The indexes swung back and forth between sleepy days Monday, Wednesday, and Friday to >1% swings on Tuesday and Thursday. Earnings and bonds were indeed the theme of the past week. The rise in Treasury yields and the narrowing of the spread between 2 and 10 year bonds were a major focus the week prior to last, and traders were wringing hands (and then not so much) again this week. The ten year briefly touched 3% for the first time since 2014 on Tuesday which sparked that day’s selloff. However a reversal took place quickly.
“Crossing 3% on the 10-year is something that will certainly raise concerns, but at this stage of the cycle, higher yields aren’t antithetical to rising stock prices. For the time being I think we’re fine, but we’re certainly keeping an eye on the yield curve, especially if the Fed becomes more aggressive,” said Bruce McCain, chief investment strategist at Key Private Bank. “Ultimately earnings remain the primary driver, along with the fact that the economy is still in pretty good shape.”
Earnings season remains strong – as anticipated – and while individual companies have been rewarded, it has not led to a broad rally of any sort as much of this was forecast.
“Earnings have been coming in very strong, but companies aren’t getting rewarded. At the same time, bonds are behaving badly, and with both struggling, investors are feeling nervous about the market in general,” said Michael Mullaney, director of global market research at Boston Partners.
“We are living in this time of great news and focusing on the possibility of future headwinds,” said Art Hogan, chief market strategist at B. Riley FBR Inc. “It’s a marked change from when everything was rosy,” he said, referring to last year’s market resilience. “I could punch you in the nose and you could say ‘That’s going to be good for earnings.’”
For the week the S&P 500 closed down 0.01% while the NASDAQ fell 0.4%.
Not much of interest on the economic front but durable goods orders climbed 2.6% in March, largely thanks to a 44.5% surge in commercial plane orders. Separately, U.S. trade deficit in goods narrowed 10.3% to $68 billion last month. First-quarter gross domestic product data showed the U.S. economy expanded at a 2.3% annual pace in the first three months of 2018. The ECB also kept rates unchanged at it’s meeting.
Crude oil remains a very strong chart.
Here is the 5 day weekly “intraday” chart of the S&P 500 …via Jill Mislinski.
The 17th million bitcoin is likely to be mined Thursday, according to Blockchain info cited by CoinDesk. That will mark the first million bitcoin milestone to be reached since mid-2016, and brings the cryptocurrency that much closer to the absolute limit of 21 million.
Lots of analysis on the government’s failure to properly measure inflation in our lives; this chart from Carpe Diem blog is quite realistic. I’d like to note (along with many others) – items with the highest price increases are often the ones subsidized by the government….
The week ahead…
We still are in earnings season, but also on the docket will be key economic data such as the ISM reports and April employment data Friday. The Federal Reserve also meets this week, with a statement released Wednesday. Apple releases earnings Tuesday.
Short term: A lot of consolidation at lower levels. That is a concern for bulls.
The Russell 2000 is back over its 50 day moving average.
The NYSE McClellan Oscillator turned back negative this past week although it poked its nose over 0 Friday.
Long term: Still very positive for the “buy and never sell” crowd.
Charts of interest / Big Movers:
Monday, Alcoa (AA) slumped 14% as the Treasury Department said it’s extended its wind-down period for dealing with Rusal, the sanctioned Russian aluminum giant.
Akorn (AKRX) tumbled 34% after German health care group Fresenius said that it was terminating its $4.3 billion agreement to buy the generic-drug maker.
Tuesday, Freeport-McMoran (FCX) sunk 14% after the company reported first-quarter earnings and revenue that missed expectations.
Thursday, Facebook (FB) surged by 9.1% after the social-media giant late Wednesday posted earnings that easily beat forecasts.
Similarly, Advancd Micro Devices (AMD) jumped by about 14% after the chip maker late Wednesday offered an upbeat revenue outlook and delivered higher profit than expected.
Chipotle Mexican Grill (CMG) soared 24% Thursday after analysts at several investment banks raised their price targets following a strong earnings reports on Wednesday.
Have a great week and we’ll see you back here Sunday!