Things were looking pretty solid coming into th week but #TRADEWARS(tm)! is the new #Brexit! and certainly roiled markets. A lot of this is perception – even the earlier announced tariffs in the steel and aluminum industries are already being watered down just days/weeks into their implementation but some ethereal worries about retaliation seem to be the cause of worries. Whatever the case, the market suffered badly this past week. Facebook (FB) and it’s scandal hurt the NASDAQ early in the week, then #TRADEWARS(tm)! hurt Thursday and Friday. The S&P 500 fell 6.0%! and the NASDAQ 6.5%! on the week.
The Trump administration instructed the office of the U.S. Trade Representative to draw up a list of tariffs on Chinese products totaling up to $60 billion. The tariffs are expected to target sensitive technologies that the U.S. considers vital to the U.S. economy in the years ahead. Investors are concerns that protectionist trade policies could be met with retaliatory measures by major trading partners, and that a trade war could contribute to inflation in the economy.
“Tariffs leveled at intellectual property abuses by China appear to be a more direct blow” compared with the steel and aluminum tariffs, said Shawn Snyder, head of investment strategy at Citi Personal Wealth Management. “The question going forward is whether or not China sees it as a glancing blow and shrugs it off or comes back swinging.”
China reacted to the Trump administration’s plans to impose tariffs, as Beijing’s commerce ministry fired back with threats of tariffs against $3 billion in U.S. goods. China stopped short of penalties on the biggest pawns in a potential trade war, leaving off soybeans, sorghum and Boeing aircraft
This all sounds threatening, but $3B is peanuts in the big picture. Nice article from Bloomberg on the topic here.
Facebook was certainly the center of attention this week; Monday’s loss of 6.8%, was the biggest one day percentage decline since March 26, 2014, as the social-media giant has ignited a firestorm over third-parties’ access to Facebook users’ personal data.
The Federal Reserve did as was expected (rate hike) and if anything was more dovish than market participants expected – no different then the last 3 Fed regimes. The Fed signaled it still expects to deliver two more before the end of the year; quite a few people had been expecting three.
Economic news was mostly ignored this week.
Here is the 5 day weekly “intraday” chart of the S&P 500 …via Jill Mislinski. Friday is missing and the S&P 500 fell another 2.1%!
The week ahead…
TRADEWARS(tm)! will continue to play out. Let’s watch the reaction of the S&P 500 to the 200 day moving average as well.
Short term: Second test of the 200 day moving average in the S&P 500 – something unfathomable in 2017!
The Russell 2000 held up decently until late Thursday, and Friday.
The NYSE McClellan Oscillator went from positive to oversold in a span of a week!
Long term: Even after a massive one week selloff, the NASDAQ is only in the middle of a massive uptrend in it’s weekly chart. Sure would be interesting to see it fall out through the bottom end of said channel.
Charts of interest / Big Movers:
Tuesday, Oracle (ORCL) tumbled around 9.4% after the company’s quarterly earnings report and forecast disappointed Wall Street’s expectations over cloud-software growth.
Wednesday, General Mills (GIS) plunged 8.9% after earnings and an outlook that came in below expectations.
Thursday, Guess (GES) surged 28% a day after the clothing seller posted better-than-expected quarterly results.
Omeros (OMER) spiked 35% on the new government spending bill that benefits its cataract surgery drug Omidria.
Dropbox (DBX) made its debut on Friday, with the stock soaring 35% to $28.48. The company priced its initial public offering at $21 a share late Thursday.
Gold perked up. Will be interesting to see if it can clear that $1370s area it has had trouble with for a long time.
Have a great week and we’ll see you back here Sunday!