Momentum has proven elusive of late, bouts of strength here and there interspersed with weakness or sideways movement. The market has been confined to a clear trading range, and when the earnings season concludes, it would seem to be hard to find catalysts for the market to rise. We could be surprised, though; with Trump having heaped on so much bad news or so many deterrents vis a vis investments go, if any of these negative factors clear up, we could see the market rally. But for now, it’s been just too much for the market. A value-oriented philosophy dictates buying the bottoms, or buying when others are selling, but there’s nothing to say that the market doesn’t have more room to fall, and like always, you shouldn’t try to catch a falling knife.
The challenge in getting in now is that price, more than anything is a function of expectations of future value, and with so many curve balls thrown into the mix – from investigations into Trump’s election dealings and personal life, a trade war that has been more threat than action and a Fed message some considered ambiguous at best – investors really don’t know how to evaluate the market. It’s hard to know which sectors and companies are innocuous to the vicissitudes of a trade war, and it’s hard to know which of the companies which now seem impervious, could suddenly be engulfed overnight. There are limits to Trump’s bluster; he set his sights on Amazon, and Bezos essentially ignored the prodding and has seen his stock continue to soar, so as a case in point, Trump’s threats notwithstanding, it could be that much of the economic threat for individual companies will prove itself nothing more than smoke and mirrors.
At the same time, drivers, catalysts, and market movers on the upside are nowhere to be found. TD Ameritrade chief strategist, JJ Kinahan, honed in the issue: “The primary thing missing from the market right now is something to spur us higher. There’s no great catalyst, and if strong earnings reports aren’t enough to do it, what would be? That’s why everyone is closer to the sell button than the buy button.”
On the Economic Calendar, jobless claims were up 2,000 last week; notwithstanding, they’ve stayed near lows not seen in decades. American business productivity climbed 0.7% in Q1. Signs of long-term improvement have been lacking, though. Another highlight, the April Markit Services Purchasing Managers Index (PMI) reading was 54.6, up from the March reading of 54; the Institute for Supply Management (ISM) nonmanufacturing index dropped beneath expectations, April’s reading coming out at 56.8. At the same time, factory orders for the month rose 1.6%.
Market Summary: The Dow eked out gains of 0.02%, avoiding what would have been a 5-day losing streak. At its low, the blue-chip index was off as much as 400 points. The S&P 500 slipped 0.23% and the NASDAQ shed 0.18%. During trading, both the S&P 500 and the Dow fell beneath their 200 moving averages, only to rebound and close near their session highs. The Cboe Volatility Index (VIX) traded about 1.6% higher.
One of the key factors in yesterday’s trading was investors’ attempt to preempt the Fed’s next move, i.e. position themselves accordingly. The Fed did note the rise in inflation. The ongoing debate in the marketplace is the extent to which the Fed’s bankers are willing to tolerate an uptick in inflation without hiking rates to cool things down. Higher rates would affect many things: corporations’ borrowing costs, consumers’ new borrowing costs, and the interest payment home and apartment owners have to pay on their loans.
Berkshire Hathaway CEO, Warren Buffet, revealed yesterday that he had bought 75 million shares of Apple (AAPL) in the first 3 months of the year.
Tesla (TSLA) tumbled 5.6%, in heavy volume trading. Down, 11% this year, the stock suffered yesterday after Musk lashed out at analysts during a long conference call.
American International Group (AIG) plunged 5.3%, the insurer falling shy of quarterly profit estimates. FireEye (FEYE) raised its full-year guidance, gaining 9.7% on the day. The New York Times (NYT), despite better than expected earnings numbers, fell 1.3%. Kraft Heinz (KHC) was up 1.4% after beating the Street’s expectations.
Economic Calendar: Be primed and ready for the critical nonfarm payrolls report at 8:30 N.Y. time. The consensus is 188 thousand new job creation, with the unemployment rate falling from 4.1% to 4%. Then at 12:45, William Dudley will be speaking. Also, watch the Baker-Hughes Rig Count at 13:00. The report could affect movement of crude and energy companies, OPEC policy having been in the spotlight of late. At 15:00, another Fed speaker, John Williams, will be speaking. Talks are currently taking place in Beijing in an attempt to avert a trade war. The market will continue to react to the Fed’s policy statement, which created uncertainty and placed a damper on yesterday’s trading.
Friday’s Hot Stocks: WTW, SHAK, TWTR, CBS
Have a great trading day!
Today’s Picks – Day Trading!