It’s been a remarkable start to the year, buoyed in part to the optimism about a potential trade deal or framework outline between the United States and China. It will be interesting to see what other developments will take place between now and the highly anticipated meeting next week that could catapult trade relations forward as the March deadline looms. However, there might be more to this market than the China trade deal and an accommodative Federal Reserve. The Russell 2000 is by far the biggest winner, which generally bodes well for the domestic economy. And yet, there have been sharp adjustments in corporate earnings estimates for the first half of the year, which would belie the notion of a strong economy.
Be that as it may, the U.S. economy continues to look firm compared with the rest of the world, especially the Eurozone. Yesterday, The International Monetary Fund (IMF) updated its global growth estimates with a big decline to 3.5% from 3.7%, as the euro area growth was lowered to 1.6% from October’s estimate of 1.9%. Germany is really taking a significant haircut to an 1.3% growth rate in 2019 from the 1.9% estimate just three months ago.
The United States and China’s growth estimates were unchanged by the Gross Domestic Product (GDP) numbers out yesterday, which point to the slowest annual growth since 2000. Beyond implications for trade talks, emerging markets need a stable Chinese economy.
Market Equities Indices | Friday | Week | 2019 |
Dow Jones Industrial Average | +1.38% | +2.96% | +5.91% |
S&P 500 | +1.32% | +2.87% | +6.54% |
NASDAQ Composite | +1.03% | +2.66% | +7.87% |
Russell 2000 | +1.04% | +2.43% | +9.93% |
Technical View
Major Indices Breaking Out
Big stock indexes are in the midst of breaking out through walls of resistance. They have already hurdled their 50-day moving averages and have the 200-day moving averages within sight. So, all the major indices are in the thick of it, ready to surge if they can clear these final hurdles.
Portfolio Approach
We are down to our last bucket of cash, just as the market is at a moment of truth where it has to break through a few additional upside tests or potentially pull back, although I don’t think the market must retest recent lows. For more information about our Hotline service, call your rep, or email us at info@wstreet.com.
Communication Services | Consumer Discretionary | Consumer Staples |
2 | 4 | 1 |
Energy | Financials | Healthcare |
1 | 1 | 1 |
Industrial | Materials | Real Estate |
3 | 4 | 0 |
Technology | Utilities | Cash |
1 | 0 | 2 |
Today’s Session
After a three-day weekend, the market momentum has stalled this morning. The focus remains on what the worst-case scenario possibility could be from an array of issues.
I think some of the actual and potential headwinds will be resolved in short order, including solid movement on China trade negotiations, but the slowdown in China might be more problematic. China implemented dozens of schemes in 2018 to move the economic needle- none worked. They haven’t worked collectively.
The biggest earnings report this morning comes from Johnson and Johnson (JNJ), which beat on revenue and earnings, but management’s range on guidance was lowered.
Traveler’s (TRV) also beat on the top and bottom lines.
EBay (EBAY) is spiking on reports Elliott Management has taken a stake.