Stocks Start Week Higher On Trade Deal Hopes

MONDAY – U.S. stock index futures rose on Monday on a report that U.S. and China are getting close to a trade deal.

This morning, the Dow Jones Industrial Average futures were up 65 points, indicating a gain of more than 70 points at the open. Futures on the S&P 500 and Nasdaq 100 were also slightly higher.

The Wall Street Journal reported that China had proposed to bring down duties on certain American goods in an attempt to strike a deal with the U.S. The same report suggested both countries are at the final stage of their negotiations, which could see the country’s leaders meeting at a special summit to sign a trade deal soon.

The Trump administration touted last week significant progress being made in U.S. negotiations with China. Treasury Secretary Steven Mnuchin told CNBC on Thursday the two sides were getting closer.

The back-and-forth on trade between the two countries has sent ripples through financial markets since last year, with investors fretting how tighter trade conditions could impact corporate profits.

On the economic front, there will be construction spending figures out at 10 a.m. ET.

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Stocks To Jump Friday

U.S. stock index futures pointed to a strong open on Friday, as Wall Street looked to build on its best start to a year in nearly 30 years.

At around 8:10 a.m. ET, Dow Jones Industrial Average futures indicated a gain of more than 170 points at the open. Futures on the S&P 500 and Nasdaq 100 were also up.

The major indexes posted solid monthly gains in February, pushing the S&P 500 to its best start to a year since 1991. The S&P 500 is up more than 11 percent for 2019, along with the Dow. The Nasdaq, meanwhile, is up 13.5 percent.

Decreasing trade tensions between China and the U.S., along with a declining fears of tighter monetary policy from the Federal Reserve, helped propel stocks higher.

Market participants are likely to closely monitor a fresh batch of economic data on Friday. Personal income, consumer spending and core PCE figures for December and January will be released at around 8:30 a.m. ET.

Manufacturing PMI, ISM manufacturing, and consumer sentiment data are all expected to follow later in the session.

 

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Stocks Flat Even After Good Economic News

THURSDAY – Stocks were little changed at Thursday’s open as stronger-than-expected economic data were offset by talks between President Donald Trump and North Korean leader Kim Jong Un falling through.

The Dow Jones Industrial Average fell just 11 points while the S&P 500 dipped around 0.1 percent. The Nasdaq Composite fell 0.2 percent.

The U.S. economy grew at an annualized rate of 2.6 percent in the fourth quarter 2018, according to the Bureau of Economic Analysis (BEA). Economists polled by Dow Jones expected the economy to grow at a pace of 2.2 percent.

Investors were closely watching the summit in Vietnam as it could potentially impact trade negotiations between China and the U.S.

On Wednesday, U.S. Trade Representative Robert Lighthizer testified in front of House members that China needed to do more than just buy more U.S. goods for the two countries to strike a permanent trade deal. But Lighthizer said after the testimony, according to The Wall Street Journal, that formal steps would be taken to abandon plans of raising tariffs on Chinese goods.

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Stocks Rebound To Turn Positive Tuesday

Stocks started lower on Tuesday as investors digested the release of weaker-than-expected Home Depot earnings, mixed economic data and testimony from the top-ranked Federal Reserve official.

The Dow Jones Industrial Average traded just above even after falling more than 100 points earlier in the day. The S&P 500 climbed 0.1 percent while the Nasdaq Composite was also up slightly.

Strong consumer confidence numbers helped stocks rebound. The Conference Board said its consumer confidence index jumped to 131.4 in February, easily topping an estimate of 124. In January, consumer confidence was at 121.7.

Investors also digested testimony from Federal Reserve Chairman Jerome Powell to a U.S. Senate committee on Tuesday. In prepared remarks, Powell said the economy is “healthy” but that the Fed is also seeing “crosscurrents and conflicting signals.” It comes after the U.S. central bank adopted a more cautious stance on future interest rate hikes last month.

Stocks have been on a tear recently, with the Dow and Nasdaq rising a nine-week winning streak. The S&P 500 has risen for eight of the past nine weeks. Diminishing concerns over U.S.-China trade and tighter monetary policy have contributed to the sharp stock gains.

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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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