Monthly Archives: April 2019

Market Insights 4/30/2019

After spending most of the day mired in negative territory, U.S. equities were able to bounce off their lows of the day to finish mixed.

The Dow finished higher, and the S&P 500 added another mark to its column of record closing highs, but a revenue miss by Google parent Alphabet kept the tech-heavy Nasdaq in the red.

Treasury yields were lower, despite upbeat reads on Consumer Confidence and pending home sales, and the U.S. dollar lost ground, while crude oil prices and gold were higher.

The Markets…

The Dow Jones Industrial Average rose 39 points (0.2%) to 26,593

The S&P 500 Index was up 3 points (0.1%) to 2,946

The Nasdaq Composite decreased 54 points (0.7%) to 8,108

In heavy volume, 1.0 billion shares were traded on the NYSE and 2.0 billion shares changed hands on the Nasdaq

WTI crude oil gained $0.41 to $63.91 per barrel and wholesale gasoline was up $0.04 at $2.07 per gallon

The Bloomberg gold spot price increased $4.16 to $1,284.06 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was down 0.4% at 97.48

Consumer Confidence jumps, housing data improves

The Consumer Confidence Index jumped to 129.2 in April, from March’s upwardly-revised 124.2 level, and well above the Bloomberg estimate of 126.8. The Present Situation Index and the Expectations Index of business conditions for the next six months both improved solidly month-over-month. On employment, the labor differential—consumers’ appraisal of jobs being “plentiful” minus being “hard to get”—rose to 33.5 from the 28.7 level posted in March.

The 20-city composite S&P CoreLogic Case-Shiller Home Price Index showed a 3.0% y/y gain in home prices in February, matching expectations. Month-over-month, home prices were up 0.2% on a seasonally adjusted basis for February, in line with forecasts.

Pending home sales grew 3.8% m/m in March, versus projections of a 1.5% increase, and following the unrevised 1.0% decrease registered in February. Sales were 3.2% lower y/y. Pending home sales reflect contract signings and are a gauge of the pipeline of existing home sales.

Treasuries were higher, as the yields on the 2-year and 10-year notes, along with the 30-year bond, fell 3 basis points (bps) to 2.26%, 2.50% and 2.93%, respectively.

Tomorrow, the monetary policy decision from the Federal Open Market Committee (FOMC) will likely be the headline event, where an expected unchanged decision will be followed by Chairman Jerome Powell’s press conference that is highly-likely to be scrutinized.

Europe mostly higher following data, Asia lower

European equities finished mostly higher, with a stronger-than-expected Eurozone Q1 GDP report tempered by some disappointing manufacturing and services data out of China, with mining issues seeing some pressure. The euro and British pound rose versus the U.S dollar, while bond yields in the region were mixed.

Stocks in Asia finished mostly to the downside, with China’s official Manufacturing and non-Manufacturing PMI Indexes showing growth was slower than expected in April, while the Japanese markets remained closed for the week-long holiday known as Golden Week. Mainland Chinese stocks gained ground, while those traded in Hong Kong, Australia and India fell. South Korean equities also traded lower, with pressure coming from the tech sector following some disappointing earnings.

Market Insights 4/29/2019

U.S. equities finished modestly higher in lackadaisical trading, with the S&P 500 and Nasdaq both marking new closing highs.

Treasury yields were higher following the data and the U.S. dollar was lower, while crude oil prices were mixed and gold lost ground.

The Markets…

The Dow Jones Industrial Average rose 11 points to 26,554

The S&P 500 Index was up 3 points (0.1%) to 2,943

The Nasdaq Composite increased 16 points (0.2%) to 8,162

In light-to-moderate volume, 741 million shares were traded on the NYSE and 1.7 billion shares changed hands on the Nasdaq

WTI crude oil gained $0.20 to $63.50 per barrel and wholesale gasoline was down $0.02 at $2.03 per gallon

The Bloomberg gold spot price decreased $5.78 to $1,280.38 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was down 0.2% at 97.85

Personal income and spending mixed, regional manufacturing better than expected

Personal income rose 0.1% month-over-month in March, versus the Bloomberg forecast of a 0.4% gain, and compared to February’s unrevised 0.2% rise. Personal spending gained 0.9%, above estimates for a 0.8% increase, and following February’s unrevised 0.1% rise. The March savings rate as a percentage of disposable income was 6.5%.

The April Dallas Fed Manufacturing Index fell to 2.0, remaining in expansion territory (a reading above zero), and exceeding the expected fall to -2.6, following the downwardly-revised 6.9 level posted in March.

Treasuries were lower following the data, as the yield on the 2-year note ticked 1 basis point higher to 2.29%, while the yields on the 10-year note and the 30-year bond were up 3 bps to 2.53% and 2.96%, respectively.

This week, earnings season will hit its pinnacle and the economic calendar wwill be robust, continuing tomorrow with the release of Consumer Confidence, forecasted to move higher during April to a level of 127.3 from March’s 124.1, as well as the Chicago Purchasing Managers Index, expected to post a reading of 58.2 for April, a few ticks below the 58.7 registered the month prior.

U.S. stocks have now recovered their late-2018 losses in a sharp V-shaped move. We’re concerned that the pendulum has swung too far, too fast and we could be vulnerable for a near-term pullback.

Economic data has been healthy enough to reduce the fears of a near-term recession, but the disconnect between weak economic surprises and the recently-strong stock market may not be sustainable. Earnings season has been mixed, while trade concerns continue to hover in the background. China has seen some results from its recent stimulus efforts but stocks may have reacted too much in the positive direction—more time is needed to see if the stimulus efforts are really having a long-term impact on the economy (vs. just China’s stock market).

Europe higher despite soft data, Spanish election results, Asia mixed

European equities finished modestly higher, even with some soft data out of the region that exacerbated worries over the outlook for the global economy. Eurozone economic sentiment fell to 104.0 for April, the tenth-consecutive monthly decline in the measure and its lowest level in over two years. Meanwhile, consumer confidence remained in negative territory and business sentiment inched lower and below expectations. Banking stocks in the region were in focus after Standard & Poor’s reaffirmed Italy’s BBB credit rating. Spanish stocks were able to move out of the red that came following weekend general election results showed the country’s Spanish Socialist Workers’ Party grabbed the largest share of votes, but short of the majority.

Stocks in Asia finished mixed on the heels of Friday’s better-than-expected GDP report out of the U.S., and amid lighter volume with markets in Japan closed for the week-long Golden Week holiday break. Focus was again on the elusive trade deal between the U.S. and China, as trade representative Robert Lighthizer and Treasury Secretary Steven Mnuchin will lead a U.S. delegation to China tomorrow to resume trade negotiations. China will reciprocate, with Vice Premier Liu He returning to Washington on May 8 to continue discussions. Reports have indicated that the talks are in the latter stages with a possible deal inked by late May or early June.

Chinese stocks finished mixed, amid continued concerns over the potential for the government to scale-back its stimulus campaign in the wake of recent upbeat economic data, exacerbated by today’s report that showed industrial profits in the Asian nation jumped 13.9% y/y for March, rebounding from last month’s 14% drop.

Mainland Chinese equities fell, while those traded in Hong Kong increased. Australian securities were lower amid weakness in energy issues with crude oil continuing to pare a recent run. Meanwhile South Korean listing increased, rebounding from a string of losses that came in the wake of last week’s disappointing GDP report, while shares in India gained ground amid continued optimism regarding corporate earnings.

Random Thoughts

April comes to a close on Tuesday, carrying with it strong performances for the month and year-to-date period.

Indeed, while the cap-weighted S&P 500, Equal-Weight 500, SmallCap 600 and Global 1200 have risen in value since 10/31/18, an equal exposure to their cyclical sectors — consumer discretionary, industrials, info tech and materials – outpaced the corresponding benchmark by 250 to 370 basis points.

Yet the strong start to the year has many investors wondering if they should still rotate, but not retreat, in the fast-approaching “Sell in May” period. History reminds us that “the Rules rule” and that investors may still be well served by rotating defensively after such a jack-rabbit beginning.

A 50% exposure to the S&P Equal Weight 500 consumer staples and health care sectors in the May through October period following the top 10 four-month beginnings since 1990 saw the defensive sectors outpace the broader index by a 2:1 margin and beat the benchmark 70% of the time.

Market Insights 4/26/2019

After a choppy day, U.S. equities finished modestly higher to close out the trading week, as investors got another heavy dose of earnings results, and scrutinized a much stronger-than-expected read on Q1 GDP.

Treasury yields were lower despite the data, and the U.S. dollar fell modestly, paring a recent run. Crude oil prices were sharply lower following a rally as of late and gold was higher.

The Markets…

The Dow Jones Industrial Average rose 81 points (0.3%) to 26,543

The S&P 500 Index was up 14 points (0.5%) to 2,940

The Nasdaq Composite increased 28 points (0.3%) to 8,146

In moderate volume, 763 million shares were traded on the NYSE and 1.9 billion shares changed hands on the Nasdaq

WTI crude oil fell $1.91 to $63.30 per barrel and wholesale gasoline was down $0.03 at $2.05 per gallon

The Bloomberg gold spot price increased $8.51 to $1,285.68 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was down 0.2% at 98.01

Markets were mixed for the week, as the DJIA fell 0.1%, the S&P 500 Index rose 1.2%, and the Nasdaq Composite advanced 1.9%

First look at Q1 GDP surprises, consumer sentiment revised higher than expected

The first look (of three) at Q1 Gross Domestic Product, the broadest measure of economic output, showed a quarter-over-quarter annualized rate of expansion of 3.2%, after the unrevised 2.2% expansion in Q4, and well above the 2.3% growth forecasted by Bloomberg. Personal consumption gained 1.2%, topping forecasts of a 1.0% rise, and following the unadjusted 2.5% increase recorded in Q4. The bulk of the stronger-than-expected growth came amid a boost in nonfarm inventories, rising exports and a drop in imports—which are a subtraction in the calculation of GDP.

On inflation, the GDP Price Index came in at a 0.9% rise, below expectations of a 1.2% gain and the unrevised 1.7% increase seen in Q4, while the core PCE Index, which excludes food and energy, moved 1.3% higher, south of expectations of a 1.4% increase, and following the unadjusted 1.8% advance in Q4.

Treasuries were higher despite the data, as the yield on the 2-year note fell 4 basis points (bps) to 2.28%, while the yields on the 10-year note and the 30-year bond decreased 3 bps to 2.50% and 2.92%, respectively.

The market reactions to the GDP report may have looked a bit counter-intuitive, with stocks subdued, bond yields seeing noticeable pressure and the U.S. dollar failing to extend its recent rally. However, personal consumption slowed significantly from Q4, residential spending declined for a fifth-straight quarter, business investment decelerated and the inflation data was more subdued than expected. Also, one of the main contributors to the growth was the build-up in inventories, which could turn into drag if personal consumption, business investment and residential spending are not strong enough to chew through the increased stockpiles.

The final April University of Michigan Consumer Sentiment Index was adjusted higher to 97.2, from the preliminary figure of 96.9 and expectations of 97.0. The index was below March’s 98.4 level. The 1-year inflation forecast remained at March’s 2.5% rate, and the 5-10 year inflation outlook fell to 2.3% from 2.5%.

Europe mostly higher following U.S. economic output surprise, Asia mixed

Europe preceded the US markets with session mostly higher across the pond and the euro and British pound were higher versus the U.S. dollar, amid some choppy trading following a recent run for the greenback and the upbeat U.S. GDP report. Bond yields in the region were mostly lower. In light economic news, French consumer sentiment came in slightly below estimates for April.

Stocks in Asia finished mixed, following the diverging action in the U.S. yesterday as the heated up earnings season remained in focus. Japanese equities declined, with the yen modestly trimming yesterday’s solid gain, while the nation heads toward a week-long holiday break.

The Japanese economic calendar was in focus, with the nation posting stronger-than-expected inflation and retail sales data, though its industrial production for March unexpectedly declined. Chinese stocks finished mixed, with stocks traded on the mainland rising and shares in Hong Kong declining, as concerns over the potential for the government to scale-back its stimulus campaign in the wake of recent upbeat economic data being countered by lingering U.S-China trade optimism.

Stocks mostly higher amid a flurry of data

U.S. stocks finished mixed this week—with the S&P 500 and Nasdaq returning to record highs—as Q1 earnings season hit a high gear, with bottom-line results continuing to hurdle a ratcheted-down expectation bar. Nearly 78% of the 230 S&P 500 companies reporting thus far have bested earnings estimates, compared to the roughly 53% that have topped revenue forecasts, per data compiled by Bloomberg. Dow member Microsoft Corporation’s upbeat results helped lift the tech sector—despite Intel’s cut forecast—and the tech-giant’s market capitalization briefly north of the $1 trillion mark. Communications services were one of the best performers, courtesy of results from Facebook Inc. and Twitter Inc. while the healthcare sector led the way, rebounding from last week’s drop on concerns about the potential impact of the recent push for “Medicare for all.”

However, materials, industrials and energy issues saw some pressure, and the Dow lagged behind, courtesy of 3M Company’s severely-disappointing earnings report, along with Caterpillar Inc’s comments about declining market share and “aggressive pricing” from competitors in China, and culminating with Friday’s earnings miss from Exxon Mobil. As such, the energy sector was the worst performer, exacerbated by a wild ride in crude oil prices which hit a six-month high as the U.S. ended sanction waivers for importers of Iranian oil, only to fall as the week matured as President Donald Trump said he called OPEC and told them to lower prices.

The economic front continued to paint an upbeat expansion picture, with the Q1 GDP report being preceded by a stronger-than-expected rebound in durable goods orders and an unexpected jump in new home sales. However, Treasury yields moved lower and the U.S. Dollar Index came off highs not seen since mid-2017 with inflation data remaining subdued to keep expectations of a return of Fed tightening in check and potentially furthering discussions regarding if the next move could be a cut.

This sets the stage for next week’s monetary policy meeting by the Federal Open Market Committee (FOMC), where an expected unchanged decision will be followed by Chairman Jerome Powell’s press conference that is highly-likely to be scrutinized. However, the spotlight on the Fed will likely be shared as earnings season will hit its pinnacle and the economic docket will be robust. Personal income and spending will get the ball rolling, followed by Consumer Confidence, preliminary Q1 non-farm productivity and unit labor costs, the ISM’s Manufacturing and non-Manufacturing Indexes, and monthly auto sales. Friday’s release of the April non-farm payroll report is likely to garner the heaviest attention, as it produces key data on both sides of the Fed’s dual—maximum employment and price stability—with job growth projected in the 180,000 range and wage growth expected to continue to grind higher.

U.S. stocks have now recovered their late-2018 losses in a sharp V-shaped move. We’re concerned that the pendulum has swung too far, too fast and we could be vulnerable for a near-term pullback. Economic data has been healthy enough to reduce the fears of a near-term recession, but the disconnect between weak economic surprises and the recently-strong stock market may not be sustainable.

Market Insights 4/25/2019

U.S. equities were mixed amid a busy day on the earnings front, with a sizable miss by 3M pressuring the Dow.

Treasury yields were mostly higher, and the U.S. dollar was nearly unchanged. Crude oil prices were lower, paring a recent rally, and gold prices were modestly higher.

The Markets…

The Dow Jones Industrial Average fell 135 points (0.5%) to 26,462

The S&P 500 Index inched 1 point (0.1%) lower to 2,926

The Nasdaq Composite gained 17 points (0.2%) to 8,119

In moderate volume, 793 million shares were traded on the NYSE and 2.0 billion shares changed hands on the Nasdaq

WTI crude oil lost $0.41 to $65.89 per barrel and wholesale gasoline was $0.01 lower at $2.07 per gallon

The Bloomberg gold spot price gained $1.80 to $1,277.56 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was unchanged at 98.19

Durable goods orders rebound more than expected, jobless claims jump

March preliminary durable goods orders jumped 2.7% month-over-month, compared to the Bloomberg estimate of a 0.8% gain and February’s upwardly-revised 1.1% drop. Ex-transportation, orders rose 0.4% m/m, above forecasts of a 0.2% rise and compared to February’s downwardly-revised 0.2% dip. Orders for non-defense capital goods excluding aircraft, considered a proxy for business spending, grew 1.3%, compared to projections of a 0.2% gain, and the prior month’s figure was revised higher to a 0.1% rise from the initially reported 0.1% dip.

Weekly initial jobless claims climbed by 37,000 to 230,000, versus forecasts of a rise to 200,000, with the prior week’s figure being upwardly-revised by 1,000 to 193,000. The four-week moving average rose 4,500 to 206,000, while continuing claims increased by 1,000 to 1,655,000, south of estimates of 1,682,000. Despite the sizeable jump, unemployment claims remain historically low and some economists are noting that the report can be volatile surrounding the Easter holiday.

Treasuries were mostly lower, as the yield on the 2-year note was up 2 basis points at 2.33%, while the yield on the 10-year note ticked 1 bp higher to 2.53%, and the 30-year bond rate was unchanged at 2.94%.

The week’s economic calendar will culminate tomorrow with the release of the first look (of three) at Q1 Gross Domestic Product (GDP), with economists predicting an annualized quarter-over-quarter rate of growth of 2.1%, while personal consumption is expected to have risen 1.3% q/q. Regarding inflation, the GDP Deflator Is estimated to have gained 1.4% q/q and the core PCE is forecasted to have moved 1.6% higher q/q. Later in the morning, the final April University of Michigan Consumer Sentiment Index will be released, expected to inch lower to a level of 96.7.

Europe mixed on flood of earnings, Asia diverged amid BoJ and China stimulus uneasiness

European equities were mixed, with the flood of global earnings results being digested, with focus on the financial sector, while the euro dipped versus the U.S. dollar, which has paused from a recent rally. Bond yields in the region were mostly higher and the British pound ticked higher compared to the greenback.

Stocks in Asia finished mixed, with earnings season heating up and mostly upbeat, while South Korea posted disappointing economic data, the Bank of Japan (BoJ) kept its monetary policy unchanged, uneasiness festered regarding Chinese stimulus measures and Australian markets were closed for a holiday.

Japanese equities finished higher, even as the yen recovered from yesterday’s slide, with earnings optimism aiding sentiment, while the BoJ tweaked its forward guidance, noting expectations for rates to remain at extremely low levels through around Spring 2020. The move comes ahead of Japan’s week-long holiday break, known as Golden Week, which will begin next week. Mainland Chinese equities and those traded in Hong Kong fell, with the recent dose of upbeat economic data continuing to dampen expectations for further stimulus measures, countering lingering optimism of a U.S.-China trade deal.

Market Insights 4/24/2019

After both the S&P 500 and Nasdaq scored all-time highs yesterday, the U.S. equity markets cooled a bit today and finished with modest losses in choppy trading amid another stream of earnings and a light economic calendar.

Treasury yields were lower and the U.S. dollar added to its run, while gold was higher and crude oil prices pared recent gains.

The Markets…

The Dow Jones Industrial Average fell 59 points (0.2%) to 26,597

The S&P 500 Index was down 6 points (0.2%) to 2,927

The Nasdaq Composite declined 19 points (0.2%) to 8,102

In moderate volume, 805 million shares were traded on the NYSE and 2.0 billion shares changed hands on the Nasdaq

WTI crude oil lost $0.41 to $65.89 per barrel and wholesale gasoline was $0.01 lower at $2.07 per gallon

The Bloomberg gold spot price gained $3.73 to $1,276.15 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.5% higher at 98.14

Mortgage applications decline for third-straight week

The MBA Mortgage Application Index dropped 7.3% last week, following the prior week’s 3.5% decline. The third-straight weekly decrease came as an 11.0% drop in the Refinance Index was met with a 4.1% fall for the Purchase Index. The average 30-year mortgage rate rose 2 basis points to 4.46%.

Treasuries rose, as the yields on the 2-year and the 10-year notes decreased 5 bps to 2.31% and 2.52%, respectively, and the 30-year bond rate was 4 bps lower at 2.94%.

Tomorrow’s economic calendar will be a bit busier, beginning with weekly initial jobless claims, forecasted to rise 8,000 to 200,000, followed by March preliminary durable goods orders, with economists projecting a 0.8% m/m rise following the 1.6% drop seen in February, while ex-transportation, orders are expected to gain 0.2% m/m, and orders for non-defense capital goods excluding aircraft, considered a proxy for business spending, is anticipated to also edge higher by 0.2% m/m.

Europe mixed amid diverging German earnings and economic data

European equities finished mixed, as the markets shrugged off the return to record highs in the U.S. yesterday, and automakers saw pressure. A read on German business sentiment unexpectedly deteriorated for April, and French manufacturing missed projections for this month, which may be adding to the dampened mood and the euro ended lower versus the U.S. dollar.

The British pound was nearly unchanged versus the greenback and bond yields in the region were lower.

Asia mixed following U.S. record highs, Australian stocks rally to highs not seen in a decade

Stocks in Asia finished mixed, with the markets digesting a return to record highs in the U.S. on stronger-than-expected economic and earnings data, while some markets grappled with the recent rally in crude oil prices and awaited tomorrow’s monetary policy decision from the Bank of Japan (BoJ).

Stocks in Japan slipped ahead of the BoJ’s decision and on some likely posturing ahead of the long Golden Week holiday break that will begin next week. Mainland Chinese equities overcame early weakness and ticked higher and those traded in Hong Kong decreased, with the markets dealing with the impact of the end of Iranian oil import sanction waivers and lingering trade uncertainty.

Random Thoughts

The S&P 500 closed at a new all-time high on April 23, confirming this bull’s 10th birthday, the longest on record, that was celebrated on 3/9/19.

As a result, this 12th bull market since WWII is now being referred to as a “Lake Wobegon Bull,” since it is above average in terms of magnitude, duration, valuation and accompanying GDP growth. Specifically, this bull has risen 334% from its 3/9/09 low, versus the median advance of 94% for all bull markets since WWII.

In addition, it has been in existence for 122 months versus a median 55 months, while Real GDP rose a cumulative 24%, versus the 21% median. Unfortunately, the current P/E on trailing 12-month GAAP EPS is third highest at 22.1X, versus the median 18.2X.

Finally, the S&P 500’s market-cap-to-GDP of 113% dwarfs the median 52% since 1966. History says that even though a digestion of recent gains is likely, relatively low interest rates and inflation, combined with improving EPS growth projections, point to additional new highs in the period ahead.

Market Insights 4/23/2019

U.S. equities finished solidly higher, with the S&P 500 and Nasdaq marking new record closing highs.

Treasury yields were lower, and gold lost ground, while the U.S. dollar was higher.

Crude oil prices added to yesterday’s rally to hit a six-month high, continuing to get a boost from the U.S. decision to end sanction waivers for Iranian oil importers.

The Markets…

The Dow Jones Industrial Average rose 145 points (0.6%) to 26,656

The S&P 500 Index was up 26 points (0.9%) to 2,934

The Nasdaq Composite jumped 106 points (1.3%) to 8,121

In moderate volume, 823 million shares were traded on the NYSE and 2.0 billion shares changed hands on the Nasdaq

WTI crude oil gained $0.75 to $66.30 per barrel and wholesale gasoline was up unchanged at $2.08 per gallon

The Bloomberg gold spot price fell $2.72 to $1,272.27 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.4% higher at 97.63

New home sales post third-straight monthly rise

New home sales rose 4.5% month-over-month in March to an annual rate of 692,000 units—the highest since November 2017—versus the Bloomberg forecast calling for 649,000 units and the downwardly-revised 662,000 unit pace in February. The median home price was down 9.7% y/y to $302,700, a two-year low. New home inventory declined to 6.0 months of supply at the current sales pace from 6.3 in February. Sales rose in the Midwest, South and the West m/m but fell in the Northeast.

Treasuries rose, as the yield on the 2-year note fell 5 basis points to 2.35%, the yield on the 10-year note declined 2 bps to 2.57%, and the 30-year bond rate dipped 1 bp to 2.98%.

Tomorrow’s domestic economic calendar will be very light, offering only MBA Mortgage Applications.

Europe and Asia mixed in a return to action for most markets

European equities finished mixed, with the markets returning to action following the extended Easter holiday break, as energy issues gained noticeable ground amid the continued run in crude oil prices, which has been amplified by the U.S. decision to end sanction waivers for Iranian oil importers. Also, the markets looked to a plethora of earnings reports across the pond, which appeared mostly better than expected. However, financials saw some pressure amid some possible caution ahead of some key reports out of the banking sector in the region this week.

The euro and the British pound were lower, as the U.S. dollar rose solidly following the upbeat earnings and economic data. Bond yields in the region advanced. In light economic news, Eurozone consumer confidence unexpectedly deteriorated for April.

Stocks in Asia finished mixed with the markets eyeing the ramping-up earnings season, along with the jump in crude oil prices that was amplified by the decision in the U.S. yesterday to end sanction waivers to countries that import oil from Iran.

Stocks in Japan overcame early losses and finished higher, with the yen trimming a decisive gain late in the day, while the energy sector moved higher. Mainland Chinese equities decreasing, extending yesterday’s drop, bogged down by reports suggesting Beijing could refocus on structural reforms over stimulus efforts in the wake of the recent dose of upbeat economic data, while those traded in Hong Kong were little changed after returning from the long Easter holiday break.

Markets in Australia also got back into action following the holiday by posting solid increases, while Indian securities declined and South Korean listings nudged higher.

Market Insights 4/22/2019

U.S. equities finished mixed in lukewarm trading in their return to action following the long Easter holiday weekend, with volume across the globe very light as Europe and several other markets remained closed.

Treasury yields were higher, while gold and the U.S. dollar were lower. Crude oil prices rallied after the U.S. announced that it will end sanction waivers for countries that import oil from Iran.

The Markets…

The Dow Jones Industrial Average fell 48 points (0.2%) to 26,511

The S&P 500 Index was up 3 points (0.1%) to 2,908

The Nasdaq Composite increased 17 points (0.2%) to 8,015

In light volume, 730 million shares were traded on the NYSE and 1.7 billion shares changed hands on the Nasdaq

WTI crude oil jumped $1.48 to $65.55 per barrel and wholesale gasoline was up $0.06 at $2.13 per gallon

The Bloomberg gold spot price inched $0.37 lower to $1,275.15 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.2% lower at 97.29

Existing home sales decline

Existing-home sales in March were down 4.9% month-over-month to an annual rate of 5.2 million units, compared to the Bloomberg expectation of a decline to 5.3 million units from February’s downwardly-revised 5.5 million rate. Sales of single-family homes were down m/m and below year-ago levels, along with purchases of condominiums and co-ops. The median existing-home price was up 3.8% y/y to $259,400.

The data follows Friday’s housing starts and building permits report that was released on Friday when the markets were closed for the Good Friday holiday, which showed starts dipped 0.3% m/m in March to an annual rate of 1,139,000 units and permits decreased 1.7% to a 1,269,000 rate. Both figures missed expectations calling for increases.

Treasuries were mostly lower, as the yield on the 2-year note ticked 1 basis point higher to 2.39%, while the yields on the 10-year and the 30-year bond rate rose 3 bps to 2.59% and 2.98%, respectively.

The markets will get back to normal this week, though a fully-loaded earnings calendar awaits and the economic calendar is poised to deliver some key pieces of data. More housing data will come tomorrow in the form of new home sales, forecasted to decline 2.5% m/m during March to an annual rate of 650,000 units, and the Richmond Fed Manufacturing Index will also be released.

Global markets mixed as many remain closed

The global markets finished mixed following the Good Friday holidays that saw most markets closed, while Europe remained closed, along with Australia and Hong Kong. Caution appears to be setting in ahead of the ramp-up of earnings season as well as this week’s monetary policy decision in Japan, which will come ahead of next week’s Golden Week holiday break. Stocks in Japan ticked higher, with the yen choppy, while those traded in South Korea finished little changed.

Mainland Chinese equities fell sharply, with the Financial Times reporting that Beijing may step-up efforts to clamp down on the shadow banking sector, while markets in India were also markedly lower, as stocks appeared to be hamstrung by the solid gain in crude oil prices—the nation’s largest import, per Bloomberg—which was amplified by reports that the U.S. will end sanction waivers to countries that currently import oil from Iran.

A Four-Month, Post-Correction Recovery Is Typical

The S&P 500 is now less than 1% below its September 20, 2018 all-time high of 2930.75, after falling into a deep correction of 19.8% on a closing basis from September 20, 2018 through December 24, 2018.

As a result, many believe the market has moved too far, too fast since jumping more than 23% in only four months. Yet history disagrees and reminds us that the 22 prior bull-market corrections since WWII took an average of only four months to go from the trough back to breakeven. (We define a correction as a decline of more than 10% that turns around before becoming a new bear market).

Therefore, should the S&P 500 set a new record high before the end of April, this recovery time would be in agreement with history. What’s more, history tells us not to be surprised that the consumer discretionary, energy, industrial and tech sectors have done so well following the 12/24 low, since the groups that lost the most during market declines tend to be among the best performers during the subsequent recovery.

Finally, history encourages investors to stay the course after the market has gotten back to breakeven, since the S&P 500 has risen about 10% on average beyond breakeven before slipping into a new decline of 5% or more.