China's Conciliatory Note on Trade Renews Optimism in Stock Market

Equities futures have regained some of yesterday’s optimism as China’s president talks about about further opening the nation’s economy, including lowering tariffs on automobiles.

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(Tuesday Market Open) Equities futures were higher this morning, with investors apparently recouping some of the optimism that had faded toward the close yesterday. China’s president gave markets a shot in the arm Tuesday with investors apparently taking heart from his comments about further opening the nation’s economy, including lowering tariffs on automobiles.

Although stocks closed higher Monday, that was after paring gains toward the close amid more political noise out of Washington. Elevated volatility continued, and the big three U.S. indices settled with just modest gains.

Facebook CEO to Face Lawmakers Tuesday, Wednesday

The U.S. House Energy and Commerce Committee’s release of Facebook (FB) CEO Mark Zuckerberg’s prepared remarks ahead of congressional testimony seemed to calm investors on Monday. But his appearance today and tomorrow before lawmakers could result in different market sentiment depending on Zuckerberg’s answers to potentially tough questions from politicians.

Long-term investors may have to stomach large percentage moves in FB’s stock in the coming days. While it may be difficult to watch these potential gyrations, it’s a reminder that these things do tend to smooth out in the long run, meaning it’s usually a good idea to not trade emotionally.

Data Release: IMX, PPI, CPI

Despite some TD Ameritrade clients selling FB shares, they were also buying shares of Amazon.com (AMZN) and Netflix (NFLX) in March, giving the indication that they may believe in tech’s ability to lead markets higher in the future, according to TD Ameritrade’s Investor Movement Index (IMX) . The IMXSM, which measures what TD Ameritrade clients are actually doing and their exposure level to markets, fell for the third-straight month in March, moving lower by 12.3% to 5.22.

Market volatility was once again prevalent during the March period, and the IMX reached its lowest point since August 2016.

Meanwhile, investors will get to eye a fresh reading on inflation as the latest Consumer Price Index (CPI) data is released Wednesday morning. The Producer Price Index (PPI), released this morning, came in a little higher than some analysts were expecting, up 0.3%. This reading may or may not be a precursor to tomorrow's CPI release. Recall two months ago, the release of January CPI up 0.5% sparked fear of coming inflation, but the subsequent release came in at a more modest 0.2%.   

Small-caps

FIGURE 1: SMALL FAVORS.

The small-cap Russell 2000 (RUT), seen here as the candlestick, has generally done better so far this year than its bigger cousin stocks in the S&P 500 (SPX), shown by the purple line. Some analysts say this could be because investors have less fear of small-caps getting hurt in a potential trade war. This is opposite of the pattern last year when small-caps under-performed amid thoughts that the tax bill would help bigger companies most. Data source: FTSE Russell, Standard & Poor’s. Chart source: The thinkorswim® platform from TD Ameritrade. For illustrative purposes only. Past performance does not guarantee future results.

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