While the indexes posted modest losses for the weeks, it was a quite volatile week, especially in relation to most of 2019. Indexes plummeted Monday on trade fears to their worst single day performance of 2019, captured back about half those losses Tuesday, then sunk again at Wednesday’s open before bulls posted a furious comeback during the day to get the market back to near even. Thursday saw a surge, while Friday morning saw another significant selloff, followed by some buying in the afternoon to reduce losses. That felt a lot like a typical day in 2008.
Monday, China allowed its currency to fall to a more than 10 year low versus the dollar. Tuesday, China’s central bank moved to restrain the fall in its currency with a fix Tuesday at 6.9683 yuan. A breach of the 7-to-the dollar level on Monday, interpreted by some as an intentional weakening of its currency, helped to ignite a global stock market selloff and slump in bond yields. By Friday it was back up to 7.01.
Trump continued to tweet about the Fed being too tight:
“Our problem is a Federal Reserve that is too… proud to admit their mistake of acting too fast and tightening too much (and that I was right!).” The president said, the central bank “must cut rates bigger and faster, and stop their ridiculous quantitative tightening NOW”
A second week of swooning in 10 year Treasury rates:
China broke it’s 200 day moving average:
Gold also surged again this week as central banks in Asia (India, New Zealand, Thailand) and you can be sure markets will continue to point a gun at the Federal Reserve’s head to continue cutting here.
In economic news ISM Services fell to 53.7 from 55.1, which is both a pretty steep retreat and edging the reading closer to that all important 50 level. This is the lowest reading since summer 2016. While ISM Manufacturing has been weak for a while now, Services had held up. Let’s see if that is a blip or the start of a trend. The bond market is saying start of trend.
For the week, the S&P 500 fell 0.5% and the NASDAQ 0.6%.
Here is the 5 day weekly intraday chart of the S&P 500 … via Jill Mislinski.
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The week ahead..
Fun fact: About 90% of the companies in the S&P 500 have reported actual results for in the second-quarter of 2019 as of Friday, with those earnings on pace for a 0.7% decline in S&P 500 earnings per share, or EPS, marking the first time the index has reported two straight quarters of year-over-year declines in earnings since 2016, wrote John Butters, FactSet analyst.
Most of the major reports are done but we have some like Nike, Walmart, Deere coming out this week. Retail sales hit Friday.
Apparently we must now watch the China-U.S. currency cross rate each day now. Until we don’t.
Short term: earlier in the year both the S&P 500 and NASDAQ formed a bearish “double top” – which led to a good bout of selling in May to early June. That level was broken early July but now we are back below the breakout level. Interestingly both Thursday and Friday the intraday high was essentially that breakout level!
The Russell 2000 temporarily fell out of the bottom of this range it has been in for almost all of 2019 much as it did 2 months ago.
The NYSE McClellan Oscillator reached rarely seen oversold levels at the worst of this week’s selling.
Long term: a pullback here on the weekly chart but big picture it’s been quite the recovery from late 2018 lows.
Charts of interest / Big Movers:
Tuesday, Dean Foods (DF) plummeted more than 36% after the milk-and-dairy products seller reported a wider-than-expected second-quarter loss and sales that rose less than analyst projections, amid volume pressure and an “accelerated decline” in the conventional white milk category.
Wednesday, home security camera company Arlo Technologies (ARLO) sunk 17.8% after the company reported better-than-expected results for its second quarter but delivered a disappointing outlook for the third quarter.
Roku (ROKU) jumped 21% Thursday after the company late Wednesday topped expectations with its second-quarter results and issued and encouraging outlook.
Uber (UBER) retreated 6.8% Friday after the ride-hailing service reported a huge $5.24 billion quarterly loss.
It’s been a heck of a year for Shopify (SHOP) which not only barely blinked this past week, but ended on all time highs!
Have a great week and we’ll see you back here Sunday!