Weekly Closing Numbers Put Stocks Under Pressure

Market Direction: BULLISH alert issued 1/10/2019

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The economy

The S&P 500 lost 0.6% on Friday, closing near session lows, following late-session news that talks between the U.S. and China have stalled. The Dow Jones Industrial Average lost 0.4%, the Nasdaq Composite lost 1.0%, and the Russell 2000 lost 1.4%.

Prior to the news, the stock market began the day retreating from a three-day advance after China called out the U.S. on its aggressive negotiating tactics. China suggested the U.S. change its approach if it wants to come to Beijing for meaningful discussions.

The major averages, however, each rallied into positive territory after consumer sentiment for May hit a 15-year high. It should be mentioned, though, that the results were tabulated before the recent setback in trade negotiations with China and implementation of new tariff rates on both sides. This understanding helped temper buying interest.

Still, the S&P 500 was on pace for a relatively flat week before CNBC reported that scheduling discussions for further trade talks have been put on hold since the White House increased scrutiny of "Chinese telecom companies." Although the news wasn't entirely surprising, it did stir concerns about possible retaliation from China.

The cyclical S&P 500 industrials (-1.1%), energy (-1.1%), information technology (-0.8%), and consumer discretionary (-0.8%) sectors led Friday's retreat. The utilities sector (+0.5%) was the lone sector to finish in the green.

Deere & Co. (DE 134.82, -11.17, -7.7%) and China's Baidu (BIDU 128.31, -25.39, -16.5%) dropped noticeably following disappointing results/guidance attributed to weakness in China. Many semiconductor stocks with Chinese exposure also underperformed. The Philadelphia Semiconductor Index lost 2.0%

Tesla (TSLA 211.03, -17.30) fell 7.6% after CEO Elon Musk emailed employees that he will be reviewing all expenses as part of "hardcore" cost cutting efforts. Pinterest (PINS 26.70, -4.16) fell 13.5% after missing earnings estimates and guiding FY19 revenue below consensus.

Separately, the U.S. and Canada agreed to eliminate aluminum and steel tariffs within 48 hours. The White House also confirmed that President Trump will delay auto tariffs for 180 days. Market reaction was muted to both developments, as reports earlier this week had already suggested these outcomes.

U.S. Treasuries finished mixed in a curve-flattening trade. The 2-yr yield increased one basis point to 2.21%, and the 10-yr yield declined two basis points to 2.39%. The U.S. Dollar Index increased 0.1% to 97.99. WTI crude declined 0.4% to $62.73/bbl.

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The market direction weekly closing numbers for the indexes this week compared to the initial BULLISH recommendation closing numbers:

Stock Market Closing Numbers
compared to Recommendation Numbers
	1/10/2019	5/17/2019	Difference
Dow Jones	24,001.90	25,764.00	1,762.10
Nasdaq	6,986.07	7,816.28	830.21
S&P 500	2,596.64	2,859.53	262.89

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