Markets mostly higher as “all eyes on G-20”

Markets were mostly higher on Friday.

The S&P 500 rose 0.6 percent while the STOXX Europe 600 rose 0.7 percent. However, the Nikkei 225 fell 0.3 percent.

“All eyes are on the G-20,” said James Masserio, head of equity derivatives trading of the Americas at Societe Generale, ahead of the meeting between US President Donald Trump and Chinese President Xi Jinping at the G-20 summit in Japan.

Analysts generally do not expect much from the meeting but think that a ceasefire in the trade war is likely.

“The Trump administration has signaled for weeks that the president again wants a trade deal with China,” said Derek Scissors, an analyst with the American Enterprise Institute. “The U.S. will agree to suspend the $300 billion tariff and talks will restart.”

Markets mixed ahead of Trump-Xi meeting

Markets were mixed on Thursday.

The S&P 500 rose 0.4 percent while the Nikkei 225 jumped 1.2 percent. However, the STOXX Europe 600 was flat.

While the coming meeting between US President Donald Trump and Chinese President Xi Jinping at the G-20 meeting has raised hopes for a reduction in trade tensions, comments by the Chinese Ministry of Commerce on Thursday suggested a firm stance by the latter is likely.

“We urge the US to immediately cancel its pressure and sanction measures on Huawei and other Chinese companies, and push for the stable and healthy development of China-US trade relations,” said Gao Feng, spokesman for the Ministry of Commerce, according to a CNBC translation.

Still, June has been a good month for stocks in the US, where cyclicals have been the best performers, according to a MarketWatch report.

However, some analysts think that investors are ignoring mounting evidence of major global risks.

“Can equity inflows continue in the face of falling bond yields and weak data?” Deutsche Bank strategists wondered in their weekly report on North American fund flows.

Stock market rally loses steam after being driven by defensives and buybacks

Markets fell on Wednesday.

The S&P 500 fell 0.1 percent, its fourth consecutive decline, the STOXX Europe 600 fell 0.3 percent and the Nikkei 225 fell 0.5 percent.

Stocks fell despite the approaching meeting between US President Donald Trump and Chinese President Xi Jinping at the Group of 20 meeting in Japan later this week.

“I am not optimistic of anything of significance to be achieved for the meetings in Japan this week,” said Mariann Montagne, a portfolio manager at Gradient Investments.

Some analysts also noted that US stocks are already near all-time highs.

“If it’s trade or another factor, the market does feel vulnerable to a setback,” said Jeff Kleintop, chief global investment strategist at Charles Schwab.

Indeed, JP Morgan has noted that the recent US stock market rally has been driven by defensive stocks rather than cyclical stocks.

“Rally leadership doesn’t inspire a lot of confidence yet,” said Jason Hunter, a chart analyst at JP Morgan. “In our view, that cross-market divergence can only persist for a short period of time, and the S&P 500 Index rally potential is limited under the current conditions.”

One thing that appears to be supporting the stock market though is stock buybacks.

“Really, the main marginal buyer of the public equity asset class has been companies, not your regular investor,” said Robert Buckland, chief global equity strategist and managing director at Citi Research.

Markets fall but melt-up possible

Markets fell on Tuesday.

The S&P 500 fell 0.8 percent, the STOXX Europe 600 fell 0.1 percent and the Nikkei 225 fell 0.4 percent.

Wilmington Trust’s chief economist Luke Tilley said that investors may have become excessively optimistic on US-China trade talks and Federal Reserve policy.

However, other analysts still see the potential for a stock market melt-up.

Maneesh Deshpande, head of equity derivatives strategy at Barclays, said that a melt-up could occur if trade tensions decrease substantially, the Federal Reserve eases aggressively and the current industrial slowdown remains a soft patch and does not turn into a full recession.

Masanari Takada, quantitative analyst at Nomura, said that “the appetite for risk is alive and well” and that an improvement in sentiment could push the market “into a ‘melt-up’ risk rally”.

Markets lower amid Middle East tension, expecting Fed rate cuts

Markets were mostly lower on Monday.

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

Oil prices were mixed on Monday even as tension in the Middle East persisted, with the US announcing financial sanctions on Iranian leaders. West Texas Intermediate crude rose 0.8 percent but Brent fell 0.5 percent.

Investors are probably also looking forward to the outcome of the meeting between US President Donald Trump and Chinese President Xi Jinping at the G-20 summit later this week.

“Financial markets welcomed the announcement that a full-blown standalone US-China ‘bilateral’ meeting would be held in the margins of the annual G20 Summit,” said Christopher Granville, managing director of global political research at TS Lombard.

However, Mike Mangieri, managing partner at Seven Points Capital, said: “It’s the Fed and nothing else matters.”

Indeed, the Federal Reserve could be about to make a big impact on markets, according to Bianco Research president James Bianco.

“The market is pricing in four cuts over the next year,” he said. That, he claimed, will eventually “drag the Fed kicking and screaming into it”.

With S&P 500 at record high, stocks could be at “biggest selling opportunity in a decade”

Stock rallied last week, with the S&P 500 jumping 2.2 percent and hitting a record high of 2,954.18 on Thursday in the process.

However, some analysts think that risks to the stock market rally abound.

“This is probably one of the riskiest points you’re ever going to see in the stock market,” said Michael O’Rourke, chief market strategist at JonesTrading. “The price level here is not supported by fundamentals. It’s supported by sentiment and hype and hopefulness about monetary policy.”

Sven Henrich, founder and the lead market strategist of NorthmanTrader.com, said that with high debt levels and limited ammunition to deal with a new recession, “everything points to a more fragile system”.

“Therefore, we may be looking at the biggest selling opportunity in a decade,” he concluded.

Leon Cooperman, Omega Advisors chairman and CEO, warned that a really big move higher in stocks could signal “the close-out move”, meaning the end of the recent bullish run.

Cooperman said that if the S&P 500 hits 3,100, it would be “knocking on the door of euphoria” and that he would “be reducing my exposure” in stocks.

Markets fall, lower corporate earnings estimates “could exert more downward pressure”

Markets fell on Friday.

The S&P 500 fell 0.1 percent, the STOXX Europe 600 fell 0.4 percent and the Nikkei 225 fell 1.0 percent.

Some investors may have turned cautious after gains made by stocks in previous sessions on the back of a dovish turn in the Federal Reserve's monetary policy stance.

“If the Fed is going to cut rates it means that the economic environment is slowing down,” said Lindsey Bell, investment strategist at CFRA. “You have investors looking to bonds to hide out in. You’re also seeing a big move up in gold on the back of the Fed’s decision as well.”

Indeed, Mark Tepper, president and CEO of Strategic Wealth Partners, thinks that with second half 2019 corporate earnings estimates “way too high” and set to fall, “that could exert even more downward pressure on stocks”.

Markets rise, S&P 500 hits record high on hopes for more accomodative monetary policy

Markets rose on Thursday.

The S&P 500 rose 0.9 percent to a record high, the STOXX Europe 600 rose 0.4 percent and the Nikkei 225 rose 0.6 percent.

Oil prices surged. West Texas Intermediate crude jumped 5.4 percent and Brent rose 4.3 percent.

Markets rallied after the Federal Reserve removed the word “patient” from its latest monetary policy statement on Wednesday and Fed Chairman Jerome Powell told a press conference that “the case for somewhat more accommodative policy has strengthened”.

Elsewhere, the Bank of Japan also indicated on Thursday a readiness to increase monetary stimulus while the Bank of England cut its UK second quarter growth forecast to zero.

Markets rise as Fed prepares for rate cut, Japanese exports plunge

Markets were mostly higher on Wednesday.

The S&P 500 rose 0.3 percent and the Nikkei 225 surged 1.7 percent. However, the STOXX Europe 600 was flat.

US stocks were boosted by the Federal Reserve's statement after its monetary policy meeting on Wednesday. “The FOMC will closely monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion,” the Fed said in its statement, removing its recent reference to being “patient”.

The Fed also said inflationary pressures have receded, lowering its forecast for PCE inflation in 2019 to 1.5 percent from 1.8 percent, below its 2 percent target.

Kevin Giddis, head of fixed-income capital markets at Raymond James, said that now that the Fed “finally realize that they are not going to see inflation”, a rate cut could come “as early as July”.

However, Mike Loewengart, vice president of investment strategy at E-Trade Financial, said: “Investors would be well served to recognize that a rate cut is not a foregone conclusion, especially given the Fed has limited ammunition in its traditional tools of monetary policy, most notably the federal-funds rates.”

Meanwhile, elsewhere, a report on Wednesday showed that Japan's exports fell 7.8 percent in May from a year earlier, its sixth consecutive declinue.

“For the Bank of Japan and for policymakers, the message is very, very clear: the industrial part of the Japanese economy is in recession, ” said Jesper Koll, senior adviser at WisdomTree Investments.

Markets rise on ECB rate cut hint

Markets mostly rose on Tuesday after European Central Bank Mario Draghi hinted at interest rate cuts.

The S&P 500 rose 1.0 percent while European stocks surged, French stocks in particular soaring 2.1 percent.

Earlier on Tuesday, Asian stocks were also mostly higher but the Nikkei 225 fell 0.7 percent.

Oil prices surged. West Texas Intermediate crude rose 3.8 percent and Brent rose 2.0 percent.

“Further cuts in policy interest rates and mitigating measures to contain any side effects remain part of our tools,” Draghi told the ECB's annual economics gathering in Sintra, Portugal.

“Super Mario is back!” said IG analyst Chris Beauchamp in summary at the market action.

A tweet by US President Donald Trump on Tuesday that there will be an “extended meeting” with President Xi Jinping of China at the Group of 20 meeting in Japan also helped boost investor sentiment.

Still, Chris Zaccarelli, chief investment officer for Independent Advisor Alliance, warned: “If the Fed doesn’t appear sufficiently dovish – including taking the word “patient” out of their statement – or the G20 meeting doesn’t result in significant progress in the trade war with China, then the market could experience a sharp pullback.”

On the other hand, investors may already have been positioned for the worst and markets ripe for a rally anyway. A recent survey by Bank of America Merrill Lynch had shown that fund managers “have not been this bearish since the Global Financial Crisis”.

Markets little-changed as investors look for rate cuts

Markets were little-changed on Monday.

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

US economic data on Monday disappointed.

The Empire State manufacturing index plummeted 26.4 points to minus 8.6 in June, a record decline. Economists had expected a reading of plus 10.

The National Association of Home Builders's home-builder confidence index fell two points to 64 in June, worse than economists’ consensus forecast of a one-point increase.

The data would have added to concerns of slowing economic growth in a week when the Federal Reserve is due to meet on monetary policy.

Mark Newton, technical analyst at Newton Advisors, wrote in a research note that “while a lowering of rates has not been priced in by the market for Tuesday, such a move is expected by July, and failure to do so would be a surprise to markets”.

Recession could be rough for markets with heavy investor weighting in risky assets

The S&P 500 closed at 2,886.98 last week. It rose 0.5 percent over the week for its second consecutive weekly gain.

Ed Clissold, chief US strategist at Ned Davis Research, told CNBC last week that as long as the economy does not fall into a recession, “the market’s in pretty good shape”.

Clissold said that “2950 is in line with what you’d expect over the long run from the S&P”.

While he said that “it’s going to be a choppy market from here”, he added that pullbacks could be “opportunities to get in at a little bit more attractive prices as we go for the next few months”.

However, Clissold also warned that “if we start spiraling towards a recession, if we get too far gone, a couple rate cuts isn’t going to be enough to pull us out and then it could be a much rougher situation”.

A recession should indeed be a concern after Morgan Stanley reported last week that its Business Conditions Index fell by 32 points in June to 13, the largest one-month decline on record and the lowest level since December 2008 during the financial crisis.

A recession could be particularly devastating with fund investors already weighted heavily toward risky assets.

According to analysts at Société Générale, positions in equity and credit accounted for 64 percent of the investment pool covered by flow-tracker EPFR Global on a monthly basis. According to the analysts, this represents 90 percent of the maximum historical level.

This heavy weighting could be why the US stock market is now priced so high that, according to Jesse Felder of the Felder Report (via MarketWatch), investors “are likely to receive essentially nothing in return in the coming decade”.

Felder estimated the future return by comparing the total value of the stock market against the overall size of the economy, what he called the “The Buffett Yardstick”.

Felder also used margin debt as an indicator of how speculative the market has become and found “it hitting a new record high over the past couple of years”.

“In all, long-term investors are risking roughly a 60% decline to try to capture a 0% rate of return over the coming decade in the stock market, one of the worst risk-to-reward setups in history,” he concluded.

Markets fall as Gundlach sees bigger chance of US recession

Markets mostly fell on Friday.

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

Economic data on Friday were mixed, with US retail sales rising 0.5 percent in May and industrial production rising 0.4 percent, but the University of Michigan’s consumer sentiment index falling to 97.9 in June from 100 in May. Also, China's industrial output growth slowed to a more than 17-year low.

Market sentiment was also dented by a Broadcom announcement on Thursday that it had lowered its outlook for the rest of the year, which Tom Martin, senior portfolio manager at Globalt Investments, said “adds to fears about global demand”.

Indeed, DoubleLine Capital Chief Executive Officer Jeffrey Gundlach now sees a bigger chance of a recession hitting the US in the not-too-distant future.

“Several indicators suggest a recession could take place in one year,” Gundlach said on an investor website.

Markets rise, oil jumps

Markets mostly rose on Thursday.

The S&P 500 rose 0.4 percent and the STOXX Europe 600 rose 0.2 percent but the Nikkei 225 fell 0.5 percent.

Energy stocks outperformed after oil jumped 2.2 percent following reports that two oil tankers were damaged in an apparent attack in the Strait of Hormuz.

However, Neil Wilson, chief market analyst for Markets.com, said that “with OPEC already curbing output and U.S. production at a record high the market is far less susceptible to a shock”.

Indeed, Sam Stovall, chief investment strategist of US equity strategy at CFRA, said that “the market doesn’t think the Strait of Hormuz will be closed” and is instead “focusing on the strong economy, rising productivity and low unemployment”.

Markets fall, risk rally “running out of steam”

Markets fell on Wednesday.

The S&P 500 fell 0.2 percent, the STOXX Europe 600 fell 0.3 percent and the Nikkei 225 fell 0.4 percent.

Oil prices plunged, with both West Texas Intermediate crude and Brent falling about 4 percent after a report showed that US crude supplies rose for a second consecutive week.

“Just the thought of overproduction in this deteriorating global economic environment suggests, unless OPEC and allies can bridge the agreement gap, markets will head south in a hurry,” said Stephen Innes, managing partner, Vanguard Markets Pte, in a note.

“The risk rally seems to be running out of steam, and there appears to be little room for further upside,” strategists at Morgan Stanley wrote.

However, for the time being, the S&P 500 remains above its 50-day moving average. According to a CNBC article, since 2009, the index has traded positive 90 percent of the time two weeks after it crossed this threshold.

US stocks give up gains, “rally not fundamentally backed”

Markets were mostly higher on Tuesday.

Early in the day, Asian markets rose, with the Nikkei 225 gaining 0.3 percent and the Shanghai Composite surging 2.6 percent. The STOXX Europe 600 rose 0.7 percent.

However, the S&P 500 gave up early gains to close flat.

Some analysts were probably not surprised by the pullback in US stocks.

“This rally is not fundamentally backed,” said Tom Essaye, founder of The Sevens Report.

While Fed funds futures suggest that traders are pricing in about 60 percent probability of three Fed rate cuts this year, Essaye is not impressed. “If the Fed cuts three times between here and January, this economy is headed for a recession,” he said.

“Our dispute with China is perhaps still the single largest cloud over the market,” said Mike Loewengart, chief investment officer at E-Trade Capital. “The issue is not going away.”

Markets rise after tariffs on Mexico suspended

Markets rose on Monday.

The S&P 500 rose 0.5 percent, the STOXX Europe 600 rose 0.2 percent and the Nikkei 225 jumped 1.2 percent.

Markets were relieved after US President Donald Trump tweeted late on Friday that he had suspended plans to impose tariffs on Mexico after reaching a deal with that country over stemming the flow of illegal immigration.

While noting that trade concerns remain between the US and China, Yousef Abbasi, global markets strategist at INTL FCStone, said that “the market has really shown its ability and wherewithal to place a bet on the strength of the Fed put”.

However, Lisa Shalett, chief investment officer of Morgan Stanley Wealth Management, said that “we are not confident that rate cuts can cure what ails the economy”.

Early on Monday, China released mixed data on trade, with exports rising 1.1 percent in May from a year earlier but imports plunging 8.5 percent.

Another report on Monday showed that the UK economy contracted by 0.4 percent in April after a 0.1 percent decline in March as manufacturers closed operations in anticipation of the UK's exit from the EU.

Markets rise as fall in US job growth may restart “cheap money train again”

Markets rose on Friday.

The S&P 500 rose 1.1 percent, the STOXX Europe 600 rose 0.9 percent and the Nikkei 225 rose 0.5 percent.

Markets shrugged off a report that the US economy created just 75,000 new jobs in May, well below the 185,000 estimated by economists surveyed by MarketWatch.

Mike Loewengart, vice president of investment strategy at E-Trade, wrote that the report “supports the argument for cutting rates beyond politics or trade issues”.

“That said, our historically low unemployment rate hasn’t moved,” he added. “So the Fed will have to walk a really thin line.”

Still, Sven Henrich, founder and lead market strategist of NorthmanTrader.com, thinks that the Federal Reserve and other global central bankers are “hapless and scared” and likely to “embark on the same cheap money train again”.

Markets mixed, ECB to keep rates on hold until 2020

Markets were mixed on Thursday.

The S&P 500 rose 0.6 percent but the STOXX Europe 600 and the Nikkei 225 were flat and the Shanghai Composite fell 1.2 percent.

The European Central Bank left interest rates unchanged on Thursday and extended the period it expects rates to remain on hold through at least the first half of 2020.

However, some analysts were unimpressed.

“Instead of taking a rate increase off the table, it instead decided to simply push the first hike further out. Head still in the sand,” said Neil Wilson, chief market analyst at Markets.com, in a note.

Still, Paul Brigandi, co-head of portfolio management and head of trading at Direxion, suggested that the “more dovish stance from the ECB today and the Fed earlier this week” may have “kind of balanced” investors' concerns over trade.

Markets rise on Fed rate cut hope

Markets rose on Wednesday.

The S&P 500 rose 0.8 percent, the STOXX Europe 600 rose 0.4 percent and the Nikkei 225 surged 1.8 percent.

“The flexibility of the Fed if needed to cut rates has set the stage for another positive trading session,” wrote Peter Cardillo, chief market economist at Spartan Capital, in a note, referring to Federal Reserve Chairman Jerome Powell's hint at a possible rate cut on Tuesday.

A chart by Barclays shows that between 1974 and 2007, the S&P 500 has gained an average 2.8 percent six months after a Fed cut and 6.7 percent a year after the cut.

However, stocks in Europe were held back by an announcement by the European Commission on Wednesday that disciplinary proceedings against Italy are warranted due to its rising public debt

US stocks surge as Fed officials hint at rate cut

Markets were mostly higher on Tuesday.

The S&P 500 surged 2.1 percent and the STOXX Europe 600 rose 0.6 percent but the Nikkei 225 finished flat.

US stocks were boosted by Federal Reserve Chairman Jerome Powell's comment at a monetary policy conference that the central bank would “act as appropriate” to sustain the economic expansion in the face of trade disputes.

Powell’s remarks followed St. Louis Fed President James Bullard's on Monday that rate cuts “may be warranted soon” amid the trade disputes.

But as far as rate cuts are concerned, the Reserve Bank of Australia has gotten a head start. It lowered its benchmark interest rate by a quarter of a percentage point to 1.25 percent, its first rate cut in nearly three years.

Markets mixed amid weak manufacturing PMI data

Markets were mixed on Monday.

The S&P 500 fell 0.3 percent and the Nikkei 225 fell 0.9 percent but the STOXX Europe 600 rose 0.4 percent.

Recent economic data suggested weakening global economic growth, with factory activity contracting across Asia and Europe last month.

US manufacturing continued to grow in May, although the Institute for Supply Management’s manufacturing PMI did fall to 52.1 from 52.8 in April.

Bill Stone, chief investment officer at Avalon Advisors LLC, warned in a note that if all the contemplated tariffs against China and Mexico are implemented, it “could knock as much as 1 percentage point off U.S. GDP”.

After first monthly decline of year, US stocks “clearly oversold”

The S&P 500 fell 2.6 percent last week, completing a 6.6 percent decline for the month of May, its first monthly decline of 2019.

A CNBC article, however, noted that the drop in May is normal for stocks.

The article cited Ben Carlson, director of institutional asset management at Ritholtz Wealth Management, as pointing out that 5 percent pullbacks in the S&P 500 have happened in 65 of the past 70 years.

Indeed, some analysts remain sanguine.

Sam Stovall, chief investment strategist at CFRA Research, said that “hefty” gains in the S&P 500 between January and April are “typically digested” in May, which is then followed by solid gains in June.

Craig Callahan, president at Icon Funds, said: “We’re clearly oversold and we’re finding good value.”

Still, LPL Financial noted that the S&P 500 has dropped more than 5 percent in May just four times in the past 50 years. Subsequently, the index has lost more than 5 percent in June on two occasions.

Markets fall as Trump raises tariff on Mexican imports

Markets fell on Friday.

The S&P 500 tumbled 1.3 percent, the STOXX Europe 600 fell 0.8 percent and the Nikkei 225 plunged 1.6 percent.

Investor sentiment took another hit after US President Donald Trump announced late on Thursday that the US would impose a 5 percent tariff on all goods from Mexico until that country stops the flow of illegal immigrants into the US. Tariffs will rise in steps up to 25 percent subsequently “unless and until Mexico substantially stops the illegal inflow of aliens coming through its territory,” said Trump.

The move on Mexico added to trade tension between the US and China that continues to escalate, with Hu Xijin, the editor of the Global Times, writing that “China will take major retaliative measures against the US placing Huawei and other Chinese companies on Entity List”.

John Bellows, a portfolio manager at Western Asset Management, said that while the economic impacts from the trade tensions are likely to be transitory and manageable, “if sentiment continues to deteriorate then that itself can become a more serious issue”.

Tom Essaye, founder of Sevens Report Research, said that foreign governments could choose to “simply wait Trump out given we’re 19 months from an election”. That would increase the chances of a recession, he added.