedge funds could be among those not liking this rally.

A Marketwatch report cited Naeem Aslam, analyst at ThinkMarkets UK, as saying that hedge funds have recently increased bets on a fall in the S&P 500.

“This shows that smart money is ready to bank big if the market falls again,” said Aslam.

Wednesday, 24 April 2019

US stocks at record high after “really solid earnings reports”

Markets were mostly higher on Tuesday.

The S&P 500 rose 0.9 percent to close at a record high, the STOXX Europe 600 rose 0.2 percent and the Nikkei 225 rose 0.2 percent.

Lindsey Bell, investment strategist with CFRA research, said that potential new closing highs “are being driven by some really solid earnings reports today”.

Colin Cieszynski, chief market strategist at SIA Wealth Management, said that corporate results “indicate an improving world economy”.

Meanwhile, Bob Pisani at CNBC noted that even as the stock market hit new highs, europhia is missing.

“It's not just today, it's been dead for weeks,” he quoted a trader as saying.

“The lack of euphoria or its opposite — the lack of worry — is one reason many traders are enthusiastic about the near-term. It means many are still sitting on the sidelines and they may now be dragged into the markets after seeing the new high headlines,” he concluded.

Tuesday, 23 April 2019

Markets “in a happy place” amid “cheap and plentiful money”

Markets were mixed on Monday.

The S&P 500 rose 0.1 percent and the Nikkei 225 rose 0.1 percent but the Shanghai Composite tumbled 1.7 percent. Major European stock markets were closed for a holiday.

Oil prices surged after the US declared it would end waivers for countries to import Iranian oil. West Texas Intermediate crude surged 2.7 percent and Brent jumped 2.9 percent.

“With the S&P 500 forward PE (price-to-earnings) ratio sitting near highs of 16.8 and the index 1.2% below its historic record, investors need convincing results to keep buying equities at their current levels,” said Hussein Sayed, chief market strategist at FXTM.

Chinese stocks fell after the Politburo said on Friday that the government would continue to implement a proactive fiscal policy and a prudent monetary policy that is neither too tight nor too loose. Shen Zhengyang, an analyst at Northeast Securities, said that investors interpreted that to mean that “the government will suspend the easing of monetary policy”.

However, Stephen Innes, head of trading at SPI Asset Management, said that a “positive confluence of events continues to support risk sentiment” and that the markets “should remain in a happy place provided the Federal Reserve stays on the dovish course as indeed cheap and plentiful money has a most soothing effect on equity investors”.

Monday, 22 April 2019

Lifelong learning is key to Warren Buffett's success

Lifelong learning may be the secret to Warren Buffett's success, according to his partner, Charlie Munger.

From Tom Popomaronis at CNBC:

As vice chairman of Berkshire Hathaway, Munger says there's one quality of Buffett's that he holds in especially high esteem: His ability to be a lifelong "learning machine."

"If you take Warren Buffett and watched him with a time clock, I would say half of all the time he spends is sitting on his ass and reading," Munger said in his 2007 commencement speech at the University of Southern California.

Buffett himself thinks that taking care of one's mind and body is important, according to Gillian Zoe Segal at CNBC.

"You have only one mind and one body for the rest of your life," Buffett says. "If you aren't taking care of them when you're young, it's like leaving that car out in hailstorms and letting rust eat away at it. If you don't take care of your mind and body now, by the time you're 40 or 50, you'll be like a car that can't go anywhere."

Saturday, 20 April 2019

Asian markets rise, slowing global growth a risk

Asian markets finished higher on Friday while major western markets were closed for a holiday.

The Nikkei 225 rose 0.5 percent while the Shanghai Composite rose 0.6 percent.

Meanwhile, the stock market rally remains at risk, said Mark Avallone, founder of Potomac Wealth Advisors.

Avallone said that while accommodative central bank policies around the globe are keeping the stock market rally alive, slowing and uneven global growth is a risk to markets.

"Valuations are reasonable, but absent a catalyst for growth, it appears that the majority of 2019 gains have been realized," he wrote.

Similarly, John Tobey said that economic growth has slowed even as the stock market is rallying.

Tobey suggested that if "growth continues to slow, another bear market leg is a real possibility".

Friday, 19 April 2019

Markets mixed as investors wait for catalyst

Markets were mixed on Thursday.

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

“A lot of good news has already been priced in to the market, and investors are still in search of the next catalyst to drive stocks higher,” said Michael Arone, chief investment strategist at State Street Global Advisors.

As investors wait for the catalyst, trading volumes in the US have been falling.

Dow Jones Market Data showed that total composite trading volume on Monday was the lowest for a full-day session since 10 September.

Thursday, 18 April 2019

Markets mixed as earnings season “not off to a very good start”

Markets were mixed on Wednesday.

The S&P 500 fell 0.2 perent but the STOXX Europe 600 rose 0.1 percent and the Nikkei 225 rose 0.3 percent.

Tom Essaye, president of the Sevens Report, noted that earnings season in the US “is not off to a very good start”.

Indeed, Lori Calvasina, RBC Capital Markets’ head of US equity strategy, suggested that there may be a little too much euphoria in the US stock market right now.

Calvasina said that “positioning in U.S. equity futures is parabolic, shooting straight up”. She said that peaks in futures contracts last year were followed by selloffs.

“If we’re only getting modest earnings growth this year, S&P 500 only deserves to have modest expansion based on how it is played out the last few times,” said Calvasina.

Wednesday, 17 April 2019

US stocks could see melt-up after turnaround in investor sentiment and fund flows

Markets rose on Tuesday.

The S&P 500 rose less than 0.1 percent, the STOXX Europe 600 rose 0.3 percent and the Nikkei 225 rose 0.2 percent.

Some analysts see further gains for stocks.

UBS strategists led by Daniel Waldman said that “markets are priced for growth stabilization, but not for acceleration”, and that “leaves room for stocks to run higher”.

“We have a risk of a melt-up, not a meltdown here. Despite where the markets are in equities, we have not seen money being put to work,” said Larry Fink, CEO of BlackRock.

That could be changing. Recent surveys have shown that individual investors have become more bullish and less bearish, with US equity funds seeing US$4.3 billion in inflows in the week ended 10 April after a US$19.7 billion outflow from the start of the year through 3 April.

Tuesday, 16 April 2019

Markets mixed but entering typically strong period

Markets were mixed on Monday.

The S&P 500 fell less than 0.1 percent while the STOXX Europe 600 rose 0.2 percent.

Earlier in Asia, the Shanghai Composite fell 0.3 percent but the Nikkei 225 jumped 1.4 percent.

“In the absence of any macro news or surprising corporate announcements, markets are trading mostly flat,” said Tom Martin, senior portfolio manager at Globalt Investments.

Still, Patti Domm at CNBC noted that US stocks typically outperform in the two-week period following the 15 April tax filing deadline according to Bespoke Investment Group.

“April seasonally is a strong month,” Paul Hickey, co-founder of Bespoke, was quoted as saying.

Monday, 15 April 2019

US stocks could face “severe” bear market in a recession

The S&P 500 rose 0.5 percent last week, boosted by a 0.7 percent rise on Friday following strong bank earnings reports.

However, asset-management firm Guggenheim warned that the stock market faces a potentially severe bear market in the event of a recession.

“Given that valuations reached elevated levels in this cycle, we expect a severe equity bear market of 40–50 percent in the next recession, consistent with our previous analysis that pointed to low expected returns over the next 10 years,” Guggenheim said in a note last week.

In his April commentary, John Hussman had even more dire projections.

“If I were to offer a guess, I’d suggest that regardless of whether the S&P 500 registers fresh near-term highs, investors should allow for the S&P 500 to be perhaps -30% lower by the end of 2019, on the way to losing an additional -50% of its remaining value over the rest of the down-cycle,” he wrote.

Saturday, 13 April 2019

Markets rise amid strong US bank earnings and jump in Chinese exports

Markets rose on Friday.

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

Stocks were boosted by strong bank earnings reports in the US.

“Company specific news from major Dow components is helping lift the market,” said Bill Northey, senior investment director at US Bank.

A report from China showing a 14.2 percent jump in exports from a year earlier in March may also have helped.

“Chinese data looks to be the main driver of the gains on Friday,” said Craig Erlam, senior market analyst at Oanda.

Friday, 12 April 2019

Analysts see further gains for S&P 500, history agrees

Markets were little changed on Thursday. The S&P 500 was flat while the Nikkei 225 and STOXX Europe 600 rose 0.1 percent.

“The market is trading at a premium to the historical average,” said Lindsey Bell, an investment strategist at CFRA Research. “We see a little bit of upside from here for the rest of the year, but you’ll see volatility throughout the course of earnings season, for sure.”

Earnings season in the US starts on Friday and while analysts are projecting S&P 500 earnings to fall 4.2 percent year-over-year, they see a seven percent gain over the next 12 months for the S&P 500.

History seems to be on the bull's side.

According to BMO, since 1935, every time the S&P 500 rose 10 percent or more in the first quarter of a year, the market managed to rise 6 percent more on average for the rest of the year, with positive performance during 11 of the 12 times.

The S&P 500 rose 13 percent in the first three months of 2019.

BMO also found that since 1990, when the central bank changed course with its monetary policy, the market rose nearly 10 percent on average from the date of the final rate hike to the date of a rate cut.

Thursday, 11 April 2019

Markets rise, Fed “to start cutting interest rates before end of year”

Markets were mostly higher on Wednesday.

The S&P 500 rose 0.7 percent and the STOXX Europe 600 rose 0.3 percent but the Nikkei 225 fell 0.5 percent.

While the minutes of the last Federal Reserve monetary policy meeting released on Wednesday confirmed a wait-and-see stance by the US central bank, inflation data showed that US consumer prices rose 0.4 percent in March, the biggest monthly increase in 14 months.

“I think there’s a bit more inflation beneath the surface than the market has been acknowledging,” said Willie Delwiche, investment strategist with RW Baird.

However, Andrew Hunter, senior US economist at Capital Economics, noted that core inflation fell to a 13-month low and concluded: “We continue to expect that weaker activity growth will convince officials to start cutting interest rates before the end of the year.”

Wednesday, 10 April 2019

Markets fall as US raises another tariff threat

Markets were mostly lower on Tuesday.

The S&P 500 fell 0.6 percent and the STOXX Europe 600 fell 0.5 percent. However, the Nikkei 225 rose 0.2 percent.

Market sentiment was affected by news that the office of the US Trade Representative has threatened to levy tariffs on many European goods in retaliation against European subsidies for aircraft manufacturer Airbus.

“The tariff threat is probably what’s moving markets negatively,” said Karen Cavanaugh, senior market strategist with Voya Investment Management.

Meanwhile, the IMF lowered the outlook for global economic growth in 2019 to 3.3 percent from 3.5 percent projected in January.

Tuesday, 9 April 2019

Markets mixed as US readies for earnings season

Markets were mixed on Monday.

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

“There are many skeptics of this bull market, and so when the market goes up a bit as it did last week, they take the opportunity to get out,” said Craig Callahan, president of Icon funds.

Still, Richard Jerram, chief economist at Bank of Singapore, thinks that the US March employment report released on Friday “really killed the fears that people had a month ago” about the US economy, which Jerram said was in “really good shape”.

That said, with the US earnings season starting this week, DataTrek Research’s Nicholas Colas warned that “once you have to face the actual earnings results, I think the story is going to change”.

Monday, 8 April 2019

Will the US bull market continue?

The S&P 500 rose 2.1 percent last week, gaining on Friday for a seventh consecutive session.

Ed Carson at Investor's Business Daily asked whether the US stock market is on the cusp of a long bullish phase.

"Look for the major indexes to convincingly clear their late 2018 peaks," he wrote. "That could happen soon, though the current stock market rally also could face resistance near the old highs. The fate of China trade talks and the upcoming earnings season likely will play a key role over the next few weeks."

Former Goldman Sachs Asset Management Chairman Jim O'Neill is not optimistic though.

O'Neill told CNBC last week that the US market was "definitely not cheap" and "very sensitive" to any bad news.

"We might be entering the end of the 10-year almost clear bull market in equities," he said.

Saturday, 6 April 2019

Stocks rise, US jobs report shows recession “not on immediate horizon”

Markets rose on Friday.

The S&P 500 rose 0.5 percent, the STOXX Europe 600 rose 0.1 percent and the Nikkei 225 rose 0.4 percent.

US stocks in particular were boosted by a report that showed that the economy gained a better-than-expected 196,000 jobs in March.

Michael Arone, chief investment strategist at State Street Global Advisors, noted that while job growth was better than expected, wage gains showed some moderation. “Investors are relieved that the labor market continues to signal strength without too much wage inflation,” he said.

Charlie Ripley, senior market strategist at Allianz Investment Management, said that “today’s report suggests a recession is not on the immediate horizon”.

Friday, 5 April 2019

Markets mixed, US tariffs on China need to be “rolled back” for further gains

Markets were mixed on Thursday.

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

Earlier in Asia, the Shanghai Composite rose 0.9 percent but the Nikkei 225 was little changed.

In the US, sentiment was boosted by a report that claims for unemployment benefits fell to 202,000 in the week ended 30 March, the lowest level since 1969.

In contrast, European investment sentiment was weighed down by a report that German factory orders fell 4.2 percent in February.

In Asia, the view that “a US-China trade agreement is virtually a done deal has fuelled optimism,” said Vishnu Varathan, head of economics and strategy at Mizuho Bank, but he warned that “markets may be converging too quickly on the 'done' before the 'deal.'”

“To really give the markets another lift, we need to see some of the existing tariffs, whether it's on the $50 billion or the $200 billion, actually rolled back,” said Rob Subbaraman, head of emerging markets economics at Nomura.

Thursday, 4 April 2019

Markets rise on US-China trade deal optimism

Markets rose on Wednesday.

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

“Stocks are rallying on hopes for a better-than-expected trade deal as senior U.S. and Chinese officials meet in Washington this week,” said Alec Young, managing director of global markets research at FTSE Russell.

“There will be a deal done this time,” said Sean Taylor, chief investment officer of Asia Pacific at DWS.

However, after ADP reported a lower-than-expected increase of 129,000 private sector jobs for March, Mike Loewengart, vice president of investment strategy at E-Trade, suggested that the job market “is rolling down”.

Indeed, “equities are a turnoff”, said Luca Paolini, chief strategist at Pictet Asset Management, in a note to clients. “With developed economies under pressure and corporate profit growth slowing, prospects for most stock markets look uninspiring.”

“The U.S. stock market looks the most vulnerable to a correction,” he added.

Wednesday, 3 April 2019

Stocks mixed, valuations “stretched”

Markets were mixed on Tuesday.

The S&P 500 and Nikkei 225 were flat while the STOXX Europe 600 rose 0.4 percent.

Daryl Deke, chief executive officer of New Market Wealth Management, said that “economic growth will continue to be relatively positive, while corporate margins remain high”, but he acknowledged that “valuations are a bit stretched”.

Meanwhile, the drama over the UK exit from the European Union continued as UK MPs failed to vote for an alternative option to Prime Minister Theresa May’s rejected Brexit agreement for the second time.

Tuesday, 2 April 2019

Wall Street sees no US recession

Wall Street does not expect a US recession within the next year, according to a poll by CNBC.

More than 96 percent of respondents to the survey, who included strategists, investors and traders who appear on CNBC's "Fast Money Halftime Report", said they do not see a recession in the next year, with just about 70 percent saying they are optimistic. Not a single strategist among the 27 respondents had a negative outlook.

However, Moody's Analytics Chief Economist Mark Zandi told CNBC that the global economy is "highly likely" to fall into a recession if the US and China do not reach a trade deal within three months.

Zandi also said that if the UK leaves the European Union without an agreement, "certainly the U.K. economy and the EU economy will be in recession, and I think the rest of the global economy will be not too far behind".

Monday, 1 April 2019

Global recession fears could be overblown, China's manufacturing PMI rises

Jeff Mills, co-chief investment strategist at PNC Financial Services Group, thinks that global recession fears are overblown.

"I think, as we move into the second half of the year, this narrative of global growth potentially causing problems here in the U.S. is going to shift to a stabilization of global growth and then more of a focus on things like earnings," Mills told CNBC last week.

Indeed, a report on Monday showed that the Caixin/Markit China manufacturing PMI rose to 50.8 in March from 49.9 in February.

Zhengsheng Zhong, director of macroeconomic analysis at CEBM Group, a subsidiary of Caixin, wrote that "the situation across the manufacturing sector recovered in March" as "both domestic and external demand rebounded moderately".