Month: April 2018

Stocks rose on Monday, led by industrials, consumer staples, energy, and materials. Crude oil declined as tensions in Syria eased.

Long-term bonds were choppy in Monday trading. Both the 10- and 30-year treasury yields have trended lower since a peak in mid-February, but are in a short-term April uptrend. The 10-year yield year-to-date high is 2.95 percent.

Retail sales for March beat expectations with the strongest auto sales since September. Auto sales rose 2 percent. Retail sales increased 0.6 percent including autos. Economists forecast 0.4 percent growth. Sales rebounded from 0.1 percent in February. Retail sales ex-autos grew 0.2 percent, matching estimates and February’s result.

The National Association of Home Builders confidence index hit 69, down from 70 last month. Homebuilders remain extremely confident (any reading over 50 signals optimism) thanks to sustained demand for new housing.

March housing starts, building permits, industrial production and capacity utilization are due on Tuesday. Economists are looking for an uptick in activity from February, with the exception of industrial production, with estimates of 0.4 percent growth in March, down from 0.9 percent.

San Francisco Fed President John Williams will become the head of the New York Federal Reserve Bank on June 18.

Fed Governor Randal Quarles will testify before Congress on Tuesday and Thursday, in addition to a speech on Wednesday. He is also the Vice-Chair of Supervision, which oversees the financial system. Congress has a bill to roll back Dodd-Frank regulations and Quarles will outline how the Fed will reduce the regulatory burden on small banks. His testimony will come alongside earnings reports from several important regional banks this week. SPDR S&P Regional Bank (KRE) has gained 3 percent in 2018.

On Monday, the U.S. Department of Commerce banned U.S. companies from selling components to Chinese firm ZTE for seven years.  The action isn’t part of the trade dispute between China and the U.S.  ZTE violated trade sanctions against Iran and compounded the situation by lying to U.S. investigators. ZTE makes communications hardware including mobile phones. U.S. suppliers of ZTE fell on Monday.

Bank of America (BAC) reported stronger-than-expected earnings on Monday. Earnings grew 51 percent and revenue climbed 4 percent.

This will be an important week for earnings reports. Bank of America, Netflix (NFLX), Johnson & Johnson (JNJ), UnitedHealth Group (UNH), International Business Machines (IBM), Goldman Sachs (GS), CSX Corp (CS) Intuitive Surgical (ISRG), Abbott Labs (ABT), Alcoa (AA), Morgan Stanley (MS), U.S. Bancorp (USB), American Express (AXP), Bank of New York (BK), Taiwan Semiconductor (TSM), Novartis (NVS), Philip Morris International (PM), Proctor & Gamble (PG), General Electric (GE), Honeywell (HON), Schlumberger (SLB), State Street (STT) and Baker Hughes (BHGE) are all scheduled to report.

Equities were choppy over the past week, but most major indexes rose into Wednesday trading. The Dow Jones Industrial Average underperformed.

The S&P 500 Index has bounced off its 200-day moving average four times in April, historically consistent with mild corrections. Larger corrections over the past decade (2010, 2011, 2015 and 2016) have finished with a dip below the 200-day.

The Dow Industrials also bounced off its 200-day moving average.

Although the Nasdaq has suffered in recent weeks, it’s strength earlier in the year has kept it above its 200-day MA.

The Russell 2000 tends to outperform in bull markets and it’s above its 50-day moving average. If we’ve seen the bottom of this correction, the other indexes will soon follow.

Technology led the largest S&P 500 sectors. Facebook (FB) rebounded strongly on Tuesday as CEO Mark Zuckerberg testified before the Senate.

Energy, telecom and materials were among the best performing sectors.

Biotechnology lifted the healthcare sector. Pharmaceuticals performed well, and medical devices outperformed the overall sector. Healthcare providers underperformed.

On Friday, Citigroup (C), J.P. Morgan (JPM) and Wells Fargo (WFC) will report earnings. Analysts predict solid earnings increases for all but Wells, which is still recovering from its accounting scandal.

Energy shares rallied strongly last week as crude oil climbed more than 5 percent. Crude oil is close to a new 52-week high. Energy stocks underperformed in 2018 relative to oil prices. This week’s move indicates some traders are positioning for a breakout.

Gold moved up sharply on Wednesday and has about 2 percent to go before it completes a long-term consolidation.

Emerging-market currencies weakened over the past week. The Turkish lira and Russian ruble both fell following U.S. sanctions. WisdomTree Emerging Currency (CEW) needs to hold above $19.60 to avoid a short-term bearish outlook.

Developed markets have steadily underperformed emerging markets since the start of 2017. They are now testing this down trend. The S&P 500 Index has performed as well as emerging markets since September.

Stocks rallied on Monday as trade war fears ebbed. President Trump expects China will lower its trade barriers. President Xi will address the Boao Forum on Tuesday (this evening in the U.S.), his first address at the economic summit since consolidating political power. Economists on both sides of the Pacific hope he will announce a major new era of economic reform.

The Nasdaq gained 0.51 percent on the day to lead the major indexes.  SPDR Technology (XLK) increased 0.78 percent, SPDR Healthcare 0.99 percent, SPDR S&P Biotech (XBI) 2.73 percent.

The National Federation of Independent Business will release the March small business confidence survey on Tuesday. The prior reading was 107.6, near the all-time high set in the early 1980s. Producer price inflation and wholesale inventories will be out the same day. Wednesday will bring consumer price inflation and the minutes from the last Federal Open Market Committee meeting. The week will close with import prices, the Job Openings and Labor Turnover Survey (JOLTS), and the flash April reading from the University of Michigan’s consumer sentiment survey.

China will report March inflation, lending, and trade data this week. The trade deficit with China has risen as consumption has increased with economic growth. Additionally, importers and exporters may be rushing orders ahead of potential tariffs later this year.

The 10- and 30-year Treasury yields moved higher on Monday. Both are also consolidating after hitting new multi-year highs in February. Crude oil rebounded above $63 a barrel to open the week.

Earnings season officially kicks off this week. Citigroup (C), Wells Fargo (WFC) and J.P. Morgan (JPM) will report earnings on Friday, alongside major regional bank PNC Financial Services (PNC). Analysts have forecast earnings growth of 19.1, 7, 38 and 23 percent at these firms, respectively. Rising interest rates are boosting bank earnings and financial market volatility should lift trading revenue.  The consensus estimate for financial sector earnings growth is 19.8 percent.

Bed, Bath & Beyond (BBBY), BlackRock (BLK) and Delta Air Lines (DAL) will also report this week.