Anyone thinking that the major averages moving back above key technical levels last week meant that the volatile, news-driven environment had ended was sorely disappointed on Friday. In short, the negative headlines returned in spades and investors were treated to yet another Friday dance to the downside.
First, we got word that Apple (NASDAQ: AAPL) may be experiencing "growth issues" relating to iPhone X sales and concerns about the company's future in China. This news came on the heels of similar worries from the semiconductors. Next, it was the announcement that the Democratic Party was suing the Trump Campaign, Russia, and Wikileaks for interference with the 2016 Presidential election. Then there was the disappointing news out of P&G (NYSE: PG). And finally, what day would be complete without a fresh Trump tweet? On Friday, the President obliged by tweeting that oil prices were "artificially high."
While not technically headlines, the fact that rates were spiking toward 3% again, the yield curve was flattening, commodities looked to be on a tear, and that some of those "important" moving averages on the major stock indices were snapping like toothpicks certainly got traders attention to end the week.
So, with the potential for the usual "headline risk" over the weekend, the algos knew what to do. Sell, early and often.
Despite the S&P 500 finishing the week with a plus sign, there was some technical damage done to the charts at the end of the week. And the discussions regarding slower growth, higher rates, and/or the potential for a constitutional crisis were a bit unnerving.
But, the game starts anew this morning and there are some fresh headlines to consider. First and foremost is the apparent softening on the trade front. Treasury Secretary Mnunchin says he is considering a trip to China to chat about trade and China's Ministry of Finance said Sunday it would welcome the visit. As such, the odds of an all-out trade war would appear to be slipping.
Yet at the same time, we should note that the yield on the U.S. 10-year traded as high as 2.9957 percent this morning in front of a big week of economic data and new bond auctions. To review, the 3% level, which was last seen in 2014, is viewed by some analysts as an important demarcation line that would signal the close of the three-decade bull market in bonds.
From my seat, the bottom line is the stock markets are continuing to adjust/adapt to the new macro outlook, which includes higher rates, higher inflation, a stronger economy, and perhaps peak earnings growth. As such, I would not be surprised to see the "sloppy" action continue. And while these types of markets are never a barrel of laughs, they are, in my opinion, a necessary part of the game.
Publishing Note: I am traveling and in meetings for much of the week and will publish reports only as my schedule permits.
Thought For The Day:
All our dreams can come true if we have the courage to pursue them. -Walt Disney