A solid start to earnings season, the Federal Reserve’s change in tone, and US-China trade talks were the major factors contributing to the market’s sharp rally in February. December losses may still be fresh on investors’ minds, but the Fed’s more accommodative turn, a blowout employment report, strong S&P earnings, and positive outlook on trade talks have set the ground for a strong rebound.
DJIA Daily Chart from February 1 to February 28, 2019
- US Indices advanced due to stronger than expected U.S. employment report, with nonfarm payrolls jumping by 304,000 jobs in January.
- This number not only exceeded forecasts but marked the largest gain since February 2018.
- The factory orders report declined by -0.6%, a few points below consensus expectation.
- Despite the sluggish start, indices advanced later in the afternoon with optimism that Q4 corporate earnings and 2019 outlook are off to a good start.
- ISM non-manufacturing sample reports sustainable and solid growth, at 56.7, which is within economist expectation.
- With news relatively light, markets may have risen due to support from S&P 500 Q4 results showing an average earnings growth rate of 12.4%.
- S. and China will start another round of trade talks next week.
- Nearly 71% of over half of the S&P 500 companies that have reported Q4 results have exceeded profit expectations.
- Despite this, analysts are reducing their earnings expectations for the first quarter of 2019.
- S&P 500 in January has been its strongest in over 30 years, a sign of potential market strength.
- S. indices fell due to weak economic news from Europe.
- Selling pressure may have been limited due to hopes that the US and China might be able to reach a trade deal in the upcoming talks.
- Initial jobless claims declined 19,000 to 234,000, higher than the 225,000 estimate.
- S. stock index futures advanced in anticipation of the latest trade talks between the U.S. and China in Beijing.
- Some analysts have expressed optimism that a trade deal may be reached by March 1.
- No major news today.
- US indices advanced somewhat slightly as the latest trade talks between the U.S. and China began in Beijing.
- 5% of the S&P 500 companies that have reported results have exceeded analyst estimates.
- US indices advanced as lawmakers reached a tentative deal to avert yet another partial government shutdown.
- Indices were also supported by expressed optimism on progress with the US-China trade talks.
- Markets moved higher despite reports that the National Federation of Independent Business small business optimism index continued its decline for a fifth straight month, falling to 101.2 in January from 104.4 a month ago. Economists were expecting a higher reading of 102.
- Job openings, as revealed in the latest JOLTS report, continue to accelerate much faster than hiring, up 3.1 percent to a 7.335 million, exceeding economist expectations of 6.900 million.
- Indices advanced partly on a report that President Trump intends to sign the border security deal to avoid another partial government shutdown.
- Additionally, markets were supported on optimism over the U.S.-China trade discussions.
- President Trump mentioned that he’s willing to relax the March 1 deadline if he and President Xi were close to an agreement.
- CPI remained unchanged, though, core prices grew 0.2% from December.
- Indices traded higher overnight due to signs of potential progress in U.S.-China trade talks.
- Several times during the week, President Donald Trump mentioned that discussions are going “very well.”
- Several sources are reporting that President Trump is may be extending the March 1 deadline by another 60 days in order to comprehensively iron out a trade deal.
- But indices quickly fell after a report that retail sales recorded their largest decline of 1.2% in more than nine years in December. Economists were expecting to see an increase rather than a decline.
- Jobless claims increased by 4,000 to 239,000, higher than consensus expectations.
- Indices continued trading higher on signs that progress in the Beijing trade talks is being made.
- Officials from both countries are planning to continue their talks in Washington next week.
- The NY Federal Reserves Empire State Manufacturing survey came in at 8.8, up from January’s reading of 3.9, and better than economist expectations of 7.1.
- The cost of US imports fell by 0.5% in January from the previous month. Economists forecasted a 0.3% decrease.
- Contrary to expectation of a rise in January industrial production, the report shows that it was down by 0.6%, and capacity utilization was 78.2% when 78.8% was anticipated.
- The end of the government shutdown helped Consumer Sentiment, which came in above consensus at 95.5.
- US Presidents Day
- Stocks opened lower after the EU threatened to retaliate if the US follows through with their threat to levy tariffs on imported EU goods.
- Indices continued advancing when President Trump said trade talks with China were going well, suggesting the possibility of pushing the deadline beyond March 1 to complete negotiations.
- Housing market index came in better than expected at 62. indicating recovery and strength in present sales–attributable by no small measure to low mortgage rates.
- Stock gains were subdued due to a few earnings reports that were more or less downbeat.
- Overall, stock market performance has been strong despite the current geopolitical environment surrounding it, a potential sign of long-term strength.
- US market lower today following a negative trading session in Europe plus some weaker-than-expected US economic data.
- Durable goods orders increased 1.2% in December, but the figure was smaller than the 1.5% gain that economists had expected.
- Initial jobless claims fell sharply to 216,000.
- Philadelphia Federal Reserve business index in February came in at -4.1, significantly lower than the expected consensus figure of 14.1.
- PMI composite came in at 55.8, though on a manufacturing level the figure came in at the lower end of 53.7 (consensus at 54.3) indicating potential “soft spot” in client demand, signalling a slowing in production most likely due to the current global economic slowdown.
- Existing home sales report came in slightly lower than expectations at 4.94 million (where 5.04 million was expected).
- Stocks moved higher today as signs that progress on trade offset the seemingly worsening global outlook.
- No major economic news or reports came in on this Friday.
- President Trump’s announcement that he would delay increasing tariffs on Chinese imports may have contributed to stocks’ advance.
- Trump cited progress trade talk progress in the areas of intellectual property protection, technology transfers, agriculture, currencies and services.
- Chinese traders might have found the news favorable as the CSI 300 Index advanced 6%, its biggest single-day gain in nearly four years.
- The also Yuan rose to a 7-month high following the news.
- Housing starts report reveals that December housing starts tumbled by 11.2%, an unexpectedly weak figure of 1.078 M, well below the 1.260 M that economists were anticipating.
- The Case-Shiller’s 20-city index also shows slowing rates of home-price appreciation–0.2%, below the 0.4% consensus expectation.
- Despite the government shutdown’s negative effect on consumer confidence in January, February consumer confidence coming in at 131.4 easily beat expectations of 125.0.
- The key word in Jerome Powell’s speech as “patience.” He described economic growth as “solid” but still “slowing,” and inflationary pressures as “muted.” Powell holds to the “wait-and-see” approach amid slowing global growth, trade uncertainties, and Brexit.
- The nation’s goods deficit swelled to a much larger-than-expected $79.5 billion in December as exports fell 2.8 percent following 0.9% contraction in November.
- Agricultural exports fell 1.9% in the month, down 5.5% YOY.
- Jerome Powell will soon be announcing the Fed’s plans for 2019 balance sheet reduction.
- The Fed aims to bring tightening to an end “some time later this year,” according to Powell, stating that another $500 Billion balance sheet reduction to $3.5 Trillion would be “reasonable.”
- Trump-Kim summit begins.
- Indices declined as the Trump-Kim summit ended without any notable progress.
- India-Pakistan tensions in the spotlight.
- GDP came in at 2.6%, a solid figure at the higher end of consensus expectations.
- Jobless claims report at 225k came in right at expectations.
- Chicago PMI came in eight points higher than expected at 64.7.
Market Strategist | Halifax America
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