The indexes continue to mark time range bound at lower levels (with moderately high volatility) which should be a concern for bulls until it changes. Unlike consolidation after a move up, this is consolidation after a selloff which is not usually bullish. Selling Monday and Wednesday was offset by a rally Friday; tech in general helped the market quite a bit this week with Apple (AAPL) contributing particularly. The Federal Reserve meeting was a nothing burger.
The Federal Reserve acknowledged rising prices and said it now expects inflation to “run near” its 2% target “over the medium term,” in its most recent policy statement. The central bank held key rates unchanged, as expected. Traders who bet on the timing of Fed rate hikes see a 94% probability of a rate hike in June.
Remember when tariffs were going to blow across the globe? Oh… a kick of the can:
President Donald Trump late Monday gave top allies—the European Union, Canada and Mexico—an extension to the tariff exemption to allow more time negotiate a new pact to avoid the levies. The tariffs of 25% on steel and 10% aluminum—already in effect against China, Russia, Japan and others—were slated to come into effect on May 1, but have now been pushed back to June 1.
For the week the S&P 500 closed down 0.2% while the NASDAQ gained 1.3%.
Tesla (TSLA) was so interesting this week it is worth it’s own section up here early in our recap – Musk is going full Tony Stark. Thursday, the company lost 5.6% amid heavy trading volume. The electric-car maker beat expectations for adjusted losses and sales in its quarterly earnings, but shares dropped during a long conference call in which Chief Executive Elon Musk gave analysts and the media the cold shoulder.
Tesla Chief Executive Elon Musk held a long, odd earnings conference call Wednesday in which he insulted analysts, the media, federal regulators and people who died behind the wheel of his cars, and then told anyone concerned about volatility not to invest in his company.
When the question-and-answer session started, Musk turned vitriolic, and not even his fellow executives were safe. After Chief Financial Officer Deepak Ahuja referred to Tesla as “best in class” for batteries while responding to an analyst query, he was interrupted by Musk.
“The best. It is not a class,” Musk interjected.
“Yes, we’re the best. Sorry,” Ahuja replied.
“The best in a class of one,” Musk made sure to point out.
When RBC Capital Markets analyst Joseph Spak then asked how many people with Model 3 reservations were actually taking delivery of their cars, Musk declined to answer any more “boring,” “dry” questions.
“You’re killing me,” he said.
Instead, Musk turned to Galileo Russell, a YouTuber whom Musk allowed to ask a question after an online campaign to appear on the earnings call. Instead of a single question, however, Musk allowed Russell to ask roughly a dozen questions, few with much relation to the quarter in question or near-term Tesla performance. Russell instead focused on long-term goals, leading to an entertaining interview that Musk used to air his ire.
The ISM manufacturing index for April fell to 57.3 in April, a nine-month low. Construction spending rose 3.6% from the year-ago period. The ISM nonmanufacturing index fell more than expected in April, dropping to 56.8.
The U.S. created 164,000 new jobs in April, below the 188,000 that had been expected. Employment gains for March and April were revised up by a combined 30,000. The unemployment rate fell to 3.9% from 4.1%, the first time the jobless rate has dropped below 4% since the end of 2000. But the decline owed to a shrinking labor force and fewer people saying they were unemployed instead of an increase in how many people found work.
For the third week in a row we will highlight the crude oil chart as it is doing very bullish things!
Here is the 5 day weekly “intraday” chart of the S&P 500 …via Jill Mislinski.
Sell in May? Or just Stay? Bespoke blog has some interesting commentary and analysis:
There are two important points worth making here. First, returns during the November through April period clearly trump the returns of the S&P 500 during the May through October period. Just as important, though, is that even as returns have been much weaker during the May through October period, if you had simply held on through both periods, your investment today would be worth more than double what it would be worth if you actually sold in May and got back in to the market at the end of October.
The week ahead…
We are in the tail end of earnings season, the employment and Federal Reserve meeting are done…. so… back to Trade Wars(tm)??
The U.S. asked China to cut its trade surplus by $200 billion while the Chinese officials sought to get Washington to ease national-security reviews of Chinese investments.
Short term: A lot of consolidation at lower levels. That is a concern for bulls. More tests of the 200 day moving average – also not great.
The Russell 2000 is back over its 50 day moving average but below various trend lines connecting highs of the year.
The NYSE McClellan Oscillator did get back to positive Friday but was in the red most of the week.
Long term: Still very positive for the “buy and never sell” crowd.
Charts of interest / Big Movers:
Monday, Sprint (S) FELL 14% following news that the wireless carrier plans to merge with rival T-Mobile (TMUS). If allowed by antitrust regulators, it would leave the U.S. wireless market dominated by three national players. It is the third time in recent years that the two rivals have attempted to merge.
Tuesday, Tenet Healthcare (THC) surged 19% after the company’s first-quarter earnings topped expectations late Monday. Looks like ~100% gains year to date there!
Wednesday, Apple (AAPL) gained 4.4%, after the company late Tuesday posted better-than-anticipated earnings and revenue for the first quarter. Then Friday, CNBC reported Berkshire Hathaway bought 75 million shares of the iPhone maker in the first quarter. The stock hit a record and had its biggest weekly gain since October 2011.
Snap (SNAP) i.e. Snapchat plummeted about 22% Wednesday, a day after reporting revenue and active daily users that were below forecasts.
This week in the biotech lottery, Esperion Therapeutics (ESPR) announced results for a late-stage clinical trial of its cholesterol-lowering medication. The stock plunged by 35% Wednesday; Thursday wasn’t much fun either.
Cardinal Health (CAH) plunged 21% after the company reported a third-quarter profit miss and lowered its 2018 adjusted earnings-per-share guidance.
Fitbit (FIT) fell 12% Thursday, after the wearable-devices company beat earnings expectations but disappointed with its outlook.
Friday, Pandora (P) soared about 20% after the streaming-music company late Thursday posted an earnings and revenue beat.
Have a great week and we’ll see you back here Sunday!