Next week we get just enough economic news to keep the state of the economy bubbling on the back burners of trader and investor attention, while first quarter earnings season picks up momentum. It’s not a lengthy list of economic reports scheduled for this week, but they are important ones. On Monday, for example, we get retail sales for March with economists expecting a big bounce back from a disappointing February
In my daily trawling through the market I come upon lots of tidbits of knowledge that I think are important to investors but that don’t justify a full post. I’ve decided to start compiling these notes here each day in a kind of running mini blog that I’m calling Notes You Need. This item from today is a representative example of an entry: “This morning the Trump administration issued an executive order setting up a task force to examine the operations and finances of the U.S. Postal Service. Section 3 says “The Task Force shall conduct a thorough evaluation of the operations and finances of the USPS, including:  (i)   the expansion and pricing of the package delivery market and the USPS’s role in competitive markets.” Think that could mean Amazon’s (AMZN) contract for package delivery?”
It’s a recent development, but it looks like more foreign buyers are sitting out recent Treasury auctions. At Tuesday’s $30 billion auction of three-year notes, foreign buyers accounted for the smallest share of the offering since September.
By and large the big banks reporting first quarter earnings today modestly beat Wall Street earnings expectations. And after some initial moves higher, all the stocks have sold off strongly as of noon New York time.
But it’s a Friday–which in these high volatility times usually means selling before the weekend. And the beats are modest so it’s possible that some investors are actually disappointed. All in all, not the tell for how traders and investors will react during the rest of earnings season that I was hoping for yesterday.
Financial stocks led the Standard & Poor’s 500 higher on Thursday as the Financial Sector Sector SPDR ETF (XLF) gained 1.75% to beat the 0.83% rise in the S&P 500. Sure felt to me like the sector was anticipating the earnings reports from the big banks due on Friday morning before the market open. Earnings from the financial sector open first quarter earnings season.
On Saturday in my Saturday Night Quarterback look ahead at the week on JubakAM.com I wrote that the week before the start of earnings reporting season–in other words, this week that we’re now in–was likely to see the market bounce from one idea to the next with one day’s worries sinking the market and the next day’s leading to gains. That’s exactly what we saw yesterday
In response to reader requests from here on out I’m going to calculate an approximate cash position (I won’t do all the nitty gritty to include things like the latest dividend payouts but the number should be reasonably close) after each buy and sell. The latest action in the portfolio was the April 3, 2018 sell of Freeport McMoRan Copper & Gold. After that sale the cash position in the portfolio is 31.6%. That’s up from 27.2% at the end of December 2017.
Global financial markets rallied today on a speech by China’s President Xi Jinping at a regional economic meeting that seemed to pull China and the United States back from the cliff and a potential global trade war. Xi promised to open up China’s economy, to raise the limits on foreign ownership in the aircraft, shipbuilding and auto industries and to reduce tariffs on auto imports and on some other products.
The market didn’t reverse or fade today. The Standard & Poor’s 500 stock index hit 2656 by 10:30 and then, despite a dip that took 20 points off the index around 12:30 managed to close at 2656 for the day. That was a gain of 1.67% for the day and near the top that Monday’s market hit before its end of the day reversal. The Dow Jones Industrial Average finished up 1.79%; the NASDAQ Composite was higher by 2.07%.
Earlier this evening I wrote about the unusual inversion in the VIX Fear Index which had futures for the CBOE S&P 500 Volatility Index (VIX) priced to show more risk in the near future than in the far future. Normally the price curve runs in the other direction since the near future is usually more predictable than the far future. Near future and far future are relative terms in the financial markets. In this case we aren’t talking about the difference between short-term 3 month Treasury bills and 10-year Treasury notes. The VIX curve stretches out from future contracts that expire in a couple of weeks to contracts that run for 40 days or more. But a market indicator that does focus on a longer time horizon is also indicating trouble ahead for 2019 or more likely 2020.
On the surface, nothing much happened in U.S. stocks today. The Standard & Poor’s 500 stock index closed up 0.33% for the day. Ho hum. But intraday the S&P 500 showed an entirely different story.
