Monthly Archives: May 2019

Market Insights 5/30/2019

After a brief dip in afternoon trading, U.S. equities were able to finish higher following two days of solid declines.

Treasury yields added to a recent drop and the U.S. dollar was little changed even with a better-than-expected revision to Q1 GDP growth coming up against another soft read on housing.

Crude oil prices tumbled and gold was higher.

The Markets…

The Dow Jones Industrial Average rose 43 points (0.2%) to 25,170

The S&P 500 Index added 6 points (0.2%) to 2,789

The Nasdaq Composite increased 20 points (0.3%) to 7,568

In light-to-moderate volume, 700 million shares were traded on the NYSE and 1.8 billion shares changed hands on the Nasdaq

WTI crude oil decreased $2.22 to $56.59 per barrel and wholesale gasoline was down $0.07 at $1.85 per gallon

The Bloomberg gold spot price rose $8.22 to $1,288.00 per ounce

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

Q1 GDP growth revised lower by smaller rate than expected, jobless claims tick higher

The second look (of three) at Q1 Gross Domestic Product, the broadest measure of economic output, showed a quarter-over-quarter annualized rate of growth of 3.1%, from the first release’s 3.2% gain and versus the Bloomberg forecast of an adjustment to a 3.0% expansion. Q4 GDP grew by an unrevised 2.2% rate. Personal consumption was revised to a 1.3% increase, from the first estimate of a 1.2% gain, where it was expected to remain, and compared to the unrevised 2.5% rise seen in Q4.

On inflation, the GDP Price Index was revised to a 0.8% increase, from the initially-reported 0.9% gain, and compared to estimates to be unrevised, while the core PCE Index, which excludes food and energy, was adjusted to a 1.0% rise, from the previous estimate of a 1.3% increase, and compared to forecasts to be unadjusted.

Weekly initial jobless claims rose by 3,000 to 215,000, compared estimates of a rise to 214,000, with the prior week’s figure being revised higher by 1,000 to 212,000. The four-week moving average declined by 3,750 to 216,750, while continuing claims fell by 26,000 to 1,657,000, south of estimates of 1,662,000.

Treasuries were slightly higher, as the yield on the 2-year note was unchanged at 2.08%, while the yield on the 10-year note ticked 1 basis point lower to 2.22% and the 30-year bond rate lost 3 bps 2.65%.

The week’s economic calendar will culminate tomorrow with personal income and spending, with income expected to have risen 0.2% m/m for April and spending to have ticked 0.1% higher m/m, as well as the final May University of Michigan Consumer Sentiment Index, forecasted to be revised to 101.5, down from the 102.4 in the preliminary report, but above the 97.2 posted in April. The Chicago Purchasing Managers Index is also expected, with economists projecting a reading of 53.7 for May, up from the 52.6 posted in April.

Europe mostly higher, Asia mixed amid trade concerns and ahead of data

European equities finished mostly higher, rebounding from yesterday’s broad-based drop that came amid heightened U.S.-China trade war concerns and recent global economic growth worries and ensuing drop in bond yields. Trade worries continued to be in focus and the markets grappled with increased political uncertainty in the region following the weekend’s European parliamentary elections. The euro and the British pound were lower versus the U.S. dollar, while bond yields in the region were mostly higher.

Stocks in Asia finished mixed, with the global markets remaining skittish amid the escalated U.S.-China trade tensions and diverging economic data that have fostered a drop in bond yields and the recent inversion of the yield curve in the U.S, which has caused growth concerns to flare up.

Japanese equities declined, with losses likely being limited by the yen giving back some of a recent gain.

Mainland Chinese securities and those traded in Hong Kong decreased amid some likely cautious trading ahead of the nation’s manufacturing and services sector reads tonight. Australian listings fell amid the global uneasiness and as the country’s building approvals unexpectedly dropped in April following March’s solid decline.

Stocks in South Korea gained ground, with some strength in the technology sector, and markets in India also advanced amid some lingering optimism from the recent decisive victory for Prime Minister Narendra Modi, and ahead of tomorrow’s GDP report.

Market Insights 5/29/2019

The U.S. equity markets posted a second-straight day of solid losses, with global sentiment remaining under pressure courtesy of omnipresent worries over trade, global economic growth and angst surrounding the continued descent in Treasury yields.

crude oil prices bounced off their lows of the day to finish with only modest losses, while the U.S. dollar inched higher and gold gained ground.

The Markets…

The Dow Jones Industrial Average tumbled 221 points (0.9%) to 25,126

The S&P 500 Index lost 19 points (0.7%) to 2,783

The Nasdaq Composite declined 60 points (0.8%) to 7,547

In moderate volume, 823 million shares were traded on the NYSE and 2.2 billion shares changed hands on the Nasdaq

WTI crude oil decreased $0.33 to $58.81 per barrel and wholesale gasoline was down $0.02 at $1.92 per gallon

The Bloomberg gold spot price rose $1.05 to $1,280.38 per ounce

The Dollar Index— a comparison of the U.S. dollar to six major world currencies—was 0.2% higher at 98.18

Mortgage applications decline

The MBA Mortgage Application Index declined 3.3% last week, following the prior week’s 2.4% gain. The decrease came as a 6.0% drop in the Refinance Index was met with a 1.4% decline for the Purchase Index. The average 30-year mortgage rate remained at 4.33%.

Treasuries rose, as the yield on the 2-year note was down 3 basis points to 2.10%, while the yields on 10-year note and the 30-year bond dipped 1 bp to 2.26% and 2.69%, respectively.

Tomorrow’s economic calendar will be the busiest day of the week, beginning with the second read (of three) on Q1 Gross Domestic Product (GDP), the broadest measure of economic activity, forecasted to be revised lower to a quarter-over-quarter annualized rate of growth of 3.0% from the 3.2% rate of expansion posted in the first release.

Europe and Asia lower on trade tensions, growth concerns and political uncertainty

European equities were broadly lower, as the intensifying trade tensions between the U.S. and China continued to dampen conviction, while global growth concerns remain higher amid the rally in the bond markets and recent mixed economic data. Adding to the uneasy mood, Italian budget worries increased in the wake of the weekend European parliamentary elections, which appeared to also exacerbate U.K. Brexit fears.

The euro and British pound dipped versus the U.S. dollar, and bond yields in the region lost ground. Economic news in the region was mixed, with German unemployment unexpectedly rising for May, while French consumer spending came in stronger than expected for last month and Italian consumer and economic sentiment surprisingly improve for May.

Stocks in Asia finished mostly lower, with the U.S. markets reversing to the downside yesterday, amid heightened global economic growth concerns as bond yields fall and the U.S.-China trade tensions remain escalated, with China threatening to leverage its strong rare earths position in the trade war.

The yen found support amid the uneasiness and Japanese equities fell, while securities in South Korea and Australia moved to the downside. Stocks in India and Hong Kong declined, though mainland Chinese equities nudged higher, with the People’s Bank of China injecting the most liquidity into the financial system since January

Market Insights 5/28/2019

Early gains for U.S. equities vanished in late trading, as an upbeat read on Consumer Confidence fell victim to the steadfast worries surrounding U.S.-China trade tensions.

Treasury yields were lower and the U.S. dollar gained modest ground, while crude oil prices were higher and gold dropped.

The Markets…

The Dow Jones Industrial Average (DJIA) tumbled 238 points (0.9%) to 25,348,

The S&P 500 Index lost 24 points (0.8%) to 2,802, and

The Nasdaq Composite declined 30 points (0.4%) to 7,607.

In heavy volume, 1.4 billion shares were traded on the NYSE and 2.3 billion shares changed hands on the Nasdaq

WTI crude oil increased $0.51 to $59.14 per barrel and wholesale gasoline was up $0.03 at $1.94 per gallon

The Bloomberg gold spot price shed $5.88 to $1,279.48 per ounce

The Dollar Index— a comparison of the U.S. dollar to six major world currencies—was 0.3% higher at 97.95

Consumer Confidence rises more than expected

The Consumer Confidence Index rose to 134.1 in May, from April’s unrevised 129.2 level, and above the Bloomberg estimate of 130.0. The Present Situation Index and the Expectations Index of business conditions for the next six months both improved month-over-month. On employment, the labor differential—consumers’ appraisal of jobs being “plentiful” minus being “hard to get”—increased to 36.3 from the 33.2 level posted in April.

Treasuries rose, as the yield on the 2-year note decreased 4 basis points to 2.11%, the yield on the 10-year note dropped 6 bps to 2.26%, and the 30-year bond rate declined 5 bps to 2.70%.

In the wake of the Memorial Day holiday and with earnings season behind us, this abbreviated week will likely continue to be at the mercy of trade headlines and the economic calendar.

Today’s Consumer Confidence report got the ball rolling, and will continue with the second read (of three) on Q1 GDP and April personal income and spending figures, while culminating with the final May University of Michigan Consumer Sentiment Index. However, tomorrow’s docket will be light, offering only the Richmond Fed Manufacturing Index, with economists looking for a level of 7 for May, up from the 3 posted in April, with a reading above zero indicating expansion in activity, as well as MBA Mortgage Applications.

Europe lower in the wake of EU election results, Asia higher

European equities finished lower, even as the U.S. recovers modestly from a trade-fueled string of weekly losses in a return to action following a long holiday weekend. The markets digested the weekend’s results of the European parliamentary elections, which appeared to foster a ramp-up in Italian fiscal concerns.

The euro and British pound dipped versus the U.S. dollar and bond yields in the region were mixed. In economic news, German consumer confidence unexpectedly dipped for June, while French consumer confidence improved more than expected in May and Eurozone economic confidence rose slightly for this month.

Stocks in Asia finished higher, trimming last week’s decline that came amid heightened trade tensions between the U.S. and China, while the U.S. markets are set to open after a long holiday weekend. Trade uncertainty remained on the heels of increased tariffs from the U.S. and China, while U.S. President Donald Trump concluded a visit to Japan in an attempt to reach a trade deal with the nation.

Stocks in Japan advanced, with the yen holding steady, while markets in both mainland China and Hong Kong moved to the upside. Meanwhile, shares traded in Australia, South Korea and India all saw gains.

June Usually Rebounds in Strong-Start Years

Should history serve as a guide, for it’s never gospel, don’t be surprised if the market pops in June after dropping in May.

Since WWII, following hefty YTD returns through the end of April (this was the third strongest since 1945), the market typically digested these gains in May only to advance quite convincingly in June.

Month to date through May 24, this pattern appears to be playing out, as the S&P 1500 slipped 4.2%, accompanied by declines for its large-, mid- and small-cap constituents. In addition, nine of its 11 sectors fell in price, as did 80% of its 146 sub-industries. Yet only 33% of the 1500’s sub-industries trade above their 10-week (50-day) moving average, which traditionally has been the threshold around which benchmark bounces begin to materialize.

April may have the reputation for being the cruelest month, but June has been among the most boring, at least from a market perspective. Since WWII, the S&P 500 posted an average price gain of just 0.00%. Indeed, one has to go out three decimal places to see that the market eked out an average advance on the month versus a typical increase of 0.69% for all months, ranking it 9th of 12. The S&P 500 rose in price just 53% of the time, which isn’t much better than a coin toss, versus the 60% average frequency for the market during all months of the year. To find the best one-month return for the “500” in June, which is the second-lowest for all months, one has to go back to 1955, in which it rose 8.2%.

Plus, the worst one-month return was, not surprisingly, in 2008, when the S&P 500 dropped 8.6%, tying it with two other months for the second-shallowest decline. What’s more, June recorded the second-lowest standard deviation of returns and was average in terms of the frequency of daily 1%+ volatility. June also ranks in the bottom one-third in terms of average trading volume and, adding insult to injury, saw the third fewest percentage of all-time highs.

So why could we see a pop after the drop? Thank the strong start to the year. Following the top five YTD performances through April since WWII, the S&P 500 rose in price 5 of 5 times in June, gaining an average 3.7%. Widening the look-back to the top 10 starts to a year, the market advanced in price 80% of the time in June (missing only in 1961 and 1991) posting an average 1.5% increase in price.

So there you have it. History warned us about a slump in May following such a strong start to the year. History now advises us to be on the alert for a favorable follow through in June.

Market Insights 5/24/2019

The U.S. equity markets headed into the holiday weekend with modest gains following a wild week amid heightened U.S.-China trade tensions and resurfaced global growth concerns.

Treasury yields were nearly unchanged and the U.S. dollar dipped amid a light economic calendar that showed that durable goods orders were a tick below estimates, while crude oil prices rose in choppy trading after yesterday’s sharp drop, and gold finished in the green.

The Markets…

The Dow Jones Industrial Average (DJIA) rose 95 points (0.4%) to 25,586

The S&P 500 Index gained 4 points (0.1%) to 2,826

The Nasdaq Composite added 9 points (0.1%) to 7,637

In light volume, 639 million shares were traded on the NYSE and 1.6 billion shares changed hands on the Nasdaq

WTI crude oil increased $0.72 to $58.63 per barrel and wholesale gasoline was up $0.02 at $1.91 per gallon

The Bloomberg gold spot price advanced $1.30 to $1,284.75 per ounce

The Dollar Index— a comparison of the U.S. dollar to six major world currencies—was down 0.3% at 97.59

Markets were lower for the week, as the DJIA fell 0.7%, the S&P 500 Index lost 1.1%, and the Nasdaq Composite declined 2.2%

Durable goods orders miss forecasts

April preliminary durable goods orders fell 2.1% month-over-month, compared to the Bloomberg estimate of a 2.0% decline and March’s downward-revised 1.7% gain. Ex-transportation, orders were little changed m/m, below forecasts of a 0.1% rise and compared to March’s downward-revised 0.5% decline. Orders for non-defense capital goods excluding aircraft, considered a proxy for business spending, decreased 0.9%, compared to projections of a 0.3% decline, and the prior month’s figure was revised lower to a 0.3% rise from the initially reported 1.4% increase.

The generally volatile report showed a drop in demand for transportation equipment, led by a sharp drop in orders for non-defense aircraft and parts, likely impacted by the 737 MAX issues for Dow member Boeing Company, which was met with weakness in manufacturing and communications equipment. The softness overshadowed a solid gain in orders for computers and related products, and modest increases for machinery and electrical equipment, appliances and components.

Treasuries were nearly flat, as the yield on the 2-year note increased 2 basis points (bps) to 2.17%, while the yields on the 10-year note and the 30-year bond were unchanged at 2.32% and 2.75%, respectively. The markets have been choppy as of late, led by heightened volatility in the technology sector, amid escalated trade tensions and some mixed global economic data.

Please note: All U.S. markets will be closed on Monday in observance of the Memorial Day holiday.

Europe finishes higher to trim weekly losses, Asia mixed

European equities finished higher, paring some of the losses seen this week which have come courtesy of increased U.S.-China trade uncertainty and economic growth concerns following some disappointing global manufacturing reports. The British pound was higher versus the U.S. dollar as U.K. Brexit uncertainty took another turn with Prime Minister Theresa May announcing that she will resign on June 7th. The euro also gained ground on the greenback and bond yields in the region were mixed. In economic news in the region, U.K. retail sales declined by a smaller amount than expected.

Stocks in Asia finished mixed following yesterday’s broad-based declines in the global markets as U.S.-China trade tensions remain escalated and continue to weigh on sentiment, while a host of manufacturing data out of the U.S., Eurozone and Japan caused growth concerns to flare up. Japanese equities declined, with the yen gaining ground amid the uneasiness, and those traded in South Korea also fell. Markets in Australia decreased, with the energy sector seeing pressure following yesterday’s tumble in crude oil prices on the trade and growth worries.

Stocks in mainland China finished flat and securities in Hong Kong gained modest ground, while Indian shares rallied after the nation’s election resulted in a decisive victory for Prime Minister Narendra Modi.

Weekly losses continue as trade jitters joined by resurfaced growth concerns

U.S. stocks extended a string of weekly losses and the global markets came under pressure, with U.S.-China trade tensions escalating as recently increased tariffs by both countries was joined by the fallout of U.S. restrictions on Chinese telecom giant Huawei Technologies.

The technology sector bore the brunt of the selling pressure, amplified by a sharp drop in Qualcomm Incorporated after a federal judge ruled that the chipmaker violated antitrust law. The energy sector led to the downside, falling amid a tumble in crude oil prices as oversupply concerns remained, with oil inventories unexpectedly jumping and exacerbated by resurfaced global growth fears.

The growth worries flared-up as manufacturing activity in the Eurozone shrank for a fourth-straight month, Japanese manufacturing output moved back to contraction territory and U.S. growth in the sector fell to the slowest pace since September 2009. Consumer discretionary issues also came under solid pressure, with retail earnings continuing to pour in and weighing on Kohl’s Corporation, Best Buy Co. Inc., Nordstrom Inc. and Lowe’s Companies Inc., partially offset by a rally in Target Corporation and a modest rise in Dow member Home Depot Inc. on the heels of their results. The markets were defensive, fostering gains for utilities, health care and real estate sectors, with the latter shrugging off some softer than expected existing and new home sales reports.

Treasury yields continued to fall, with the 10-year rate hitting the lowest since late 2017, and the U.S. dollar dipped.

In the wake of the Memorial Day holiday and with earnings season behind us, the abbreviated week will likely continue to be at the mercy of trade headlines and the economic calendar. The ball will get rolling with May Consumer Confidence, and roll on with the second (of three) read on Q1 GDP and April personal income and spending figures, while culminating with the final May University of Michigan Consumer Sentiment Index.

Market Insights 5/23/2019

U.S. equities were sharply lower in today’s session amid continued anxiety over a resolution to the trade conflict, some disappointing manufacturing reports domestically and abroad, as well as some increased drama in Washington.

Treasury yields were sharply lower and crude oil prices tumbled, while gold rallied and the U.S. dollar ticked lower.

The Markets…

The Dow Jones Industrial Average fell 286 points (1.1%) to 25,490

The S&P 500 Index lost 34 points (1.2%) to 2,822

The Nasdaq Composite plunged 123 points (1.6%) to 7,628

In moderate volume, 869 million shares were traded on the NYSE and 2.2 billion shares changed hands on the Nasdaq

WTI crude oil tumbled $3.51 to $57.91 per barrel and wholesale gasoline was down $0.08 at $1.91 per gallon

The Bloomberg gold spot price jumped $10.98 to $1,284.32 per ounce

The Dollar Index— a comparison of the U.S. dollar to six major world currencies—was down 0.2% at 97.87

Jobless claims surprisingly dip, business activity slows and new home sales drop

Weekly initial jobless claims declined by 1,000 to 211,000, compared to the Bloomberg estimate of a rise to 215,000, with the prior week’s figure being unrevised at 212,000. The four-week moving average fell by 4,750 to 220,250, while continuing claims rose by 12,000 to 1,676,000, north of estimates of 1,666,000.

The preliminary Markit U.S. Manufacturing PMI Index showed growth unexpectedly slowed in May, declining to 50.6 from April’s unrevised 52.6 figure, where it was expected to remain. In addition, the preliminary Markit U.S. Services PMI Index showed growth also surprisingly decelerated for the key U.S. sector this month, falling to 50.9 from April’s 53.0 figure, and versus expectations of a rise to 53.5. Readings above 50 for both indexes denote expansion.

New home sales fell 6.9% month-over-month in April to an annual rate of 673,000 units versus forecasts calling for 675,000 units and the upwardly-revised 723,000 unit pace in March, which was the highest since October 2007. The median home price was up 8.8% y/y to $342,200, after hitting a two-year low. New home inventory rose to 5.9 months of supply at the current sales pace from 5.6 in March. Sales rose solidly m/m in the Northeast, but declined in Midwest, South and West. New home sales are based on contract signings instead of closings.

Treasuries rallied, as the yields on the 2-year and 10-year notes dropped 8 basis points to 2.14% and 2.32%, respectively, and the 30-year bond rate declined 7 bps to 2.75%. The U.S. dollar gave up a solid early advance on the data and finished modestly lower.

Tomorrow’s economic calendar will offer durable goods orders, forecasted to have declined 2.0% m/m during April, while ex-transportation orders are estimated to have inched 0.2% higher m/m, and non-defense capital goods excluding aircraft are projected to have fallen 2.0% m/m.

Europe and Asia see widespread losses on data, politics and trade

European equities were broadly lower, with the global markets remaining hampered by increased pessimism regarding a solution to the U.S.-China trade war. Political uncertainty has increased as a U.K. Brexit agreement remains elusive and European parliamentary elections get underway.

Global growth uneasiness was preserved by Japan’s manufacturing output returning to contraction territory, while Eurozone manufacturing activity contracted for a fourth-straight month in May and German business confidence dropped to the lowest level in more than four years. The euro was little changed and the British pound dipped versus the U.S. dollar and bond yields in the region were mostly lower.

Stocks in Asia finished broadly lower with worries that the escalated trade tensions between the U.S. and China could be prolonged continued to drain sentiment, exacerbated by the fallout in the tech sector from U.S. restrictions on business with Chinese telecom giant Huawei Technologies.

Mainland Chinese equities and those traded in Hong Kong fell, while South Korean securities also lost ground. Global growth concerns also festered, with Japan reporting that its manufacturing output returned to contraction territory this month. Stocks in Japan declined, with the yen gaining ground despite the manufacturing data.

Random Thoughts – Earnings

The S&P 500’s Q1 2019 earnings reporting period is essentially behind us and is set to record the 29th consecutive quarter in which actual results beat end-of-quarter estimates.

On 3/31, S&P Capital IQ consensus estimates called for a 2.4% year-over-year decline in Q1 EPS growth, setting the stage for a potential EPS recession, since Q2 EPS growth was pegged at only 0.7%. Q1 EPS are now seen rising 2.0%, or 4.4 percentage points higher than initial expectations.

Revenues came in on the light side, however, rising 4.9%, as compared with the initial estimate of 5.4%. Q2 EPS growth is now projected to be the softest quarter of the year, showing a 1.0% y/y decline.

Full-year EPS are projected to rise 2.5% in 2019 but accelerate to 11.8% in 2020. The S&P 500′s P/E on next-12-month (NTM) EPS now stands at 16.9x, just 2.9% above the average 16.4x multiple since 2000. Finally, S&P 500 revenues are seen rising 4.9% in 2019 after increasing 8.6% in 2018.

Market Insights 5/22/2019

U.S. equities finished lower, as the continued uncertainty swirling around trade remains at the front of mind for investors.

Treasury yields were lower and the U.S. dollar was little changed, showing little reaction to the afternoon release of the minutes from the Fed’s most recent monetary policy meeting, while gold was only modestly lower and crude oil prices fell following a bearish oil inventory report.

The Markets…

The Dow Jones Industrial Average declined 101 points (0.4%) to 25,777

The S&P 500 Index fell 8 points (0.3%) to 2,856

The Nasdaq Composite decreased 35 points (0.5%) to 7,751

In lighter volume, 686 million shares were traded on the NYSE and 1.8 billion shares changed hands on the Nasdaq

WTI crude oil tumbled $1.71 to $61.42 per barrel and wholesale gasoline was down $0.03 at $1.99 per gallon

The Bloomberg gold spot price decreased $0.77 to $1,273.91 per ounce

The Dollar Index— a comparison of the U.S. dollar to six major world currencies—was unchanged at 98.07

Fed details opinions in meeting minutes, mortgage applications rise

At 2:00 p.m. ET, the Federal Reserve released the minutes from its monetary policy meeting that ended on May 1st with no change to its target range for the fed funds rate. The report showed that members agreed that a patient stance on interest rates could last “for some time, especially in an environment of moderate economic growth and muted inflation pressures, even if global economic and financial conditions continued to improve.” The minutes appeared to show a more upbeat tone, indicating, “A number of participants observed that some of the risks and uncertainties that had surrounded their outlooks earlier in the year had moderated, including those related to the global economic outlook, Brexit, and trade negotiations.” Officials were split on the outlook for interest rates, with a few members saying that there might be a need “to firm” its policy if the economy evolves as projected. However, others exhibited concerns about lower inflation expectations amid a tight labor market.

The MBA Mortgage Application Index rose 2.4% last week, following the prior week’s 0.6% dip. The gain came as an 8.3% rise in the Refinance Index more than offset a 2.0% drop for the Purchase Index. The average 30-year mortgage rate fell 7 basis points to 4.33%.

Treasuries rose, as the yield on the 2-year note was 1 bp lower at 2.23%, the yield on the 10-year note was down 4 bps at 2.39%, and the 30-year bond rate decreased 3 bps to 2.81%.

Europe mixed as trade uncertainty festers

European equities were mixed following yesterday’s rebound, with the escalated trade tensions between the U.S. and China continuing to curb conviction. The markets digested some mixed earnings results across the pond, while U.K. Brexit progress remained elusive, and April inflation statistics out of the U.K. came in mixed. The euro was little changed versus the U.S. dollar, but the British pound saw pressure and bond yields in the region were mostly lower.

Stocks in Asia finished mostly higher, appearing to find support from yesterday’s rebounds in the U.S. and Europe that came as a temporary reprieve in U.S. restrictions on Chinese telecom giant Huawei Technologies led a recovery in the technology sector from Monday’s tumble. However, gains were limited by some mixed Japanese economic data and mainland Chinese markets dipped as trade tensions between the U.S. and China continued to fester.

Stocks in Japan ticked higher, with the yen trimming yesterday’s drop, and as the nation’s stronger-than-expected March core machine orders—a gauge of capital investment—was countered by a larger-than-anticipated decline in April exports.

Mainland Chinese equities declined, while those traded in Hong Kong traded higher. Securities in South Korea and Australia both gained ground, while shares in India also advanced.

Market Insights 5/21/2019

After being the thorn in the side of the markets yesterday, technology stocks gave U.S. equities the boost it needed today to finish the green, after the U.S. offered a temporary reprieve of restrictions on Chinese telecom giant Huawei.

Treasury yields and the U.S. dollar were modestly higher, despite a disappointing read on existing home sales, while crude oil prices were mixed and gold was lower.

The Markets…

The Dow Jones Industrial Average increased 197 points (0.8%) to 25,877

The S&P 500 Index rose 24 points (0.9%) to 2,864

The Nasdaq Composite advanced 83 points (1.1%) to 7,786

In moderate volume, 733 million shares were traded on the NYSE and 1.9 billion shares changed hands on the Nasdaq

WTI crude oil inched $0.08 lower to $63.13 per barrel and wholesale gasoline was up $0.01 at $2.02 per gallon

The Bloomberg gold spot price decreased $3.16 to $1,274.66 per ounce

The Dollar Index— a comparison of the U.S. dollar to six major world currencies—ticked 0.1% higher to 98.05

Existing home sales unexpectedly dip

Existing-home sales in April were down 0.4% month-over-month to an annual rate of 5.19 million units, compared to the Bloomberg expectation of a rise to 5.35 million units from March’s unrevised 5.21 million rate. Sales of single-family homes were lower m/m and year-ago levels, while purchases of condominiums and co-ops rose compared to last month and were down y/y. The median existing-home price rose 3.6% y/y to $267,300.

Treasuries were lower, as the yield on the 2-year note rose 3 basis points to 2.25%, the yield on the 10-year note gained 2 bps to 2.43%, and the 30-year bond rate ticked 1 bp higher to 2.83%.

Tomorrow’s economic calendar will be light, but likely garner heightened attention, as the early morning release of MBA Mortgage Applications will be followed in afternoon action by the minutes from the Federal Open Market Committee’s (FOMC) last monetary policy meeting. There was no change to the Fed’s target for the Fed funds rate following the meeting, however, in his press conference shortly after the gathering, Fed Chief Jerome Powell indicated that the low inflation that the economy was experiencing was transitory, cooling recent speculation that any near term move by the Fed could be a rate cut.

Europe higher as tech stocks rebound, Asia mixed

European equities finished higher, with the technology sector rebounding from yesterday’s drop that pressured the global markets. The recovery in technology issues came as the U.S. granted a temporary reprieve of restrictions on Chinese telecom giant Huawei, which was at the heart of yesterday’s selloff.

The euro and British pound dipped versus the U.S. dollar amid continued Brexit uncertainty and as Eurozone consumer confidence improved in May but remained in negative territory.

Stocks in Asia finished mixed on the heels of yesterday’s tech-fueled decline in the global markets as the U.S. restrictions targeting business activity with Chinese telecom giant Huawei Technologies rippled through the sector. However, news of a temporary reprieve on restrictions against Huawei helped limit pressure and push some markets higher, with stocks traded in mainland China rising.

Japanese equities dipped, as the yen gave back some of yesterday’s gains, while those traded in Hong Kong also fell. Securities in South Korea and Australia traded higher, with the latter gaining ground after Reserve Bank of Australia Governor Lowe said he will consider a rate cut at next month’s monetary policy meeting.

Market Insights 5/17/2019

U.S. equities finished lower in a volatile session, as investors weighed the continued uncertainty surrounding U.S.-China trade tensions, as well as some earnings results and upbeat economic data.

The Leading Index improved and consumer sentiment jumped to a 15-year high.

Treasury yields were mixed after overcoming early declines and crude oil prices were lower, while the U.S. dollar saw a modest gain and gold fell.

The Markets…

The Dow Jones Industrial Average decreased 99 points (0.4%) to 25,764

The S&P 500 Index was down 17 points (0.6%) to 2,860

The Nasdaq Composite dropped 82 points (1.0%) to 7,816

In moderate volume, 867 million shares were traded on the NYSE and 2.1 billion shares changed hands on the Nasdaq

WTI crude oil inched $0.11 lower to $62.76 per barrel and wholesale gasoline was down $0.01 at $2.05 per gallon

The Bloomberg gold spot price decreased $8.58 to $1,278.14 per ounce

The Dollar Index— a comparison of the U.S. dollar to six major world currencies—was up 0.1% at 97.99

Markets were lower for the week, as the DJIA fell 0.7%, the S&P 500 Index lost 0.8%, and the Nasdaq Composite declined 1.3%

Leading Indicators rise and consumer sentiment jumps to 15-year high

The Conference Board’s Index of Leading Economic Indicators (LEI) for April rose 0.2% month-over-month, matching the Bloomberg projection and compared to March’s revised 0.3% gain. None of the ten components of the index declined, with jobless claims, stock prices, credit and consumer expectations the major positive contributors.

The May preliminary University of Michigan Consumer Sentiment Index rose to 102.4 from April’s read of 97.2, where it was expected to remain. This was the highest level since 2004 as the consumer expectations portion of the survey jumped, while the current economic conditions component ticked higher. The 1-year inflation forecast rose to 2.8% from 2.5%, and the 5-10 year inflation forecast increased to 2.6% from the previous 2.3% rate.

Treasuries finished mixed after giving up an early advance, as the yield on the 2-year note was up 1 basis point at 2.20%, while the yield on the 10-year note ticked 1 bp lower to 2.39%, and the 30-year bond rate dipped 2 bps to 2.82%.

Europe broadly lower, Asia mixed after a recovery as trade concerns remain

European equities finished broadly lower following a recovery in the past couple sessions, as U.S.-China trade concerns lingered ahead of the weekend, while Brexit uncertainty festered as talks continue to fail to deliver any new progress. The euro and the British pound came under some pressure versus the U.S. dollar, while bond yields in the region were mostly lower.

Stocks in Asia finished mixed to close out a choppy week that saw the U.S. markets post a three-day rebound to erase Monday’s selloff as economic and earnings data pleased and trade concerns cooled a bit. U.S.-China trade uncertainty festered, exacerbated by U.S. President Donald Trump signing an executive order giving the Commerce Department authority to ban telecommunications network gear and services from foreign adversaries, which weighed on the Chinese markets with those traded on the mainland and Hong Kong solidly lower.

Stocks in Japan rose, with the yen holding onto yesterday’s decline during the session. Shares in South Korea declined, but markets in Australia moved to the upside with most sectors gaining ground to overshadow a decline in the financial sector.

Stocks dip in a choppy week amid data and escalated trade tensions

U.S. stocks led a global market selloff to begin the week as the U.S.-China trade dispute escalated. Global growth concerns also flared-up, with China and the U.S. both posting softer-than-expected retail sales and industrial production reports. However, the U.S. markets rebounded with a string of gains to trim Monday’s tumble as the U.S. eased trade concerns toward Japan and Europe by delaying imposing tariffs on auto imports, while the aforementioned disappointing dose of global economic data was countered by stronger-than-expected reads on U.S. jobless claims, regional manufacturing activity, small business optimism, homebuilder sentiment and housing construction activity, which preceded Friday’s positive Leading Indicators and consumer sentiment reports.

Q1 earnings season is pretty much in the books, Dow components Walmart Inc. and Cisco Systems Inc. delivered upbeat quarterly results to solidify a better-than-feared quarter. Treasury yields extending a recent slide and the U.S. Dollar Index snapped a two-week losing streak, while crude oil prices gained ground as heightened geopolitical concerns overshadowed another larger-than-expected rise in oil inventories. As such, financials were the worst performers and real estate issues posted a solid advance.

Results from the retail sector will continue to put the finishing touches on earnings season next week, while the economic calendar will remain focused on the housing market, courtesy of the releases of existing and new home sales. The Fed will also garner attention as the Fed will release the minutes from its most recent monetary policy meeting, and Chairman Jerome Powell is scheduled to speak Monday night.