Stocks Fell After Hitting New Highs Last Week

After all was said and done, underneath the surface, it wasn’t a pretty week on Wall Street. On Monday, the benchmark S&P 500 hit a new high for the year, then turned lower after several key areas of the market began to fall out of bed. Social media stocks were smacked hard last week after several key companies lowered guidance. The Fed met last week but didn’t say much as they removed all calendar references from their after market commentary and remain data-dependent. So far, the data remains lackluster at best which lowers the odds of a rate hike in the near future. The big winners (so far) from earnings season include: Amazon.com ($AMZN), Netflix ($NFLX), Hasbro ($HAS), Domino’s Pizza ($DPZ), Skechers ($SKX), Dunkin (Donuts) Brands Group ($DNKN), Microsoft Corp ($MSFT), O’Reilly Automotive ($ORLY), and YUM Brands ($YUM), Skywest ($SKYW), Web.com ($WWWW), Equinix ($EQIX), Styngenta ($SYT), Nutri System ($NTRI), Brink’s Co ($BCO), Teradyne Inc ($TER), Skyworks Solutions ($SWKS), GoPro ($GPRO), Estee Lauder ($EL), Abiomed Inc ($ABMD), Golar LNG ($GLNR), Energizer Holdings ($ENR), RetailMeNot, Inc ($SALE), Herbalife ($HLF), BlueBird Bio ($BLUE), HubSpot Inc ($HUBS), Alibaba Group ($BABA), Qorvo Inc ($QRVO), Visteon Copr ($VC), Norwegian Cruise Line Holdings ($NCLH)
On the downside: Whole Foods Market ($WFM), Keurig Green Mountain ($GMCR), Kate Spade ($KATE), Lannett Co ($LCI), Nu Skin ($NUS), Terra Nitrogen ($TNH), Tumi Holdings ($TUMI), Noodles & Company ($NDLS), Qualys ($QLYS), Groupon Inc ($GRPN), News Corporation ($NWSA), Vitamin Shoppe Inc, ($VSI), Fossil Inc ($FOSL), Frontier Communication ($FTR), TriNet Group ($TNET), Zulily Inc ($ZU), Weight Watchers ($WTW), Walter Energy Inc. ($WLT), Skullcandy ($SKUL) Twitter ($TWTR), Yelp ($YELP), LinkedIn ($LNKD), Constant Contact (CTCT), Accuray ($ARAY), Cooper Tire & Rubber ($CTB), Abaxis ($ABAX), Texas Instruments ($TXN), Buffalo Wild Wings ($BWLD), Baidu Inc. ($BIDU), Stratasys ($SSYS), Harman ($HAR), Nokia ($NOK), Travelers ($TRV), 3M ($MMM), Chipotle ($CMG), Pulte Group ($PHM), Biogen Inc ($BIIB), Generac Holdings ($GNRC), First Solar ($FSLR), and American Express ($AXP), just to name a few. We mention this because history shows us that some of the market’s strongest performers occur from big gaps up on earnings and some of the weakest stocks gap down after reporting numbers. Even though we saw some distribution (selling) last week, it is important to note that on Monday, the major averages hit new highs (record highs and 2000 highs for the Nasdaq), and the broader trend remains higher – for now. In the short term, the long range-bound action we have seen most of the year remains in place. 

Monday-Wednesday’s Action: Earnings Continue To Be Released

On Monday, stocks fell after a slew of biotechs got hammered. The benchmark S&P 500 hit a fresh record high on Monday but then turned lower which is not an ideal sign. The biotechs have been one of the strongest areas in the market over the past few years and continues to be a good proxy for the broader risk appetite from institutional investors. Therefore, that area must be watched closely. Once again, China’s Shanghai Composite led other global stock markets and soared +3.0% after reports spread that the People’s Bank of China (China’s Central Bank) was looking into buying local government bonds (Their latest attempt to boost markets). In Europe, optimism spread regarding the ongoing Greek drama. On the upside, steel and gold stocks rallied nicely as they bounce off a near term low. The Market Vectors Gold Miners ETF ($GDX) and Market Vectors Steel ETF ($SLX) rallied +2.1% and +0.8%, respectively. After Monday’s close, Apple Inc ($AAPL) reported another very strong quarter with iPhone sales as the standout winner.

Thursday-Friday’s Action: Biotechs Break 50 DMA 

Market Outlook: The Central Bank Put Is Alive And Well

Remember, in bull markets surprises happen to the upside. This has been our primary thesis since the end of 2012. We would be remiss not to note that this very strong bull market is aging (celebrated its 6th anniversary in March 2015) and the last two major bull markets ended shortly after their 5th anniversary; 1994-2000 & 2002-Oct 2007). To be clear, the central bank put is very strong and until material damage occurs, the stock market deserves the longer-term bullish benefit of the doubt. As always, keep your losses small and never argue with the tape. 

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Stocks Rally During Heart Of Earnings Season

Stocks rallied last week as investors digested the latest round of largely lackluster economic and earnings data. The big winners (so far) from earnings season include: Amazon.com ($AMZN), Netflix ($NFLX), Hasbro ($HAS), Domino’s Pizza ($DPZ), Sketchers ($SKX), Dunkin (Donuts) Brands Group ($DNKN), Google Inc ($GOOG), Microsoft Corp ($MSFT), O’Reilly Automotive ($ORLY), and YUM Brands ($YUM). On the downside: Texas Instruments ($TXN), Travelers ($TRV), 3M ($MMM), Chipotle ($CMG), Pulte Group ($PHM), Biogen Inc ($BIIB), and American Express ($AXP), just to name a few. We mention this because history shows us that some of the market’s strongest performers occur from big gaps up on earnings and some of the weakest stocks gap down after reporting numbers. Separately, it is important to note that so far, the major averages continue to grind higher which suggests the bulls still remain in control – for now.  

Monday-Wednesday’s Action: Earnings Continue To Be Released

Stocks rallied sharply on Monday after China took more steps to stimulate their economy. Over the weekend, China’s Central Bank, The People’s Bank of China, lowered the reserve requirement ratio for banks to 18.5% from 19.5%. The 100 basis point cut was the largest move since November 2008 and is intended to stimulate their economy. The move came one trading day after China raise margin requirements for traders and allowed short selling in their equity market. Stocks sold off hard on the prior Friday but bounced back on Monday after more interference from global central banks. Hasbro ($HAS) gapped up after reporting Q1 results. 

Thursday-Friday’s Action: Nasdaq Hits 2000 Closing High

Market Outlook: The Central Bank Put Is Alive And Well

Remember, in bull markets surprises happen to the upside. This has been our primary thesis since the end of 2012. We would be remiss not to note that this very strong bull market is aging (celebrated its 6th anniversary in March 2015) and the last two major bull markets ended shortly after their 5th anniversary; 1994-2000 & 2002-Oct 2007). To be clear, the central bank put is very strong and until material damage occurs, the stock market deserves the longer-term bullish benefit of the doubt. As always, keep your losses small and never argue with the tape. 

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Stocks End Mixed On Tepid Economic Data

Stocks ended mixed during the shortened holiday week as investors digested the latest round of weaker-than-expected economic data. The self-described data-dependent Fed will likely err on the side of keeping rates low for the foreseeable future because the “data” remains very weak. The Fed has held rates near zero since the 2008 financial crisis and has engaged in three rounds of massive QE (printing money). Even after all this, the Fed finds itself between a rock and a hard place. The Fed has a dual mandate, steady economic growth and keep inflation around 2%. Right now, they are failing on both fronts. Deflation remains more of a threat than inflation and the “data” suggests the economy remains very weak (and possibly contracted in Q1). In addition, Q1 earnings are projected to be negative which is not ideal. All this tells us that the Fed will continue to err on the side of EASY MONEY for the foreseeable future. 

Monday & Tuesday’s Action: Economic Data Remains Weak

The Dow Industrial average soared nearly 300 points on Monday after two important Fed officials came out and basically reiterated their case for “easy money.” After Friday’s (3/27’s) close, Janet Yellen gave a speech and basically said the Fed remains data dependent and will err on the side of keeping rates lower, until needed. Then Sunday night, futures barely budged so before Monday’s open (6am EST), Ben Bernanke turned into a blogger and of course his first blog post made the case for keeping rates near zero for the near future. The Yellen/Bernanke one-two punch was enough to send stocks nicely higher on Monday. Overseas, China’s Central Bank said they are ready to lower rates and bank reserve requirements to fight deflation, if needed. This is their way of saying that they will gladly join the international central bank easy money parade, if needed.  Economic data was mixed on Monday. Personal income beat estimates but personal spending fell short. The closely watched PCE deflator, which is the Fed’s preferred inflation measure, rose +1.4% year-over-year, which barely topped the +1.3% forecast. Separately, the Dallas Fed manufacturing Activity Index plunged by -17.4, widely missing estimates.

Wednesday & Thursday’s Action: Jobs Report Disappoints

Market Outlook: The Central Bank Put Is Alive And Well

Remember, in bull markets surprises happen to the upside. This has been our primary thesis since the end of 2012. We would be remiss not to note that this very strong bull market is aging (celebrated its 6th anniversary in March 2015) and the last two major bull markets ended shortly after their 5th anniversary; 1994-2000 & 2002-Oct 2007). To be clear, the central bank put is very strong and until material damage occurs, the stock market deserves the longer-term bullish benefit of the doubt. As always, keep your losses small and never argue with the tape. 

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Stocks Fall As Oil Surges 14% Over Past Two Weeks

Stocks fell hard last week as the major averages paused to digest their recent and robust rally. A slew of “leading stocks” (mainly biotech, small-cap and tech stocks) fell hard last week which dragged the major averages lower. In other news, Crude Oil surged over +20% in the last 9 trading days! Clearly, that is not an insignificant sum and crude is actually forming the right side of double bottom pattern. Remember crude oil is a major global commodity, not a thinly traded penny stock, so a +20% move in a few trading days is definitely not normal and something that should be watched closely. In most cases, when we see major global markets (stocks, currencies, and commodities) trading like penny stocks — AFTER a big move, that typically signals trouble lies ahead for Wall Street. Having said that it is important to note that we have not seen the S&P 500 correct 10% or more since June 2012! That is a very long time and the market is way overdue for a nice pullback. Additionally, it is important to note that over the past few years- March-June period tends to be a weak period for US stocks. We’ll see what happens but want to urge a caution right now.

Mon-Wed’s Action: Nasdaq Below 5k

Stocks were quiet on Monday as investors digested the prior week’s Fed induced rally. Economic data was less than stellar. The Chicago Fed National Activity Index and Existing Homes Sales reports both missed estimates. Stocks were quiet on Tuesday as traders digested the latest round of mixed economic data. Inflation was tame as the Consumer Price Index rose +0.2% in February, which matched expectations. A closer look showed that the core reading, which strips out food and energy prices, came in slightly above consensus. Meanwhile, New Home Sales in Feb rose to 539k, beating Wall Street’s 464k estimate. A separate report showed the January FHFA House Price Index rising +0.3%, missing estimates for a +0.5% gain. The March Richmond Fed Manufacturing Index disappointed by a large margin, falling to negative -8 which is not ideal. Finally, the March Markit US Manufacturing PMI beat the consensus and jumped to 55.3.

Thurs & Fri’s Action: Leaders Drag The Market Lower

Market Outlook: The Central Bank Put Is Alive And Well

Remember, in bull markets surprises happen to the upside. This has been our primary thesis since the end of 2012. We would be remiss not to note that this very strong bull market is aging (celebrating its 6th anniversary in March 2015) and the last two major bull markets ended shortly after their 5th anniversary; 1994-March 2000 & Oct 2002-Oct 2007). To be clear, the central bank put is very strong and until material damage occurs, the stock market deserves the longer-term bullish benefit of the doubt. As always, keep your losses small and never argue with the tape.

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Stocks Rally After Fed Meeting

Stocks soared last week after the Fed surprised investors and said they are not in a rush to raise rates. The move came as a big surprise because the “consensus” believed that the Fed may begin raising rates in June. Stepping back the action remains very healthy as the S&P 500 is simply bouncing after another shallow pullback in size (small % decline) and scope (short in duration). Stepping back, the S&P 500 vaulted 7% from Feb’s low of 1980 to Feb’s high of 2119. Remember, in “normal” (non Easy Money) days, a 10% rally for the entire year was welcomed. So clearly 7% in under a month is a strong run and the market has earned the right to pullback and digest that move. After that strong gain it pulled back 3.8% and is now bouncing back to flirt with new record highs – again. It is important to keep in mind that in very strong bull markets (present market included) weakness should be bought, not sold (i.e. buy the bounce after the dip).

Mon-Wed’s Action: Nasdaq Flirts With 5k

Stocks soared 1% on Monday as the US dollar pulled back a bit to digest its latest (and very strong) rally. Crude oil slid to a fresh low, hitting the lowest level since 2009! Economic data was less than stellar. Home builder confidence fell to 53 in March, down from a high of 59 last September. Before Monday’s open, the Empire State Index slid to 6.90 for March, below February’s 7.78. Finally, Industrial production rose 0.1% in February, below expectations, with capacity utilization slightly lower at 78.9%. Stocks were mixed on Tuesday as the world waited for the Federal Reserve to conclude its latest March meeting. Economic data was note ideal – housing starts plunged -17% in February, missing the -2.4% forecast. On a healthier note, building permits increased by +3%, beating estimates for a gain of +0.5%. Finally, the Citi ($C) Economic Surprise Index, which measures trends in economic data, slid to -72, missing estimates and the lowest reading since 2011. Overseas markets largely rallied as global central banks continue to pump money into the system. China’s Central Bank (People’s Bank of China) cut its seven-day reverse-repo rate to 3.65% from 3.75% in an attempt to help stimulate their economy. The came a few days after China’s Premier Li Keqiang promised to take action to keep the Chinese economy on track even as their GDP continues to slow. Stocks soared on Wednesday after the Fed gave the market “The Perfect Hedge.” As expected, the Fed left rates steady and removed the word “patience” from its after meeting commentary. The big news came when the Fed made it clear that it was not in a rush to raise rates because they are still concerned with the lackluster economy and deflation remains more of a threat than inflation. This sent stocks soaring as investors cheered the fact that the Fed is not in a rush to raise rates. Then in Janet Yellen’s Press Conference, she said the Fed remains data dependent and will not rule out a possible rate hike in June – hence creating “The Perfect Hedge.” At this point, no one, including the Fed, knows what will happen in June…It all depends on the data..

Thurs & Fri’s Action: Nasdaq Closes Above 5k

Stocks opened lower on Thursday as the market digested the Fed’s latest meeting and the latest round of economic data. The government said, weekly jobless claims edged slightly higher to 291k, the national current account deficit widened significantly in Q4 2014 to the largest level since 2012, The Philly Fed index rose to 5.0, missing estimates for 7.0. Finally, Leading indicators grew by 0.2%, matching the Street’s forecast. On average the economic data is less than thrilling which means the Fed will likely hold off on raising rates in the near future. Buyers returned on Friday and sent stocks soaring after the bulls showed up and bought the “dip” and a slew of options expired. Friday was quadruple witching day and that added a ton of volume as stocks rallied. The tech heavy Nasdaq composite closed above 5k and is about to take out its record high, set in March 2,000.

Market Outlook: The Central Bank Put Is Alive And Well

Remember, in bull markets surprises happen to the upside. This has been our primary thesis since the end of 2012. We would be remiss not to note that this very strong bull market is aging (celebrating its 6th anniversary in March 2015) and the last two major bull markets ended shortly after their 5th anniversary; 1994-March 2000 & Oct 2002-Oct 2007). To be clear, the central bank put is very strong and until material damage occurs, the stock market deserves the longer-term bullish benefit of the doubt. As always, keep your losses small and never argue with the tape.

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Stocks Pullback To Consolidate Recent Gain

Stocks fell for a third consecutive week as the market pauses to consolidate the latest and very strong rally. As a quick refresher, the benchmark S&P 500 vaulted 7% from Feb’s low of 1980 to Feb’s high of 2119. Remember, in “normal” (non Easy Money) days, a 10% rally for the entire year was welcomed. So clearly 7% in under a month is a strong run and the market has earned the right to pullback and digest that move. That is exactly what is happening on Wall Street and so far the action remains healthy (for now). We would be remiss not to note that the market has not experienced a 10% correction since June 2012! That is a very long time and we are way overdue for a nice correction to shake out the weaker hands. We should also note that nearly every major central bank in the world continues to adopt a very strong easy money stance which should be bullish for stocks down the road. Further more, in very strong bull markets (present market included) weakness should be bought, not sold (i.e. buy the bounce after the dip). It is important (and healthy) to note that the small cap Russell 2000 index closed higher last week. The Russell 2000 tends to act as a leading indicator for the broader market -both up and down.

Mon-Wed’s Action: Another Shallow Pullback

Stocks edged higher on Monday as buyers showed up to defend the S&P 500’s 50 DMA line. The ECB officially began its version of QE. Reports suggested that the ECB was buying German and Italian bonds. Shares of Apple ($AAPL) jumped after the tech giant held its latest product launch and introduced the highly anticipated iWatch. The company also announced a partnership with HBO and a new Macbook notebook computer. The most expensive iWatch will cost $17k. But really, for Apple, what’s 17k among friends? In other news, General Motors (GM) announced a $5B share buy-back plan which helped the stock rally over 3%. M&A watchers saw a little action. Alcoa (AA) said it planed to acquire RTI International Metals (RTI) for $1.5 billion. Separately, shopping mall operator Simon Property Group (SPG) made a $16 billion bid to acquire Macerich Company (MAC).

Thurs & Fri’s Action: Stocks Edge Lower

Stocks soared on Thursday after the Fed released the latest round of bank stress tests and South Korea’s central bank unexpectedly cut rates. Citigroup (C), Goldman Sachs (GS), JP Morgan (JPM) and Morgan Stanley announced capital return programs via buy-backs and dividend increases. Bank of America (BAC) did not fare well.  South Korea’s central bank jumped aboard the easy money train and announced a surprise cut in its seven-day repurchase rate, taking it down to 1.75%. Stocks fell on Friday as investors digested the latest round of economic and earnings data. U.S. producer prices slid by 0.5% in February which shows that deflation remains more of a threat than inflation. U.S. Consumer sentiment also fell which bodes poorly for the ongoing economy. Separately, Russia’s Central Bank cut rates to help stimulate their economy as the US dollar continued to soar and Crude oil (and a slew of other commodities) plunged.

Market Outlook: The Central Bank Put Is Alive And Well

Remember, in bull markets surprises happen to the upside. This has been our primary thesis since the end of 2012. We would be remiss not to note that this very strong bull market is aging (celebrating its 6th anniversary in March 2015) and the last two major bull markets ended shortly after their 5th anniversary; 1994-March 2000 & Oct 2002-Oct 2007). To be clear, the central bank put is very strong and until material damage occurs, the stock market deserves the longer-term bullish benefit of the doubt. As always, keep your losses small and never argue with the tape.

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Stocks Surge In February

After all was said and done it was a very bullish month on Wall Street. The Dow Jones Industrial Average, the benchmark S&P 500, and the small-cap Russell 2000 all hit new record highs in February and the tech-heavy Nasdaq Composite galloped higher and is inching closer to its record high of 5132.52, hit in March 2000. The bullish fundamental backdrop remains in place which is healthy for the market. The twofold bullish backdrop remains: an improving global economy coupled with “easy money” from major central banks. From our point of view, pullbacks should be bought, until material weakness develops in the major averages. In the short-term we would be remiss not to note that the major averages are clearly extended and due for a nice pullback to consolidate their recent (and robust) rally.

Mon-Wed’s Action: Greece Remains In Focus

Stocks slid on Monday but ended near their highs as the world waited for Janet Yellen to begin her two-day testimony on Capitol Hill. Economic data was not promising – Existing Home Sales, the Chicago Fed National Activity, & The Dallas Fed Manufacturing Activity all missed estimates. Stocks rallied to new record highs after Janet Yellen remained dovish and said a rate hike would not be likely in the next few meetings. Traders interpreted that to mean that the Fed will not raise rates until October. In other news, the Eurozone approved Greece’s bailout extension plan. Greece said it become more conservative with fiscal matters including government spending and tax collection. In the short term, this helped allay concerns of a Grexit (Greek exit). Economic data in the US was mixed at best. The S&P/Case Shiller home price index topped estimates which bodes well for the housing market. Markit’s ($MRKT) US PMI numbers also beat estimates. On the downside, Consumer Confidence fell in February to 96.4, which missed estimates for 99.5. The February Richmond Fed Manufacturing Index came in at 0, missing estimates for 6.0. Stocks were relatively quiet on Wednesday as Yellen spent another day on the Hill. Economic data was mixed. January New Home sales edged higher to 481k, slightly beating the 470k consensus. Meanwhile, weekly Mortgage applications slid by -3.5%, which was better than the prior week’s dismal reading of -13.2%.

Thurs & Fri’s Action: Stocks Pause Near The Highs

Stocks ended mixed on Thursday as investors digested mixed economic data. Deflation concerns remained elevated after the Consumer Price Index fell 0.7% in January which was the largest monthly decline since December 2008! The large decline was due to plunging gasoline prices. Core prices, which exclude food and energy, rose 0.2%. Separately, d urable goods rose 2.8% last month which beat estimates for a gain of 1.6%. Initial Jobless Claims were 313k, which just missed estimates. James Bullard, President of the St. Louis Fed, told CNBC that the recent economic data was supportive of a rate hike by the Fed sooner rather than later. Investors largely shrugged off his comments because Yellen is in charge and she was so dovish. Stocks fell on Friday as investors wrapped up the last day of the week and month and digested the latest round of economic data. The government revised Q4 GDP down to 2.2%, just higher than the 2.1% expectation. GDP jumped 5.0% in Q3 2014. Separately, the Chicago Purchasing Managers Index totaled 45.8 which was the lowest level since July 2009. Consumer sentiment came in at 95.4 for February which beat estimates but was lower than January’s 98.1. Finally, The National Association of Realtors said pending home sales jumped to the highest level in 18 months.

Market Outlook: The Central Bank Put Is Alive And Well

Remember, in bull markets surprises happen to the upside. This has been our primary thesis since the end of 2012. We would be remiss not to note that this very strong bull market is aging (turning 6 in March 2015 and the last two major bull markets ended shortly after their 5th anniversary; 1994-March 2000 & Oct 2002-Oct 2007). To be clear, the central bank put is very strong and until material damage occurs, the stock market deserves the longer-term bullish benefit of the doubt. As always, keep your losses small and never argue with the tape.

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