Happy Memorial Day!
China – U.S. trade (along with company specific restrictions related to Huawei Technologies) once again were the focus of the week. Some significant volatility Monday (down) and Tuesday (up), with another strong downdraft Thursday highlighted the week’s action in markets.
“At the margin, the global trade situation is deteriorating, and that increases uncertainty,” Willie Delwiche, investment strategist at R.W. Baird, told MarketWatch. “These trade concerns are not going away, and so the question is: Does it have a meaningful impact on consumer and business confidence?” he said.
U.S. officials said late Monday they would offer some temporary exceptions to an export blacklist against Huawei Technologies, which will provide some suppliers and customers of China’s telecom giant a 90-day reprieve from tough trade penalties. “Following the White House’s attempt to tighten the trade screws on China via blacklisting Huawei last week…the U.S. government has rowed back slightly on the issue,” wrote Connor Campbell, financial analyst at Spreadex in a Tuesday note.
As for the Federal Reserve minutes:
Minutes for the rate-setting Federal Open Market Committee’s April 30-May 1 meeting indicated that the voting members agreed the current accommodative policy can remain for now and that they were comfortable with the wait-and-see approach. They were, however, split on whether higher rates were necessary if the economy continued to evolved along the predicted path while others argued that higher productivity could indicate more economic softness than the low unemployment rate suggests.
The slowdown in housing continues to appear in most of the data:
Existing-home sales fell 4.4% in April from a year earlier, and 0.4% below March levels, the National Association of Realtors said Tuesday. Thursday, the Commerce Department said new-home sales declined 6.9% to a seasonally adjusted annual rate of 673,000 in April.
Note the performance of the year 10 Treasury bond which has broken the low of April – it is now at levels we have not seen in a long time even in this ultra low yield environment. The bond market is usually ahead of the stock market in signaling trouble.
Oil also stubbed its toe Thursday as it had its biggest 1 day loss of 2019.
For the week, the S&P 500 fell 1.2% and the NASDAQ 2.3%.
Here is the 5 day weekly intraday chart of the S&P 500 … via Jill Mislinski. Friday was missing from the chart but was only a 0.1% gain.
The week ahead…
We are at an interesting spot short term in quite a few charts – the S&P 500 is at a key long term support on the weekly chart and the Russell 2000 is at the bottom end of a range it has been in since February. All this while 10 year Treasuries broke to a new low late last week. Should be an interesting week ahead. Economic news flow will be quiet and we don’t have many earning reports in the weeks ahead so trade seems like it will be the focus again.
Short term: Both the S&P 500 and NASDAQ might have double tops in which would be bearish. That would be erased by the index powering through those highs.
The Russell 2000 it at the low end of a range it has been stuck in since February.
The NYSE McClellan Oscillator remains firmly in the red.
Long term: the S&P 500 is now back to this long term support line – once that broke firmly in late 2018 we had a heck of a selloff.
Charts of interest / Big Movers:
Monday, Sprint (S) rallied 13% after Federal Communications Chairman Ajit Pai issued a statement endorsing its planned merger with T-Mobile after the companies told the commission that they “would take a series of significant steps if the companies’ merger application is approved,” including committing to build out a new 5G system that would cover 90% of rural America within six years.
Blue Apron Holdings (APRN) sank 8.3% Monday after the meal-kit preparation company said it is pursuing plans for a reverse stock split.
The slow death of most retailers not named Walmart, Target, or Amazon continued as JC Penney (JCP), Nordstrom (JWN), Lowe’s (LOW), Foot Locker (FL), and Kohl’s (KSS) reported dour numbers.
Meanwhile, Target (TGT) surged 7.8% after reporting results that were better than analysts’ consensus estimates.
At least people are still going to stores to buy lingerie (give it a few years). L Brands (LB) rallied 13% Thursday after the parent of Victoria’s Secret reported better-than-expected first-quarter earnings and raised its guidance for the year.
Qualcomm (QCOM) skidded 11% Wednesday after a federal judge ruled late Tuesday that the chip equipment company violated antitrust laws, The Wall Street Journal reported.
Have a great week and we’ll see you back here Sunday!