2 items of interest before we begin:
- We will be emailing out a quick reader survey this week; this will be the first time it will be sent in email format and the first reader survey since we’ve changed to our weekly format. Please take a moment to grade the content of our weekly content, thanks!
- For those interested in forex trading, ForexBrokers.com (sister site to us here at StockTrader.com and StockBrokers.com) has published its first annual forex broker review. There were 20 international fx brokers included and a total of 5,236 data points assessed.
It was another week of “modest moves” in a year that thus far has been completely full of them. The lack of volatility in 2017 has been both striking and at times record breaking. (last week we noted the daily S&P change of 0.3% was the lowest since the late 1960s!). For the week, the S&P 500 shed 0.3% and the NASDAQ 0.6%. Wednesday was the one day of significant volatility as solid early gains due to the ADP private sector employment data (+263K jobs created) was offset by selling following the release of the Federal Reserve minutes. Futures slid Friday on the Syrian strike but recovered much of that before markets opened in the U.S. Friday. No war of words at the Trump-Xi summit this week as both leaders projected everything as hunky dory.
This week’s review of some significant economic indicators:
- Monday, ISM manufacturing for March fell to 57.2 from 57.7, though the employment index hit a six year high. A reading of 50 indicates economic expansion.
- Tuesday, the February U.S. trade deficit shrank almost 10% to $43.6 billion , aided by an increase in exports to a 26-month high and a plunge in imports of automobiles and cellphones.
- Wednesday, ISM non manufacturing for March fell to 55.2 from 57.6.
- Friday, government data said employment was a big miss at just 98,000 jobs created (expectations were about 180,000 gained); but some analysts blamed weather. Whatever the case reading too much into any 1 data point – especially 1 that gets revised in the coming months – is a fool’s game. The unemployment rate did shrink to 4.5% from 4.7%. Average wages rose 0.2% to $26.14 an hour.
“Today’s report from the Bureau of Labor Statistics shows the economy added 98,000 jobs in March. While this is considerably lower than the past few months, this is likely due in part to seasonal adjustments not capturing the early March winter storms and a mild pullback after February’s strength and unusually mild weather, and it is just enough to keep up with working-age population growth.” — Elise Gould, Economic Policy Institute.
We’ve been noting the slumping retail sector – look at those 30K jobs lost as a big outlier!
About those Federal Reserve minutes from the March meeting – language noting plans to reduce its $4.5 trillion balance sheet this year and talk that some Fed members thought stock prices were “quite high relative to standard valuation measures” spooked people… for a half day anyhow.
Fun fact: the S&P 500 has gone >100 days without closing below its 50 day moving average, the longest since March 2011. In the last 20 years, this is only the fifth time the S&P 500 has traded for longer than four months above its 50 day moving average. It is also only the 11th streak of more than four months over the last 50 years, based on Bespoke Investment Group’s data.
So what happens when this level breaches? Not too much negative historically. Per Bespoke:
In previous instances where the S&P 500 has broken below its 50-day moving average after an extended period above it, the index has returned 0.68% in the subsequent month and 1.97% in the three months following, as the following chart shows.
No 5 day weekly “intraday” chart of the S&P 500 provided this week by Jill Mislinksi.
Quote of the week: “My business model right now for Blue Origin is I sell about a billion a year of Amazon stock and I use it to fund Blue Origin.” — Amazon.com founder Jeff Bezos as he laid out his vision for his space-travel startup.
Mind blowing stat of the week: 325,000 square meters (about 80 acres) — That is how much Apple has allocated for parking at its eye-catching new campus, while offices and labs will take up less space — just 318,000 square meters. This is according to The Economist magazine, which is crusading against parking lots.
The campus looks like a flying saucer – that’s interesting.
The 2.8 million-square-foot main building features curved class and solar panels that will enable much of the facility to operate on renewable energy. It will also include a 1,000-seat auditorium for the company to host future flagship product events. In addition to the main building, Campus 2 has an underground theater, several parking garages that are connected to the main building through a network of underground tunnels, and a 100,000-square-foot fitness center for employees. The project is costing Apple an estimated $5 billion,
The week ahead…
The major economic data for the month is out of the way, and April is the heart of earnings season – so we begin this cycle next week. Large cap financials lead the way.
Earnings are expected to rise as much as 12%, which will mark the highest growth in profitability since third quarter 2011, according to John Butters, senior earnings analyst at FactSet.
Retail sales will be released Friday; this is the one major economic report of the week!
Short term: A bit of bifurcation here as the S&P 500 is in a bit of a short term downtrend here while the NASDAQ is approaching highs set a month earlier. The S&P 500 range is narrowing.
The Russell 2000 has been stuck in this same range for all of 2017!
The NYSE McClellan Oscillator remained solidly above zero for a second week in a row; until that changes we can’t get put on our bear costume.
Long term: Here are 5 year charts on the major indexes; if your trading timeline is measured in years rather than days or weeks, you remain in “sit and smile” mode.
Charts of interest:
Monday, shares of Tesla (TSLA) closed up 7.3% after the electric-car maker beat expectations with 25,000 deliveries in the first quarter. Analysts had expected 23,000 to 24,500. About 13,450 deliveries were Model S sedans, and 11,500 were Model X SUVs, the company said. About 4,650 vehicles were still in transit at the end of the quarter and will be counted as second-quarter deliveries, Tesla said. With the move Monday, Tesla surpassed Ford in market capitalization for the first time in its history .
Panera Bread (PNRA) soared 14% Wednesday after the fast-casual restaurant chain reached a deal to be acquired for $7.5 billion by privately held JAB Holding, the parent for Peet’s Coffee & Tea and Krispy Kreme. There had been news on Monday that Panera was exploring a sale.
In rare good news in retail, Conn’s (CONN) soared 29% Tuesday after posting better-than-expected quarterly results.
After dipping below $50 recently, crude oil got back over $50 this week.
Have a great week and we’ll see you back here Sunday!