Weekly market update
Stocks suffered another down week as U.S.-China trade tensions have completely taken over the headlines, and not in a good way. We did make some progress with Mexico and Canada, but it’s the China negotiations that are pressuring stocks.
The Dow has now been down 5 straight weeks (longest since 2011) and the NASDAQ and S&P 500 have been under more pressure because it is the tech stocks that have borne the brunt of selling due to trade tensions and those companies that are impacted by the trade tensions.
The continued churning action is creating potential market tops in the leading indexes—their March lows are key—they serve as critical near-term support. If broken, then tops will be in place and expect more selling pressure on stocks.
The benchmark 10-year U.S. Treasury yield has fallen to a 19-month low of 2.27% as Wall Street is growing more confident that the trade tensions will last longer and impact GDP growth more than originally thought. And not just GDP growth here in the U.S. but also China, Japan and much of Europe are impacted.
On the earnings front, retail names reported over the last two weeks and for the most part, it was UGLY. Two standouts that reported strong quarters were Home Depot and Target. They both beat top and bottom lines and raised forward guidance. One that was particularly bad was Lowes. They cut guidance and the investors took them to the woodshed.
The latest release of the FED minutes indicated we weren’t going to see any rate increases for some time to come even if the economy improves, but most alarming to FED watchers was the fact they didn’t mention any chance of rate cuts which the futures market has been pricing in toward the end of the year.
So, in a holiday-shortened trading week, we look set to open modestly higher, but as we have said, it only takes one headline tweet to change that, and change it quickly. So, stay tuned and we’ll keep you posted.
Todd Day, MBA
Portfolio Manager
Horizon Financial Services, LLC
May 28, 2019
