Stocks Start Higher, But Fall Again

FRIDAY – Stocks fell for a third consecutive day Friday, exacerbating a week-long equity exodus that has pushed the Nasdaq Composite Index into a bear market and put the S&P 500 on track for its worst December since the Great Depression. The Federal Reserve’s rate hike on Wednesday drove the losses and fears of an extended government shutdown only added to the pain on Friday.

The Dow Jones Industrial Average fell 150 points in turbulent trading that sent the blue-chip index up as much as 300 points earlier in the day, only to trade in negative territory less than one hour later. The initial tick upward came as Federal Reserve Bank of New York President John Williams said that the central bank could reassess its interest rate policy and balance sheet reduction in the new year if the economy slows. But those gains slowly disappeared as investors used that short-term pop as a chance to sell more. The broader S&P 500 fell 1 percent on Friday, while the tech-heavy Nasdaq Composite shed 1.8 percent.

Technology stocks led the sell-off again on Friday as they have since September. Facebook lost 5.3 percent, Apple lost 2 percent and Amazon lost 4.8 percent on Friday.

The Fed currently is allowing $50 billion a month to run off its massive debt balance sheet as its securities mature, tightening financial conditions. The balance sheet is mostly a collection of bonds the central bank purchased to vitalize the economy during and after the financial crisis.

Equities fell to their lows of the day in the previous session after U.S. House of Representatives Speaker Paul Ryan announced that PresidentTrump would not sign a temporary government funding resolution without funding for a U.S.-Mexico border wall.

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Dow Up On Easing Trade Fears

WEDNESDAY – Stocks rose on Wednesday as investors awaited a key speech from the top Federal Reserve official, while hope that a U.S.-China trade truce could come lifted sentiment on Wall Street.

The Dow Jones Industrial Average climbed 200 points, led by gains in Boeing. The S&P 500 rose 0.5 percent as the technology sector gained around 1 percent. The Nasdaq Composite advanced 0.7 percent.

Fed Chair Jerome Powell is expected to speak at the Economic Club of New York. During the event, Powell is slated to talk about the Fed’s framework for monitoring financial stability. Investors are eagerly awaiting the speech as stocks have fallen in part because of fears the central bank may be tightening monetary policy too quickly.

Easing worries on U.S.-China trade also boosted stocks on Wednesday. A New York Times report said Trump was worried about the impact of a long trade war with China on markets and the economy. This could lead Trump to seek a compromise with China on trade, the Times said, citing U.S. officials.

Boeing shares rose more than 2 percent as trade worries eased. They also rose after Indonesia investigators said they are looking at a possible maintenance issue that could have led to the Lion Air crash last month.

Stocks also rose as beaten-down tech shares regained some of their losses. Facebook, Amazon, Apple, Netflix and Alphabet all rose.

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Dow Jumps 350 After Election Results Match Expectations

Stocks rose on Wednesday after the midterm election, lifting a cloud of uncertainty that was weighing on the market.

The major index averages hit their session highs after President Trump said he is willing to work with Democrats on policy initiatives that would help the economy keep growing.

The Dow Jones Industrial Average (^DJI) rose 350+ points, led by gains in UnitedHealth and Microsoft. The S&P 500 gained 1.5 percent as the health care and tech sectors both rallied more than 2 percent. The Nasdaq Composite rose 1.9 percent.

Trump said, “Hopefully we can all work together next year to continue delivering for the American people, including on economic growth, infrastructure, trade, lowering the cost of prescription drugs. The Democrats will come to us with a plan for infrastructure, a plan for healthcare, a plan for whatever they’re looking at and we’ll negotiate.”

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Stocks Rise Of Jobs News

Stocks rose on Friday on the back of stronger-than-expected employment data. Investors also shrugged off concerns over an escalating trade war between the U.S. and China.

The Dow Jones Industrial Average jumped 99.74 points to 24,456.48, with Apple and Microsoft outperforming. The S&P 500 closed 0.8 percent higher at 2,759.82, with health care rising 1.5 percent. The Nasdaq composite climbed 1.3 percent to 7,688.39 as the iShares Nasdaq Biotechnology ETF (IBB) surged 3.8 percent. Facebook rose to an all-time high, also boosting the Nasdaq.

The U.S. economy added 213,000 jobs in June, while economists polled by Reuters expected a gain of 195,000.

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Bear Market Watch!

The stock market was hammered by trade tariff threats again this week, a frequent occurrence during this administration. Based on last week’s public comments, some Republican representatives are now becoming more worried. Without any concrete policy changes actually occurring, no one can be sure whether the threats are real, or just part of the negotiation strategy.

The Dow Industrials managed to close higher on Friday, avoiding the longest daily losing streak since 1978. Then, the Dow closed lower for eight days in a row, and a losing day on Friday would have been nine days in a row. Again, this kind of streak has not happened since February 1978.

Even though the first tariffs are scheduled to take effect July 6, there is uncertainty over which tariffs will actually be enforced. Therefore, it is difficult to determine what impact they will have on the economy and the stock market. As the rhetoric continues between the US, China, Canada, and the Eurozone markets, more economists are expressing their views on what these tariffs might mean.

Many of the world’s central bankers met last week in Portugal, and they also expressed their concerns. European Central Bank President Mario Draghi cited that past trade disputes had been overwhelmingly negative for the economy, and said that there was “no ground to be optimistic” about the current trade tensions. Some market’s segments are already reacting, as shares of Mercedes Benz and Fiat both dropped over 4% on concerns over what the tariffs could do to profits of the automakers.

Right now, the economy is still acting strong, consumers are optimistic, and technically the stock market is in a positive trend. Market action, however, is cyclical, so eventually these positive trends will turn negative. What signs should investors look for to warn them of a change in these trends? There are three trends that I feel investors can monitor for an early warning of an imminent recession and a bear market.

The first sign to look for is deterioration in the consumer sentiment, as the consumer plays an important role in the health of the economy. I never recommend basing decisions on individual data or even several data points, Rather, one should monitor the overall trend.

What to do? The market acted a bit tired last week and trade threats are likely to pick up again next week, which could trigger some more profit taking. The strong readings from the weekly studies indicate that this should be a buying opportunity for those without long positions in equities.

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Nasdaq Hits New Highs

WEDNESDAY – Stocks rose on Wednesday, boosted by dealmaking activity and potentially improving trade relations between the U.S. and the European Union.

The Nasdaq composite rose 1 percent and hit an all-time high, led by Facebook and Netflix, which also reached record levels. The S&P 500 gained 0.4 percent, with technology stocks outperforming.

The Dow Jones industrial average, meanwhile, rose 10 points as it tired to snap its longest losing streak since March 2017.

Disney raised its bid for Twenty-First Century Fox assets to $38 per share, or $71.3 billion, surpassing an offer made by rival and NBCUniversal parent Comcast. Last week, Comcast bid $65 billion in cash for Fox assets which include FX, Star TV and stakes in Sky.

The bid sent Fox shares higher by 7.3 percent.

Stocks fell on Tuesday as trade tensions between the U.S. and China intensified. The Dow led the way lower, sliding nearly 300 points and erasing its gains for 2018.

Small cap and penny stock index Russell 2000 also jumped higher Wednesday.

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Small Cap Stocks Lead The Markets Higher

Size doesn’t matter when it comes to US stocks, because investors seem to prefer small companies over big ones in 2018.

That’s a sign of the continued strength of America’s economy as small-caps tend to move earlier than later stocks whether up or down.

The Russell 2000, an index that includes shares of mostly smaller US companies, is up nearly 7% this year and is trading at an all-time high this week.

The Dow and S&P 500, both of which are home for industry giants like Apple, Disney, Coca-Cola and Boeing are up just 1% and 2% respectively. They are both still trading about 5% below their record highs.

Why?

To start, many smaller businesses in the Russell 2000 are growing their profits at a faster rate than the giants of the Dow and S&P 500.

Earnings for the Russell 2000 companies are expected to increase more than 40% this year and another 23% in 2019. That’s much better than analysts’ forecasts of a 20% jump in earnings for S&P 500 companies this year and 10% next year.

We see this continuing throughout the rest of 2018. Investors would be wise to consider smaller stocks as they tend to move higher faster when things are going well and lead the overall markets.

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3.9% Unemployment Can’t Keep Stocks Up

U.S. stocks fell Friday morning after the government’s monthly jobs report missed Wall Street expectations.

The Dow Jones industrial average fell more than 100 points shortly after the opening bell, as large industrial components like Boeing and Caterpillar weighed down the other blue-chip stocks.

The S&P 500 fell about 0.4 percent in early trading as a decline in interest rates pulled financial and banking stocks down; shares of J.P. Morgan fell 0.8 percent while Bank of America lost about 1 percent.

The Labor Department reported that the economy added 164,000 jobs in the month of April, lower than the 195,000 expected by economists polled by Reuters. Average hourly earnings growth also missed, rising only 0.15 percent against expectations of a 0.2 percent gain.

Despite the miss in the number of jobs added, the government said the unemployment rate fell to 3.9 percent, an 18-year low.

Despite a broader slip in equities, Apple jumped after longtime investor Warren Buffett revealed that he bought 75 million shares during the first quarter, which added to the conglomerate’s already massive stake in the tech giant, “brought down our cash position moderately.”

The early moves in U.S. stocks came as markets across the globe showed a mixed picture. On Thursday, U.S. stocks finished relatively mixed, after the Dow Jones industrial average erased a nearly 400-point loss during the session, on the back of strong earnings.

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Trade Deficit Shrinks! First Drop in 7 Months

Record exports reduced the U.S. trade deficit in March, the first drop in seven months in a massive gap that President Trump has been determined to shrink with an aggressive America first policy.

The Commerce Department says the trade deficit slid to $49 billion, down from $57.7 billion in February and lowest since last September.

The President has vowed to bring down America’s massive deficits, which he blames on bad trade agreements and abusive practices by U.S. trading partners.

Exports rose in March to a record $208.5 billion, led by shipments of civilian aircraft and soybeans. Imports slipped 1.8 percent to $257.5 billion.

The United States ran a $20.5 billion surplus in the trade of services such as education and banking. But that was offset by a $69.5 billion deficit in the trade of goods.

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