The “V” shape bounce continues in unrelenting fashion as bulls are stampeding bears in 2019! All due to a little “patience” from the Federal Reserve. It is really quite breathtaking but we have seen it repeatedly the past decade as the Federal Reserve pours gas on the market. Hopes for a deal with China also spurred the action upward. Rallies (both with gap ups) on Tuesday and Friday provided the juice this week. The S&P 500 is back over its 200 day moving average after being below for 46 days – it’s longest period of time below that level since March 2016.
Mat Klody, chief investment officer at Keebeck Wealth Management, told MarketWatch that the major benchmarks’ steady march higher since the beginning of the year is being driven “by the perception that the Fed has done a complete 180” in its apparent dovish turn, after raising rates four times last year.
U.S.-China trade talks wrapped up Friday in Beijing, with reports that negotiators remained deadlocked over key issues, but were set to resume discussions next week in Washington — viewed as a sign that both sides were eager to reach a deal ahead of the March 1 deadline.
In economic news, retail sales plunged 1.2% the largest single-month decline since 2009 and well below the flat growth expected by economists. That said the market isn’t concerned with such things as it’s all about the Federal Reserve giving out goodies. It will be interesting to see if there is a big jump next month as a “reversion to mean”.
Sales fell in every retail category except auto dealers and home centers. What’s was surprising was a 3.9% reported decline in sales at internet sellers. That would mark the sharpest drop since November 2008 — the middle of the last recession. Sales also fell at bars, restaurants, apparel stores, grocers, home furnishers, pharmacies and outlets that sell hobby items such as books and sporting goods.
“The consumer is no longer enjoying tax cuts or falling gas prices, but that’s no reason to expect a rollover,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics. “It’s a puzzle. Strong job gains, wage growth, and the drop in gasoline sales should be very supportive of consumer spending growth,” added Scott Brown of Raymond James.
For the week the S&P 500 gained 2.5% and the NASDAQ 2.4%. That is 8 up weeks in a row!
Here is the 5 day weekly “intraday” chart of the S&P 500 … via Jill Mislinski.
The week ahead…
More talk about the US-China trade talk and seeing if the market can go down for a week.
Short term: the S&P 500 didn’t have much trouble with that 200 day moving average – the low 2800s is the next interest spot. The NASDAQ is where the S&P 500 was a week ago.
Unlike 2018, the Russell 2000 seems to be patterning itself pretty closely to the S&P 500 and NASDAQ of late.
After 5 weeks in a row at abnormal levels of overbought the NYSE McClellan Oscillator is now just at a normal overbought level!
Long term: The S&P came a touch over our very long term weekly trend line.
Charts of interest / Big Movers:
Tuesday, Coty (COTY) jumped 13% after JAB holdings announced its plans to commence a tender offer to acquire 150 million shares of the company at a price of $11.65 a share, versus Monday’s closing price of $9.66 per share.
Molson Coors Brewing (TAP) slid 9.4% Tuesday after the beer maker reported higher-than-expected, fourth-quarter earnings but missed Wall Street’s revenue forecasts.
Thursday, Coca Cola (KO) fell 8.4% Thursday after the beverage giant reported results that showed the company falling short of fourth-quarter revenue expectations.
Bloomin’ Brands (BLMN) jumped 9% after the parent company of Outback Steakhouse reported fourth-quarter profits and sales that surpassed Wall Street expectations.
Six Flags (SIX) tumbled 13% after the firm reported weaker-than-expected fourth-quarter earnings.
Friday, Newell Brands (NWL) skidded 21% after the consumer-products company beat fourth-quarter earning and revenue expectations, but offered a downbeat outlook for 2019.
Also Friday, Mattel (MAT) tumbled 18.3%, notching its worst daily drop since Oct. 4, 1999, when shares cratered 29.6%. Friday’s decline for the toy maker came after it revealed that sales would remain flat this year.
Have a great week and we’ll see you back here Sunday!