Market Direction: BULLISH alert
issued 1/10/2019
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The economy
The S&P 500 declined as much as 1.0% on Friday, as disappointing growth in U.S. jobs contributed to global growth concerns and profit-taking interest. However, renewed buying interest in the afternoon helped the benchmark index trim its loss to 0.2% and close at session highs.
The Dow Jones Industrial Average (-0.1%), the Nasdaq Composite (-0.2%), and the Russell 2000 (-0.1%) also finished near session highs after being down as much as 0.9%, 1.2%, and 0.9%, respectively.
The S&P 500 energy (-2.0%) and consumer discretionary (-0.7%) sectors underperformed the broader market. Conversely, the utilities (+0.4%), materials (+0.2%), real estate (+0.1%), and consumer staples (+0.1%) sectors outperformed.
It had been broad-based retreat for most of the day with all 11 S&P 500 sectors trading lower following a mixed February Employment Situation Report. The ability to hold above morning lows, though, encouraged some buying interest, and the acceleration of the rebound likely added a short-covering element into the picture.
February nonfarm payroll growth was surprisingly weak, coming in at just 20,000 (Briefing.com consensus 173,000). NEC Director Larry Kudlow, among many others, believed the payroll figure was an outlier.
The positive spin is that average hourly earnings grew 0.4%, which pushed up the year-over-year wage growth rate to 3.4% -- the highest since April 2009, and unemployment fell to 3.8% from 4.0%. Still, the big miss on payrolls stoked concerns that it was a sign of developing softness in the labor market.
At the same time, weak trade data out of China, where February exports declined 20.7% year-over-year, and some pessimism about the prospects for a U.S.-China trade deal helped contribute to early-morning weakness.
In earnings news, Costco (COST 227.82, +11.03, +5.1%) and Big Lots (BIG 36.18, +4.34, +13.6%) sported notable gains after both beat earnings estimates. National Beverage (FIZZ 58.27, -10.00), meanwhile, dropped 14.7% after it missed top and bottom-line estimates.
U.S. Treasuries edged higher, pushing yields lower. The 2-yr yield declined two basis points to 2.44%, and the 10-yr yield declined one basis point to 2.63%. The U.S. Dollar Index declined 0.3% to 97.36. WTI crude lost 0.8% to $56.14/bbl.
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By the numbers the weekly closing index numbers compared to the initial BULLISH recommendation closing numbers:
Stock Market Closing Numbers
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compared to Recommendation Numbers
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1/10/2019
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3/8/2019
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Difference
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24,001.90
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25,450.24
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1,448.34
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6,986.07
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7,408.14
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422.07
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2,596.64
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2,743.07
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146.43
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