Market Direction: BULLISH alert
issued 2/15/2018
The economyThe stock market direction remains under pressure. These volatile whipsaws daily can be very frustrating for investors. Be careful...
It was a losing week for the equity market and another volatile one to boot. The major indices were all over the place, twisting and turning amid a barrage of headlines that played into its fears about trade wars and rising interest rates.
The whipsaw action was embodied in the behavior of the Dow Jones Industrial Average, which swung 1100 points between its low on Wednesday and its high on Thursday. On Friday, it dropped as many as 767 points before settling the session down 572 points.
All told, the Dow Jones Industrial Average declined 0.7% for the week, which made it the best-performing of the major indices. The Russell 2000 fell 1.1%; the S&P 500 dropped 1.4%; and the Nasdaq Composite declined 2.1%.
Talk of trade wars dominated the market narrative after the Trump Administration proposed a $50 billion tariff plan on Wednesday and then followed with an order to the Office of the U.S. Trade Representative on Friday to consider whether it would be appropriate under section 301 to impose an additional $100 billion of tariffs on Chinese imports.
China quickly countered on Wednesday with a proposed $50 billion tariff plan on 106 products imported from the U.S. and said on Friday that it would protect its interest at any cost if the U.S. ultimately pressed ahead with its tariff plans.
The stock market managed to overcome its trade concerns on Wednesday after NEC Director Kudlow appeased it with the reminder that these are just proposals and that it is possible no tariffs will go into effect.
That perspective got diluted on Friday, however, when Treasury Secretary Mnuchin acknowledged there could be a potential trade war with China (even though that is not the objective). Furthermore, a remark from President Trump that the stock market might have to have a little pain as he works to protect the trade interests of the U.S. also shook investor sentiment and contributed to broad-based selling on Friday that led to declines that ranged from 1.9% to 2.3% for the major indices.
It didn't help matters either that Fed Chair Powell toed the party line on Friday, saying to the Economic Club of Chicago that he sees further gradual rate hikes as he expects inflation to pick up this Spring.
The view from Mr. Powell was not surprising, yet it was offputting for the stock market nonetheless since it reminded market participants that the Federal Reserve is still operating with a tightening bias even though volatility has increased in the financial markets and heated trade rhetoric threatens to curtail economic growth.
The latter is one reason why the market has not taken much solace of late in the understanding that the first quarter earnings growth is expected to be the strongest growth in seven years. This market is looking further ahead and is bothered by a sense that companies may not be able to live up to the high earnings growth expectations if the Fed keeps raising rates and trade wars break out.
Fittingly, the week's weakest performers were some of its most economically-sensitive sectors.
The information technology sector (-2.3%) had the worst showing as investors continued to exit crowded positions in mega-cap tech leaders like Facebook (FB), Alphabet (GOOG), and NVIDIA (NVDA). The industrials sector (-2.0%) was the next worst performer followed by health care (-1.7%) and financials (-1.5%).
Amazon.com (AMZN) was another notable stock that got hit with selling interest. That interest was precipitated by a rebuke from the president who said Amazon needs to pay more taxes and should be paying the U.S. Post office more for its services. Shares of AMZN fell 2.9% this week.
There was a good bit of economic data this week and it was generally weaker than expected, with the ISM Manufacturing and Non-Manufacturing Indexes, Construction Spending, Factory Orders, Trade Balance, and Nonfarm Payroll reports all coming up shy of consensus estimates.
From a headline perspective, the Trade Balance and March employment reports captured the most attention. The former showed a widening in the trade deficit to $57.6 billion in February, which was the largest deficit since October 2008. The March employment report, meanwhile, indicated nonfarm payrolls increased just 103,000 while average hourly earnings jumped 0.3%.
The employment report was a mixed bag. The key takeaway, though, is that it was neither too hot nor too cold to provide a clear basis for the Federal Reserve to re-think its outlook for monetary policy. As it so happens, San Francisco Fed President John Williams (who is an FOMC voter and will soon be the New York Fed President) said after Friday's close that he sees three to four rate hikes this year.
That view effectively wrapped up a tumultuous week that left the S&P 500 down 2.6% for the year.
$tockMarketDirection proprietary model is currently BULLISH. We strongly encourage you to monitor positions closely, exercise proper money management strategies and follow us at $tockMarketDirection for ALERTS we may issue advising a change in the current market direction. Stay tuned and follow us. If you have a testimonial or comment of how this website has helped you we would like to know, write us. Share with a friend.
By the numbers the weekly closing index numbers compared to the initial BULLISH recommendation closing numbers:
Stock Market Closing Numbers
|
|||
compared to Recommendation Numbers
|
|||
2/15/2018
|
4/6/2018
|
Difference
|
|
25,200.37
|
23,932.76
|
1,267.61
|
|
7,256.43
|
6,915.11
|
341.42
|
|
2,731.20
|
2,604.47
|
126.73
|
|
Register
at: http://www.stockmarket-direction.com/
No comments:
Post a Comment