Week-In-Review: Stocks Fall For Second Straight Week As Trade Tensions Rise

Stocks Fall For Second Straight Week As Trade Tensions Rise

The market fell for a second straight week as tensions continued to rise between the U.S. and China. The Dow fell 700 points on Monday, then bounced back Tuesday-Thursday but still ended the week lower. For most of this year the 50 DMA line has served as support but it may now become resistance. The bulls want to see the major indices get- and stay- above that important level. There is an old saying on Wall Street, Sell In May & Go Away. In recent years, that has not been the case, but so far May has not been a kind month to Wall Street. On a bullish note, if the market quickly repairs the damage and gets back above the 50 DMA line then this can easily become another bullish buying opportunity.

Monday-Wednesday’s Action:

Stocks plunged nearly 700 points on Monday after China retaliated and announced $60 billion in new tariffs against the U.S. Starting on June 1, the new tariffs will largely target agricultural products. China said that the U.S. decision jeopardized the interests of both countries and does not meet the “general expectations of the international community.” In response, Treasury Secretary Steven Mnuchin told CNBC the two countries are “still in negotiations.“ Separately, Trump said the U.S. is in a “great position,” in the negotiations, and shed light on the fact that “our economy has been very powerful; theirs has not been.” On Tuesday, stocks rebounded sharply erasing half of Monday’s losses after some of the fear eased regarding the escalating trade rhetoric. President Trump tweeted, “We can make a deal with China tomorrow, before their companies start leaving so as not to lose USA business, but the last time we were close they wanted to renegotiate the deal. No way! We are in a much better position now than any deal we could have made” which helped allay concerns. Separately, rumors spread that the Fed may have to cut rates if conditions worsen and Morgan Stanley told clients that higher U.S. tariffs on Chinese goods will likely turn into a headwind for corporate earnings — and the economy could fall into a recession if the country’s trade war keeps escalating. On Wednesday, stocks opened down 190 points but quickly recovered and closed higher after the US said it will push auto tariffs back by six months. That was viewed as a positive signal and the market closed higher on the day.

Thursday & Friday Action:

On Thursday, stocks jumped over 200 points after shares of Walmart and Cisco Systems jumped on earnings. Walmart rose 1.4% after the retail giant posted first-quarter earnings for fiscal 2020 that beat estimates and said it is in a good position to hit 2019 estimates despite tough comparisons for the second quarter. Meanwhile, Cisco Systems jumped nearly 7% after the stock posted stronger-than-expected earnings raised guidance as well. Stocks fell on Friday after consumer confidence jumped to the highest level in 15 years, the US ended tariffs on Canada and Mexico and rumors spread that the U.S.-China trade talks “stalled.” Elsewhere, shares of Pinterest plunged after the company reported earnings. 

Market Outlook: Bullish Tailwind Continues

Stepping back, the market remains very strong after the Federal Reserve reversed its stance and moved back into the easy money camp. Near-term resistance is the recent high while near-term support is March 2019’s low, the 200 DMA line and then 2018’s low. As always, keep your losses small and never argue with the tape.

 

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Week-In-Review: Stocks Fall As US-China Trade Woes Intensify

Market Ends Week Lower As US-China Trade Woes Intensify

The market fell last week after tensions spread regarding the US-China trade talks. For the past few weeks, the market was very extended to the upside and due to pullback. The “news” that triggered the sharp pullback was the US-China trade tensions but that was just the latest headline du jour —and the important thing to keep in mind is that the market pulled back and has worked off its over bought conditions. If we get a deal, the market can easily rip higher. On the other hand, if we don’t, and the talks just somehow “stop,” then it will keep falling. The odds of the former happening are much greater than the latter so I am looking at this pullback as another buying opportunity, if the market bounces from here. The good news is that the bulls showed up and are doing their best to defend the 50 DMA line which is a healthy sign in the short-term.

Monday-Wednesday’s Action:

Over the weekend, Trump tweeted that he would raise tariffs and that spooked investors because it threatened the China trade talks. On Sunday night, futures plunged nearly 500 points and China’s stock market sank -3% on Monday. At Monday’s open, the market was down nearly 500 points and then spent the rest of the day recovering. The Russell 2000 ended higher on the day and the other popular averages ended with minimal losses. Stocks fell hard on Tuesday after U.S. Trade Representative Robert Lighthizer echoed Trump’s tweet and said the U.S. will increase tariffs on Chinese imports on Friday. That spooked the market and led many people to worry about the fall out to the global economy. Stocks opened lower on Wednesday but closed higher after China said it will take “necessary” countermeasures if US raises tariffs Friday. In other news, Uber priced its IPO toward the lower end of its target range. 

Thursday & Friday Action:

On Thursday, stocks fell hard after the open but recovered after President Trump said, “a deal with China is still possible, but tariffs are an ‘excellent’ alternative.” Trump said that Chinese President Xi Jinping “wrote me a beautiful letter, I just received it, and I’ll probably speak to him by phone.” That helped the market erase most of its earlier losses but investors were still concerned about what will happen on Friday. Stocks opened lower on Friday after the White House raised tariffs on China and the trade talks ended for the week without a deal. Stocks bounced after Trump said the talks will continue and Treasury Secretary Mnuchin said the talks were constructive. Separately, Uber finally started trading on the NYSE and the ride-hailing giant started trading near $45 which was in the lower end of its range. 

Market Outlook: Bullish Tailwind Continues

Stepping back, the market remains very strong after the Federal Reserve reversed its stance and moved back into the easy money camp. Near-term resistance is the record high while near-term support is March 2019’s low, the 200 DMA line and then 2018’s low. As always, keep your losses small and never argue with the tape.

 

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Week-In-Review: Transitory Fed, Sparks Transitory Pullback

Transitory Fed, Sparks Transitory Pullback

The market remains very strong as it refuses to pullback in a meaningful fashion. Investors digested a slew of earnings, economic data and the latest Fed data last week. The big headline came on Wednesday when Jay Powell did not cut rates. Instead, he said that the current state of low inflation is transitory. That word sent stocks lower because many people were expecting the Fed to cut rates later this year. Once again, the pullback did not last long as buyers showed up Friday morning and sent stocks higher. The fact that the market refuses to fall clearly shows us how strong the market is right now. Additionally, the inability to fall strengths the case for a melt-up before the market eventually tops out.

Monday-Wednesday’s Action:

Stocks were quiet on Monday as investors waited for a slew of earnings and economic data to be released later this week. So far, over 230 companies in the S&P 500 have reported quarterly results and close to 80% have beat estimates according to data from FactSet. Stocks opened lower on Tuesday after shares of Alphabet fell more than 8% after reporting earnings. Alphabet had its worst day since Dec. 1, 2008 after posting revenue of $36.34 billion in the first quarter, missing estimates of $37.33 billion. The company said the weaker revenue was due to changes in YouTube’s algorithm to help filter out negative content. After Tuesday’s close Apple reported earnings and the stock rallied on the news. On Wednesday, the market opened higher but closed lower. Before the open ADP and Moody’s Analytics said private payrolls rose by 275,000 in April, easily beating the Street’s estimate for 177,000. In the afternoon, the Fed held rates steady and said it does not plan on cutting rates anytime soon when it said the current inflation is transitory. That word sent stocks lower because many people were expecting the Fed to cut rates later this year.

Thursday & Friday Action:

The market fell on Thursday after House Speaker Nancy Pelosi, accused Attorney General William Bar, of lying to Congress. Clearly, that is not a light statement and that could spark more partisan infighting which could hurt the market if it gets worse. Before Friday’s open, the Labor Department said US employers added +263,000 new jobs last month while the unemployment rate fell to 3.6%. That was the lowest unemployment rate since December 1969. Meanwhile, the report easily beat the Street’s estimate of 190,000 and a 3.8% jobless rate. The strong rally on Friday erased most of earlier decline. 

Market Outlook: Bullish Tailwind Continues

The market remains very strong after the Federal Reserve reversed its stance and moved back into the easy money camp. Near-term resistance is 2018’s high while near-term support is March 2019’s low, then the 200 and 50 DMA lines, and then 2018’s low. As always, keep your losses small and never argue with the tape.

 

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Week-In-Review: Stocks & Earnings Mixed To Mostly Higher

Stocks & Earnings Mixed To Mostly Higher

The market ended mixed last week as investors digested a slew of earnings. So far, the vast majority of companies that reported earnings beat estimates which is a net positive for both Main Street and Wall Street. The market is acting very well as the major indices refuse to fall in a meaningful fashion. Stepping back, in the short-term, the market is clearly extended and due to pullback. Near-term support is the 50 DMA line and then the 200 DMA line. It would be encouraging to see a nice quiet light volume pullback before the next leg higher. Again, until we see any meaningful selling, the bulls remain in clear control of the market. 

Monday-Wednesday’s Action:

On Monday, stocks ended mixed as investors waited for another busy week of earnings. Boeing contributed the most to the Dow’s losses, falling 1.3% after The New York Times reported that workers at the company’s 787 jet plant have complained about shoddy production and bad safety practices. On Tuesday, stocks rallied nicely after the latest round of earnings was announced. Shares of Coca-Cola and Twitter both rallied after reporting earnings. Stocks were quiet on Wednesday as investors waited for a slew of well-known companies to report earnings after the bell. Facebook, Microsoft and Tesla were some of the well-known stocks that reported earnings.

Thursday & Friday Action:

The Dow fell on Thursday after 3M plunged on earnings. Other earnings were mixed as Tesla fell and Microsoft and Facebook rallied helping the S&P 500 and Nasdaq end flat to higher. So far, over 170 companies in the S&P 500 have reported earnings and 78% have posted stronger-than-expected results, according to FactSet. Before Friday’s open, the government said GDP grew by 3.2% in Q1 2019 which beat estimates for 2.5%. 

Market Outlook: Bullish Tailwind Continues

The market remains very strong after the Federal Reserve reversed its stance and moved back into the easy money camp. Near-term resistance is 2018’s high while near-term support is March 2019’s low, then the 200 and 50 DMA lines, and then 2018’s low. As always, keep your losses small and never argue with the tape.

 

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Week-In-Review: Stocks Kick Off Earnings Season With A Bang

Strong Start To Earnings Season

The market continued marching higher last week as earnings season officially began. The market is moving higher as the major indices are now, once again, flirting with fresh all-time highs! The fact that this market refuses to fall is extremely bullish and is setting the stage for a climax run similar to what we saw back in 1929 and 1999. It’s still not clear if that is going to unfold that way or if the market will continue to grind higher. Stepping back, in the short-term the market is very extended and due to pullback. In the long-run, the bulls remain in clear control as long as the major indices continue trading above December 2018’s low. Looking forward, we are entering the heart of earnings season over the next few weeks and want to see how the market and individual stocks perform as they report earnings.  

Monday-Wednesday’s Action:

Stocks ended mixed to mostly lower on Monday as investors waited for earnings season to begin. Shares of Boeing and General Electric dragged the Dow lower after both stocks were downgraded for separate reasons. Elsewhere, the Nasdaq and the S&P 500 eked out a small gain. The big news on Monday came after several high profile billionaires said capitalism was broken due to income disparity and said taxes should be raised to level the playing field. On Tuesday, the Dow fell about 200 points after fear spread regarding earnings. The selling didn’t last long because the market rebounded nicely on Wednesday after Delta, Levis, and several other well-known companies reported earnings. In other news the European Central Bank held rates steady and expressed concern regarding the global economy.

Thursday & Friday Action:

The market was relatively quiet on Thursday as investors waited for the big banks to start reporting earnings on Friday. Stocks rallied hard on Friday after JP Morgan and Disney gapped up. JPM gapped up after reporting earnings and shares of Disney soared after the entertainment giant said it was releasing a new streaming services, Disney+, and pricing it at only $6.99/month – that is half of Netflix’s monthly rate. 

Market Outlook: Bullish Tailwind Continues

The market remains very strong after the Federal Reserve reversed its stance and moved back into the easy money camp. Near-term resistance is 2018’s high while near-term support is March 2019’s low, then the 200 and 50 DMA lines, and then 2018’s low. As always, keep your losses small and never argue with the tape.

 

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