Despite all the hoo-ha about tariffs, trade wars, and John Bolton’s appointment as national security advisor, the government will continue to pump out important economic data. This week the big day is Thursday (since Friday is a market holiday). That day sees the release of the Federal Reserve’s preferred inflation measure, the Personal Consumption Expenditure index (PCE).
When I last rebalanced my Perfect 5 Active Passive ETF Portfolio on January 16, I said that I’d rebalance it again on July 1–unless events intervened to force an unscheduled rebalancing. Well, events have indeed intervened. The S&P 500 index closed within a handful of points of the February 8 low today, March 23. If the index and the U.S. stock markets were only going to drop another few points and then hold (or even bounce on that low), I wouldn’t feel the need to rebalance. But there’s a good chance the market will fail its test of the February 8 low.
Twice today investors and traders sold an intraday rally.  Think we might have a pattern here? After hitting a 0.38% gain at 11 a.m. New York time, the Standard  & Poor’s 500 went into a steady decline.  Then, after having rallied by 2 p.m. to just below that 11 a.m. gain, the stocks in the index sold off again.
U.S. stocks started the day in the green with the Standard & Poor’s 500 stock index up 0.44% was of 9:33 a.m. New York time. The index was still in the green as of 11 a.m. (up 0.38%) but then came the retreat. As of 11:30 a.m. the S&P 500 was off 0.37%. The Dow Jones Industrial Average was lower by 0.25% and the NASDAQ Composite had declined 0.64%. The drop in the indexes came even as oil and energy stocks rallied
In a post earlier today I argued that the plunge in U.S. stocks on March 22 was due to investor’s and trader’s suffering from an exhaustion of sentiment. They simply couldn’t see enough reason to the upside to stay in the market against a tide of pessimistic sentiment. I should have called it an exhaustion of good news. But “exhaustion” is also a pattern familiar to technical analysts who look for these periods when all the buyers or sellers are committed to the current trend so that there are no new buyers or sellers to drive the market higher or lower.
You might have missed it in the hoopla over President Donald Trump’s signing an order to apply higher tariffs to $50 billion in Chinese goods and the “associated” 724 point drop in the Dow Jones Industrial Average. But the House of Representatives passed a $1.3 tillion spending bill that keeps the government funded past tomorrow’s deadline and through the end of the fiscal year in September.
This isn’t going to sound very technical or sophisticated but to me the day feels like one where lots of traders and investors decided that they just couldn’t see any near term upside and in the absence of that upside they decided to sell. This pessimism strikes me as a delayed reaction to yesterday’s Fed meeting and a new dot plot that showed increased sentiment at the Federal Reserve for at least two more and possibly three more interest rate increases in 2018–and more rate increases to come in 2019 and 2020. In this context the President’s China tariff proposal isn’t the killer but rather just one more negative element.
The only thing that is (relatively) certain is that President Trump will announce $50 billion in tariff and other trade restrictions aimed at China. That announcement is scheduled for 12:30 p.m. today in Washington. There’s plenty of speculation today about the nature and extent of China’s response.
Today, the Federal Reserve raised its benchmark short term interest rate another 25 basis points to a range of 1.5% to 1.75%.  And forecast a steeper path of hikes in 2019 and 2020. Fed policy member remained divided over the outlook for 2018 with seven Fed officials projecting at least four interest rate increases in 2018 and eight expecting three or fewer.
The U.S. Energy Information Administration reported this morning that U.S. crude oil inventories fell 2.62 million barrels for the week ended March 16. Last week inventories rose by 5 million barrels. As of 11:20 a.m. New York time U.S. benchmark West Texas Intermediate was up 2.01% to $64.82 a barrel.
