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Weekly Market Recap Apr 1, 2018

Courtesy of Blain.

Emotional angst about #TRADEWARS(tm)! lightened up Monday leading to a big rally; in percentage terms the best move up August 2015 on a single day.  The rest of the week was very choppy with a big drawdown Tuesday and a rally into the holiday Thursday.  Needless to say the benign and calm market of 2017 is long gone and with it a historical level of non volatility.  The S&P 500 did gain 2.1% for the week, while the NASDAQ added 1%.  This was the first quarterly loss (-1.2%) for the S&P 500 since… 2015!!!  The NASDAQ GAINED 2.3% for the quarter – it’s seventh straight quarterly gain.  That despite the Facebook mess late in the quarter and the selloff of some of places every hedge and mutual fund is hiding in (Google, Apple, Facebook, Netflix, etc)

While #TRADEWARS(tm) are all the fashion these days, the Trump policy in all things seems to make a blustery proclamation/action – and then provide loophole after loophole.  i.e. all those steel and aluminum tariffs already have so many exceptions it’s basically become a tariff on Asia and that’s about it.  So the market reacts to the bluster.  Meanwhile quietly China and the U.S. are working on back side deals.

China and the U.S. have quietly started negotiating to improve U.S. access to Chinese markets, after a week filled with harsh words from both sides over Washington’s threat to use tariffs to address trade imbalances, people with knowledge of the matter said.

Economic news was light  – The annualized pace of growth in the economy in the fourth quarter of 2017 was boosted to 2.9% from 2.5%, reflecting the biggest increase in consumer spending in three years and higher investment in business inventories.

Here is the 5 day weekly “intraday” chart of the S&P 500 …via Jill Mislinski.

Giant infographic on all things Amazon.  (too big to upload!)

The week ahead…

Finally maybe a change in focus from #TRADEWARS(tm)! as we have a heavy economic data slate ahead, and earnings season is soon upon us!  2018 will be the year the massive corporate tax cuts boost earnings.

According to FactSet, earnings for companies in the S&P 500 are expected to grow 17.3% in the first quarter. Not only would that represent the fastest pace of profit growth since the first quarter of 2011, but expectations have been swiftly ratcheted up over the past few months. At the end of December, analysts were expecting a growth rate of 11.4%. Much of that increase was due to the recently passed tax-reform bill.

Friday is the employment data with expectations of 200,000 jobs added, and 0.2% hourly wage growth.

Spotify (SPOT) will IPO April 3.

Index charts:

Short term: Lots of tests of that 200 day moving average on the S&P 500.  A break of that level would be very interesting – the more times a level gets tested the more apt it is to break!  The NASDAQ has a support line as well with the 2 recent lows; still quite far from the 200 day moving average.  There is a “gap” in the NASDAQ chart that we will show if and when we get closer to that level.

The Russell 2000 is actually holding up somewhat well considering the action in some of the other indexes – remember it is less affected by tariffs due to a concentration of more domestic facing companies.  That said, if there is a larger correction it will break down just the same.

The NYSE McClellan Oscillator entered the week oversold so a bounce was likely.  But right now it’s just negative; so caution remains.

Long term: It’s been unicorns and sunshine for ages.  Even now a massive uptrend is holding.  What would be interesting down the road – if it happens – is a breakdown of the NASDAQ out of the lower channel, which is somewhere near 6500.

Charts of interest / Big Movers:

Monday, USG (USG) rejected an unsolicited buyout bid by Gerb. Knauf AG, saying it “substantially undervalues” the company and is not in the best interest of its shareholders. The stock gained 19%.

Finish Line (FINL) surged 31% after JD Sports Fashion (JD) said it would buy the U.S. retail chain for $13.50 per share in cash, in a deal valued at $558 million.  That seems to be the only hope for most brick & mortar nowadays.

Rough week for the semiconductor sector.

Tesla (TSLA) is facing an investigation of a fatal crash of one of the company’s electric cars in California last week; traders didn’t like the news.

This week in Trump’s musings/tweets – Amazon tumbled 4.4% Thursday after a report that President Donald Trump wants to go after the e-commerce giant.  This is an interesting one as many of Trump’s buddies are in commercial real estate which is of course getting hurt by the decimation of brick & mortar.

Dropbox (DBX) held in quite well in it’s second week as a public company.

Have a great week and we’ll see you back here Sunday!


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