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Weekly Market Recap Jun 3, 2018

Courtesy of Blain.

After 2 weeks of low volatility, that variable was introduced back into the holiday shortened week!  Another change from 2017 when almost every week was a low volatility week.   That said, small caps (Russell 2000) and tech stocks held in quite well and we don’t have any major technical change in the indexes – more on that later.

“Political drama in Italy” was what caused some ruckus Tuesday when traders returned from the long break.

“Today’s selling is happening on a larger volume, which is concerning. It means that investors are now worried about contagion from the fallout in Italy,” said Joe Saluzzi, partner and co-head of equity trading at Themis Trading.

And then Wednesday it was “not so much” as indexes rebounded.  With a “gap up” pre market. (A coalition government was formed later in the week).

“The fact that the market is shrugging off Italy’s political drama suggests that maybe it was a crowded trade that was being unwound and not something more serious,” said Michael Antonelli, equity sales trader at Robert W. Baird & Co.

Ah, she is a mercurial beast.

Thursday, TRADER WARS!! ™ were back on the forefront as the U.S. decided to impose tariffs on steel and aluminum imports from the European Union, Canada and Mexico.  Canadian Prime Minister Justin Trudeau said Ottawa would impose a 25% tariff on steel imports from the U.S., a 10% tariff on aluminum and other U.S. goods.

Friday, a Trump tweet about the employment data led to a “gap up”.

For the week the S&P 500 closed up 0.5% while the NASDAQ added 1.6%.  Second straight week of big outperformance by the NASDAQ.

Wednesday, the first revision of Q1 gross domestic product  showed the U.S. economy grew a touch softer than originally reported, mainly because of a slower buildup in inventories. GDP was trimmed to an annual 2.2% pace from 2.3%.  The Federal Reserve said in it’s “beige book” that the U.S. grew “moderately” from late April to early May.  ISM Manufacturing rose to 58.7 which is a quite strong number.

Friday’s employment report was a bit more positive than expectations with 223,000 new jobs created in May, while the unemployment rate fell to 3.8%. Wage growth was modest, with the yearly rate of pay rising to 2.7% from 2.6%.

“The market wanted a goldilocks jobs report and that’s exactly what May’s report was. The economy is still adding jobs but wage growth and inflation are not at extreme levels,” said Lisa Erickson, head of traditional investments for U.S. Bank Wealth Management.

“The latest jobs numbers only reaffirm the Fed’s plan to raise interest rates twice more this year — one in June and one in September, with a 50/50 chance of third hike in December,” said Wouter Sturkenboom, senior investment strategist at Russell Investments.

Probably the most interesting part of the report was Trump “front running” the news with a tweet that many read as signaling positive…

Financials had a rough week as the drop in Treasury yields hurt prospects for some fatter margins.

These market favorites just look so strong again….

Here is the 5 day weekly “intraday” chart of the S&P 500 …via Jill Mislinski.  (please note she transposed the words Thursday & Tuesday)

A lot of you folk are borrowing a LOT of money on new cars!

In the first quarter of this year, the average monthly loan payment for a new vehicle climbed $15 compared with last year, hitting an all-time high of $523, according to Experian. The credit analysis company’s review of new and open auto loans for the first three months of this year found buyers of new cars, trucks and SUVs borrowed an average of $31,453 — also a record high.

Experian says the average length of an auto loan in the first quarter was just over five years and nine months.

The week ahead…

Tuesday brings ISM Services but overall it appears not too much eye opening lays ahead outside of TRADE WARS!!(tm) – we’ll see if volatility dies down.

Index charts:

Short term: The S&P 500 remains mostly range bound and has for a few weeks, meanwhile the NASDAQ is looking a bit more spiffy of late.

The Russell 2000 has been the best of the bunch.  So far in 2018, the Russell is up 7.3% to the S&P 500’s 2.3% rise.

The NYSE McClellan Oscillator remains in a positive spot.

Long term: Still very positive for the “buy and never sell” crowd.

Charts of interest / Big Movers:

Wednesday, retailer Michael Kors (KORS) skidded 11% after the fashion house posted its results but investors are more concerned with weak sales growth going forward.

Meanwhile, Dick’s Sporting Goods (DKS) jumped 26% after the retailer reported first quarter earnings and revenue that beat expectations and raised its guidance.

Thursday, General Motors (GM) surged 12.9% after the car maker said the SoftBank Vision Fund plans to invest $2.25 billion in its self-driving unit.   Now the company just needs to announce it is using “block chain” to develop the self driving cars and the stock should double overnight.  Or was that a 2017 thing???

Hmmm even the discount retailers are getting hit on earnings – #AMAZON’D

This one has been in a death spiral for years – Sears Holdings (SHLD) fell 12.5% after the department store chain swung to a fiscal first-quarter loss and revenue fell sharply.   Seems like a likely candidate to some day be #TOYSRUS’D.

Yoga pants are still in fashion and Lululemon (LULU) late Thursday reported forecast-beating earnings and issued better than expected guidance.

Zuora (ZUO) soared 21% after the business-subscription software company late Thursday announced results and an outlook that topped expectations.

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

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