Rerun.  Stocks surged yesterday in a move reminiscent of the days of easy money with tech leading the way and financials pulling up the rear.  Investors chose to view Wednesday’s fed statement as “half full” reversing the negative sentiment that drove equities down late in Wednesday’s session.


1)  Investor sentiment, not numbers, govern the market at these levels.  The only meaningful shift in Wednesday’s Fed report was in the Dot Plot which signaled that a majority of Fed governors expect no rate hikes for 2019 versus the one hike which was forecast in December.  Though some may argue that rates held steady represents easy money for corporations thus increasing future earnings potential, the reality may be quite the opposite as companies may be tempted to add more debt to their balance sheets.

2)  Brexit takes on some new twists.  Overnight WHILE YOU SLEPT, the EU gave Theresa May two weeks to sell her deal to Parliament or risk a longer delay which could be as long as two years.  The move puts pressure on MP’s to find a solution as a two year delay would be unfavorable.  The EU is exploiting the weaknesses exposed by infighting in the House.  Many companies are now preparing for a worst case scenario of a hard Brexit.

3)  A deal between the US and China appears to be hitting some stumbling blocks.  In recent days Administration officials have been playing down an imminent deal with the President himself saying yesterday that he wanted China to “double or triple” the amount of American goods they have pledged to purchase.  Additionally, in a move that will certainly raise some temperatures, the Administration seems agreeable to allow F-16 purchases by Taiwan.


Stocks soared yesterday in response to the the Fed’s dovish policy release led by technology shares which were helped by chip maker Micron Technologies (MU) on an earnings beat and upgrades for Apple ahead of its streaming product announcement.   In yesterday’s exuberant session the S&P500 rose by +1.09%, the Dow Jones Industrial Average climbed by +0.84%, the Russell 2000 gained +1.25%, and the NASDAQ 100 ascended by +1.25%.  That’s a rally.  Technology stocks, being the most speculative, typically lead emotional rallies and they have done just that, outperforming all other sectors in the past week as well as the past 60 sessions (see charts 1 and 2 in my attached daily chartbook). Shares of Biogen were pummeled falling by -29% in yesterday’s session as the company made a surprise announcement that it would stop work on the development of an Alzheimers drug.  The move serves as a reminder that company risk is real and diversity is important.  Bonds continue to focus on the negative part of the Fed release and traded up slightly yesterday.  10 year treasury yields closed at 2.53% and the 2/10 yield curve stayed steady at +12 basis points just two basis points away from its recent low.


This morning we will get Markit Manufacturing PMI which is expected to come in at 53.5 up from last month’s 53.  Markit will also release its services PMI which is forecast to be at 55.5 down from last months 56.0.  Later this morning, the National Association of Realtors will report its Existing Home Sales figure which is expected to show a month over month growth of +3.2% versus last month’s fall of -1.2%. Tiffany and company will release its earnings before the bell and is forecast to have earned $1.601 per share.  Next week brings a full calendar of releases including more housing numbers, consumer confidence, and GDP along with its now-famous inflation figures.  Have a great weekend.

daily chartbook 2019-03-22


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