Is This Movie a Rerun? Markets Appear Poised for Strength in Early Going

Day 3 of gains in early trading amid volatility and devoid of news. The first two were marked by late-day fade outs. Maybe today could be different. And maybe not.

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(Friday Market Open) The markets looked poised to start the trading day on solid footing, ending a week of on-again/off-again trading that’s been marked by late-day fadeouts. But like yesterday, there’s little news that might make for any meaningful market moves and we could end up watching the same movie for the third straight day. Stay tuned.

The S&P 500 (SPX) might be worth watching today as it tests the 2,700 level again. Yesterday, the SPX had touched an intraday high of 2,731 before ending flat. In the early going, it was slightly over 2,700.

Investors could be searching for more clues on interest rates and the Federal Reserve’s thinking about inflation and the economy when the monetary policy-making body releases prepared remarks from the new chair Jerome Powell. His testimony is expected to be released later this morning, ahead of next week’s scheduled appearance before Congress.

More insight might come from a handful of Fed officials who are slated to speak at the Fed’s annual Monetary Policy Forum in New York today. On the agenda: Boston Fed President Eric Rosengren, New York Fed President William Dudley, Cleveland Fed President Loretta Mester, and Kansas City Fed President Esther George. San Francisco Fed President John Williams also is expected to give a speech on the economic outlook at the City Club of Los Angeles this afternoon.

Investors might want to keep an eye on Amazon (AMZN) shares, which passed a key $1,500 level yesterday in intraday trading but couldn’t hold on to the gains. That had some Wall Street analysts suggesting that AMZN had peaked. Has it?

Other stocks to consider keeping an eye on might include General Mills (GIS) and Blue Buffalo Pet Products (BUFF). Shares of BUFF jumped 17% after the two announced that GIS made a buyout offer for $8 billion.

Snap (SNAP) shares took a $1.7 billion hit yesterday that some analysts blamed on Kardashian sibling Kylie Jenner’s tweet expressing dismay over the Snapchat app’s new design. Might the stock recover today?   

Intuit (INTU) shares were off by nearly 4% in the early going. INTU reported earnings that outpaced Wall Street’s expectations but a forecast that disappointed some analysts. Hewlett-Packard (HPE) shares were up by 10% in pre-market trading. The tech firm also turned in a strong quarterly report.

As noted yesterday, there’s a pattern that appears to be shaping up here: Markets start out on a rickety platform, stabilize somewhat by late morning to early afternoon, only to lose a lot of that momentum in the last hours, sometimes with only minutes left of trading. Let’s see if that changes today.

In the early going, crude oil prices were marginally lower in the early going but still on pace to post a second week of gains. Can they hold on? Yesterday, prices touched above the $63 a barrel levels but couldn’t stay there, closing at $62.77.


SPX chart

FIGURE 1: BREAKING RESISTANCE?

The SPX had touched an intraday high of 2,731 before ending flat yesterday. Can it break through that? In early trading, the SPX was just above 2,700. The SPX peaked at 2,872 on Jan. 26 and has had trouble regaining that since. Data sources: CME Group, Standard & Poor’s. Chart source: The thinkorswim® platform from TD AmeritradeFor illustrative purposes only. Past performance does not guarantee future results.

Pro World Economy: That’s the word from JPMorgan (JPM), which said this week that a recent study showed that some 69% of mid-sized U.S. companies are upbeat about the global economy in 2018. That’s more than double the 30% JPM tracked in a similar study last year.

What’s more, some 89% said they were optimistic about the prospects for the U.S. economy this year, compared with 80% a year ago and only 39% in 2016, according to the study. And that tax cut? A full 70% expect the reduction to benefit their companies “somewhat” or “to a great extent.” They also noted that they would use the savings to pay down debt, invest in the business, or do what many workers like to hear—give them a raise or a bonus.

Remember the Fundamentals: Lindsey Bell, investment strategist at CFRA Research, reminds investors that the nitty-gritty details of Q4 corporate earnings has been strong, no matter what’s going on elsewhere. “Fourth-quarter earnings season has seemingly been forgotten given the noise created by the return of volatility to the market and a 10-year (Treasury note) yield that continues to creep closer to 3%,” she said in a recent note to clients. “A focus on results from corporations serves as a reminder of the underlying strength in the fundamentals.”

Worth noting, she said, is that sales growth has rebounded to 8.1%, up from the average growth rate of 5% since the earnings recession of 2015-2016. That marks three straight quarters of double-digit growth. “The last time the index posted three quarters of double-digit growth in a year was 2011,” she added.

Americans Are Saving Again: That’s according to Bankrate’s latest Financial Security Index survey. Some 58% of respondents said savings, either in an emergency fund or a separate account, was greater than their credit-card debt. That’s up from 52% in both 2016 and 2017, and matches the 2015 numbers.

Why is that noteworthy? Bankrate notes that the average U.S. adult is carrying about $5,839 in credit-card debt. “As unemployment declines and household income rises, more households are making progress on boosting savings, paying down debt or both,” Greg McBride, Bankrate’s chief financial analyst, said.

Good Trading,
JJ
@TDAJJKinahan

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Economic calendar

FIGURE 2: THIS WEEK'S ECONOMIC CALENDAR.

Source: Briefing.com

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