After entering the week quite overbought, indexes took a small retreat Monday before hurling back upwards. This is typical of the “V” shaped moves up after any significant selloff, we’ve seen most of the past decade and watching them unfurl is quite amazing actually. Thought maybe this time would be “different” but not so much. So two week’s ago we asked “Has the Fed solved all the market’s problem in 1 speech?” – and thus far the market has answered resoundingly yes. The word of the year thus far in 2019 is “patience” as that simple insert into a speech change the whole complexion of everything.
China has also been busy stimulating; on Tuesday:
An announcement from the People’s Bank of China that it would increase efforts to spur their economy by improving credit availability for smaller companies and a pledge by the Chinese Ministry of Finance to cut taxes and ramp up infrastructure spending helped to buoy market sentiment. The comments come a day after China’s trade data came in weaker than expected, underlining worries that the country’s economy was locked in a downturn that could weigh on global expansion amid a protracted tariff spat between China and the U.S.
Thursday, the Wall Street Journal reported that the Trump administration was debating whether to ease tariffs on Chinese imports in a bid to calm markets. Meanwhile Friday, a Bloomberg report said that Chinese officials have offered to increase imports from the U.S. by $1 trillion over the next six years, a plan that would reportedly bring the U.S. trade deficit with China to zero by 2024.
Not too much on the economic front but it is worth noting the Beige Book for anecdotal commentary:
The Beige Book showed eight out of 12 Federal Reserve districts reporting modest to moderate growth. However, the degree of optimism appears to be waning, in part due to financial-market volatility and rising interest rates. On prices, “most” districts reported firms were seeing rising input costs, but said firms were “mixed” on whether they could pass these higher costs to customers. High tariffs were seen as one factor in increased expenses, along with higher prices for materials and freight.
For the week the S&P 500 gained 2.9% and the NASDAQ 2.7%.
Is that an inverse head and shoulders formation on the oil chart?
Twilio (TWLO) is already back to new highs.
Here is the 5 day weekly “intraday” chart of the S&P 500 … via Jill Mislinski.
The week ahead…
Earnings kicks into gear. Regurgitating the thought of the prior recap: “We enter the week extremely overbought”.
Short term: No matter how many times you see it, when these 180 degree turns happen in the market, they can take the breath away.
Another very good week for the Russell 2000 – so far 2019 has been excellent for this index which suffered in 2018.
Small capitalization stocks had a miserable final four months of 2018, with the small cap oriented Russell 2000 index falling 27% from its Aug. 31 high to its nadir on Dec. 24, more than doubling the losses produced by the S&P 500 index over the same period.
This chart is startling – rarely do you ever see the the NYSE McClellan Oscillator over 70 for a day; currently it’s been sustained over that level for over a week. For 70, this is an extended run in the 100s. Wow. Here is a 3 year NYMO chart to show how rare this is – last time we can see any action of a similar sort it was 2016.
Long term: The “V” is on…
Charts of interest / Big Movers:
PG&E Corp (PCG) was in last week’s recap, and we’ll repost it this week as it tumbled 52% Monday after the gas and electric company said it plans to file for bankruptcy on or about Jan. 29.
Gannett (GCI) rallied 21% after private equity firm MNG announced an unsolicited bid to buy the owner of USA Today, valuing the company at $1.4 billion.
Netflix (NFLX) jumped 6% Tuesday after the video streaming company said it would raise U.S. prices by 13% to 18%, the biggest rise since launching its streaming service 12 years ago.
Blue Apron Holdings (APRN) surged by more than 45% Tuesday after the meal kit company predicted it would reach profitability on an adjusted-Ebitda basis in the first quarter and full year 2019.
Bank of America (BAC) gained 7.2% Wednesday after the bank reported revenue and profitabove average analysts’ estimates. Similar spike for Goldman Sachs (GS).
Sears Holdings (SHLDQ) soared 56% Wednesday after Chairman Eddie Lampert prevailed in a bankruptcy auction for the struggling department store chain with an improved takeover bid of roughly $5.2 billion, according to reports.
Tesla (TSLA) slumped 13% Friday after the company announced job cuts and warned on profits.
Have a great week and we’ll see you back here Sunday!