After a mostly blah week, stocks staged a respectable rally Friday to cruise solidly into the black, up 1% last week. The main impetus was a concurrent rise in crude prices, but more monetary easing announced by the European Central Bank lent support.

With little in the way of important U.S. economic news, eyes were focused on the global oil market and the ECB. Crude oil rose 7% last week to $38.50 per barrel, after the International Energy Agency said it saw signs of a price bottom and talk of a production freeze from some oil producers.

This fourth week in a row of rising energy prices bolsters the idea that oil is finally stabilizing after the precipitous drop of the past 20 months. It’s perhaps no surprise then that stocks rose four weeks in a row, too.

The ECB whipsawed markets. A big move up Thursday was the initial market reaction to the ECB’s new rate cuts and other stimulus moves. However, that excitement dissipated when ECB President Mario Draghi noted that he didn’t anticipate further rate reductions. Equity investors didn’t like that, and the euro rose quickly against the U.S. dollar, but the oil rally came to the rescue.

The Dow Jones Industrial Average added 207 points or 1.2%, to 17213.31 last week, while the Standard & Poor’s 500 index gained 22, to 2022.19. The Nasdaq increased 0.7% to 4748.47.

For the past few years, when monetary stimulus is applied, “it’s been risk on,” says Richard Weeks, managing director at Hightower Advisors. The situation is more nuanced now, and the market has reached a “no man’s land” level. It’s a spot where some funds are ready to re-short the market, but where recent good U.S. economic news belies the growth scare that drove down stocks in February, he says.

After Draghi’s comments, central-bank credibility will hang in the balance, adds Jack Ablin, chief investment officer at BMO Private Bank. Investors are weighing whether the stimulus will work, as some fear Draghi has “thrown in the kitchen sink,” and that there isn’t much else he can do to stimulate Europe’s lethargic economy.

The U.S. economic backdrop seems positive, but market fundamentals are lousy, he adds. Market valuation is a head wind that could make it hard for stocks to rally, while profit growth continues to slide, he says. The market’s price/earnings ratio is nearly 17 times analysts’ 2016 consensus earnings-per-share estimates.

Investors shouldn’t get too comfortable when it seems that oil moves and central-bank maneuvers are the main reason stocks go up or down, not earnings and economic growth.

(Source: Barrons Online)

The February blues melted away, and stocks roared ahead nearly 3% for a third consecutive weekly gain. Global equities jumped, particularly emerging markets.

Improved sentiment was supported by higher commodity prices; macroeconomic news that was, on balance positive; and little prospect of the Federal Reserve hiking interest rates March 16 when its Federal Open Market Committee next meets. U.S. economic data continue to be mixed to good. Investors are trying to have it both ways, hoping for positive data, but not so positive that the Fed will raise rates sooner than expected.

A general rebound in commodities, from copper to cotton, plus crude oil’s 37% rise from its lows have investors less worried about global growth. One technical negative note is that this stock market rebound continues to be characterized by low trading volumes, meaning conviction isn’t strong.

The Dow Jones Industrial Average tacked on 367 points, or 2.2%, to 17,006.77 last week, while the S&P 500 rose 52 pts to 1999.99. The Nasdaq rose 2.8% to 4717.02.The Labor Department on Friday reported better-than-expected data, as nonfarm payrolls picked up 242,000 jobs last month, compared to projections of 195,000. The unemployment rate was flat at 4.9%, and labor participation rose.

As good as the rebound has been, it remains suspect to some. “It’s hard to see the market propelled to higher levels,” says Margaret Patel, a senior portfolio manager at Wells Capital Management. The U.S economy is still growing slowly, emerging markets are still deteriorating, and Europe is just “slogging along, a little better than flat.”

Paul Nolte, a portfolio manager at Kingsview Asset Management, says the only good thing about the employment numbers was the payrolls headline. “Wage growth was terrible for an economic recovery that has lasted this long,” he notes. Average weekly earnings data fell to 1.6% growth year on year from 2.5% in January. “It’s just one month of data, but you’d expect higher wage gains with the rise in payrolls,” he says.

“It was an oversold condition with everyone on one side of the boat,” adds Michael Mullaney, chief investment officer of Fiduciary Trust, of the February downdraft. “With this rebound the market’s overall tone is better, and things have stopped getting worse,” he says, helped by Fed chatter that has been more dovish lately, backing away from the idea of four rate hikes this year.

For a sustained rebound, however, “we need to see positive earnings estimate revisions. You have to be somewhat suspect of the market’s ability to hold this level without that,” says Mullaney.

(Source: Barrons Online)

The stock market rose smartly for the second straight week, up 1.5%, continuing a steep rebound from Feb. 11 lows. Trading volumes were relatively light. Stocks fell Friday, however, failing to follow through on a strong mid-week rally and leaving some to wonder about its sustainability.

On the whole, U.S. economic figures last week were mixed to bullish, but the strongest data raised concerns the Federal Reserve will feel more pressure to raise rates faster than expected. Friday’s weakness stemmed from consumer spending and inflation data—both out the same day—that buttressed the view that the economy is healthier than bears contend. Yet accelerating inflation also brings rate hikes that much closer.

That could explain the market’s softness after the Standard & Poor’s 500 index topped the 1950 level Thursday, the previous mini-rally’s high and a point many considered a strong technical resistance level.  A number of other bullish technical signs were evident. The S&P 500 index moved back above its 50-day moving average for the first time since Dec. 29. While trading activity was generally light, advancing share volume was strong compared to declining volume, with fewer stocks making new lows.

The Dow Jones Industrial Average rose nearly 250 points, or 1.5%, last week, to 16,639.97, while the S&P 500 index gained 30, or 1.6%, to 1948.05. The Nasdaq finished with a 2% gain to 4590.47

“We’ve seen a reversal of some very pessimistic sentiment that was around at the beginning of February,” says Anthony Valeri, a stock market strategist. Helping were bullish economic releases, including a 4.9% rise in January durable goods orders, the biggest in 10 months, he notes.

On Friday, the Commerce Department said January consumer spending rose 0.5%, also the biggest gain in 10 months. And personal consumption expenditures (PCE), the Fed’s preferred inflation measure, increased 1.3% in December from 12 months prior, the largest rise in the price index since October, 2014. Core PCE rose 1.7%, the most since July 2014. Fourth-quarter GDP was revised up to a 1% expansion from 0.7%, significantly above consensus of 0.4%Investors already are looking to the next Federal Open Market Committee meeting, which ends March 16, though no rate change is expected. Instead, says Valeri, the Street will be looking for hints about the pace of possible rate hikes.

Jeffrey Kleintop, chief global investment strategist at Schwab, says the economic data might not be enough to influence Fed chair Janet Yellen or change the central bank’s recent signals that rates might be temporarily on hold. “Does the FOMC tone change a little?” That’s what investors want to know, he says.

Further out, the political backdrop could bring more choppiness and a range-bound market, says Thomas Villalta, director of investment research at Covenant Multifamily Offices. “The electorate seems to want anything but a conventional party politician, whether Donald Trump or Bernie Sanders,” he says. Both represent uncertainty for investors and portend volatility, he adds.

February’s unemployment figures are due out Friday. Investors and the Fed will be examining them closely.

(Source: Barrons Online)

Stocks staged a sharp rally last week, with the major indexes rising nearly 3% in a holiday-shortened week. The market has rebounded almost 5% from the previous Thursday, when it hit 2016 lows, inspiring hope that at least a near-term bottom is within sight.

While investors welcomed the bullish turn, it was more style than substance. Given that buying was concentrated in the worst-performing stocks, last week’s rally seems more of a knee-jerk reaction to an oversold condition. Crude prices rose last week, and the lack of bad news from that sector was good news for stocks. In general, U.S. economic data was mixed but leaned positive, a badly needed boost to morale.

The Dow Jones Industrial Average tacked on 418 points or 2.6%, to 16,391.99 last week, while the Standard & Poor’s 500 index rose 53 to 1917.78. The Nasdaq finished with a 4% gain to 4504.43.

It was a “happy,” nearly 100-point jump in the S&P 500 over the past five trading days, says Jonathan Corpina, senior managing partner at Meridian Equity Partners. Nevertheless, “all the fear factors haven’t gone away,” and short covering helped. “It’s not as if the economic data or earnings-reports releases were particularly better last week.”

Bernie McGinn, CEO of McGinn Investment Management, concurs, adding that the rally had “more to do with bottom fishing than any major change in direction.” For months, the story’s been “energy, energy, energy, so when oil hangs around $30, as it did last week, that’s at least healthy.” Crude rose 0.7% to settle at $29.64 per barrel, snapping a two-week losing streak.

For the stock market to regain its equipoise, energy and financial stocks need to show strength, McGinn adds. Both sectors are down 14% over the past three months, the two worst sectors in the market. “Oil doesn’t need to get back to $75 per barrel, but even stabilization in the $30s” would take the edge off bearish attitudes, he says.

Meridian’s Corpina says Monday might be a good indicator for the action the rest of this week, as there’s little in the way of important economic indicators or earnings news to influence prices. The market will be on its own, he notes.

Looking ahead a few months, there are three factors that would help stocks the most, says Kevin Mahn, chief investment officer at Hennion & Walsh Asset Management. The market needs economic data to be good, but not so strong as to force the Federal Reserve to raise rates in March. The European Central Bank must continue to ease monetary policy, and a real deal on cutting the world’s supply of oil is necessary, he says. If things go the opposite way, however, then pressure on stocks will renew, Mahn adds.

(Source: Barrons Online)

Stocks slipped some 1% last week, but managed to rally from lows, thanks to a late-week rebound in oil prices and Friday’s comments from a Federal Reserve official that bolstered poorly performing bank stocks.

Financials were the second-worst-performing sector for the week, down 2.4%, but did the best Friday, up 4%. Wednesday Fed Chair Janet Yellen played down talk of negative interest rates as only a remote possibility. But investor chatter about it roiled markets, and New York Fed President William Dudley Friday said the debate about negative rates is “extremely premature…The U.S. economy is in quite good shape.”

Investors are antsy over the possibility of a negative-interest-rate policy, something employed in Europe and Japan to encourage growth. But such a program could hurt profits at banks, which would have to pay for reserves they keep at the Fed. A minor recovery in oil prices Friday helped improve investor sentiment, if only for a day. Crude rose 12% Friday to $29.44 per barrel, but was down 5% on the week.

The Dow Jones Industrial Average lost 231 points, or 1.4%, to 15973.84 last week, while the Standard & Poor’s 500 index dropped 15 to 1864.78. On Thursday, both indexes closed at levels not seen since 2014. The Nasdaq fell 0.6%, to 4337.51, for the week.

Thursday, crude received a boost after the United Arab Emirates energy minister said OPEC was ready to cooperate on production cuts, says Jason Ware, chief investment officer at Albion Financial Group. Though low oil prices are good for the global economy, the stock market continues to follow the oil market slavishly, he says.

What’s happening in the real economy isn’t as bad as traders’ screens would have it, he adds, pointing to U.S. January retail sales and weekly jobless claims data out last week that were above consensus.

Brad McMillan, chief investment officer at Commonwealth Financial Network, concurs. The market is slowly coming to terms with the removal of the Fed security blanket—its extraordinary easing policy. “The negative first-quarter earnings seasons is mostly behind us, and it’s gradually sinking in that this isn’t as bad as 2008,” he adds.

Still, the heretofore nonstop fretting in 2016 about Chinese economic growth magically disappeared last week. It might be because Chinese markets were closed last week for the Asian New Year, notes Louie Nguyen, chief investment officer at Soledad Investment Management. “It’s as if the play was missing its main actor,” he says.

When China returns from the wings this week, there could be some volatility if growth slowdown fears return, Nguyen adds. Moreover, on Monday, U.S. markets are closed for Presidents’ Day, and it might not be so relaxing for traders when Chinese markets reopen Sunday evening, U.S. time.

(Source: Barrons Online)

Stocks jumped Friday, turning an otherwise punk week into a winner. The major indexes rose about 2%, and investors cheered a surprise action by the Bank of Japan overnight Thursday to move its benchmark interest rate below zero.

With U.S. fourth-quarter gross-domestic-product numbers—out Friday morning—showing poor growth, 0.7% annualized, the BOJ move rescued a market worried that energy-sector carnage will hurt overall growth.

Crude oil, too, cooperated, up for a second consecutive week, 4.4% to $33.62 per barrel. A Federal Reserve statement Wednesday said it was watching “global economic and financial developments,” in a nod to market volatility over the past two months. However, the market was disappointed there were no indications it is backing away from the expected four rate hikes this year.

The Dow Jones Industrial Average gained 373 points, or 2.3%, to 16466.30 last week, while the Standard & Poor’s 500 index rose 33 to 1940.24. Both fell over 5% last month. The Nasdaq picked up 0.5%, to 4613.95, last week.

Some of the factors pressuring the market—weak oil prices and fear of a global growth slowdown—were temporarily relieved, says Peter Boockvar, chief market analyst at Lindsey Group. “The market continues to respond positively to any global easing,” he adds. The BOJ move was welcome given investors are fretting over whether the Fed will push back its rate-hike plan.

There will be diminishing returns to easing moves, however, predicts Boockvar, who notes many sectors and countries are already in a bear market, even if the  U.S. isn’t—yet. Bear markets—not bulls—are characterized by these sharp, violent moves upward, he adds.

Concern has grown that the oil-patch weakness of the past 18 months won’t stay confined to that sector and will eventually “leak into” and affect the wider economy, says Anwiti Bahuguna, a senior portfolio manager at Columbia Threadneedle Investments.

The equity rally could continue with more central bank action, she adds, but investors remain skittish. “If we don’t see better U.S. economic data, we haven’t seen the end of market weakness,” Bahuguna says.

Some investors might see two up weeks in a row as a turning point, but if that were true then why did defensive sectors—such as telecom, utilities, and consumer staples, up 3% to 4%—make up three of the top four sectors last week?

We are back to bad news is good again, something that’s characterized the market’s churning since midsummer. Since the top last May, with each new rally we’ve seen a cycle of lower highs, not a particularly encouraging sign.

(Source: Barrons Online)

Stocks finished more than 1% higher last week, but not before investors were treated to the market’s version of the Coney Island Cyclone, a ride equal parts thrilling and frightening. The scary nadir was reached Wednesday, when the two major broad indexes fell three-quarters of the way to a bear market, down about 15% from last May’s all- time highs.

On the week, the market dropped 4% before turning and soaring higher, finishing up better than 5% from the low. The violent moves were driven by similarly volatile oil prices, which hit a low Wednesday but finished up 9% on the week to $32.16 per barrel, up 21% from lows. Traders scrambled to cover their short positions.

Last week, the Dow Jones Industrial Average gained 105 points or 0.7%, to 16,093.51, and the Standard & Poor’s 500 index rose 27 to 1906.90. The Nasdaq picked up 2.3%, to 4591.18

Energy stocks jumped 2%. While the oil market ruled the day, equities also were boosted by comments about further stimulative central bank measures from officials in Europe and Japan last week. In the background, fears lurk about global growth, despite a decent 6.8% fourth quarter China GDP growth number released last week. Though a bit less than expected, it was much better than investors’ worst fears. Nevertheless, it was the lowest in a quarter century.

“There was a coiled spring of short positions” that were released in the upsurge, says Michael Purves, chief global strategist at Weeden. The oil bounce was particularly interesting as it occurred against a challenging backdrop of a rising dollar and news of rising U.S. crude supplies.

The oil rally is interesting from a historical view, as well. Two of the last three times crude prices closed up at least 9% on the week happened within the same week as a bottom in the stock market, in March 2009, and August 2015, according to WSJ Market Data Group.

Nevertheless, Adam Sarhan, CEO of Sarhan Capital, views last week’s recovery as just a relief rally from much oversold levels. Indeed, on Thursday, according to Bespoke Investment Group, the S&P 500 index had closed two standard deviations below its 50-day moving average for 11 straight days. Such a streak is rare, and the last one that long was October 2008, and before that September 2001.

Sarhan expects the broad stock indexes to enter a bear market and join many subgroups of stocks—commodity, small caps, banks, among others—already there. The market put in a “near term low” Wednesday, he says, but not “the low.”

Big violent rallies are par for the course in bear markets, not in bull markets, he adds. The market has not had a good time of it going right back to when the Federal Reserve ended its quantitative easing program in October 2014. The biggest driver of the bull was its easy monetary policy.

No moves are expected, but investors will be paying close attention this Tuesday and Wednesday, when the Federal Open Market Committee meets.

(Source: Barrons Online)

U.S. equities tanked for the third consecutive week, down another 2%. Investors were socked by high volatility, and the Standard & Poor’s 500 index finished in correction territory—defined as a drop of 10% or more from highs—for the second time since last August.

Once again, the debacle was blamed on fresh fears about slowing global and Chinese economic growth and on the now more than 16-month old slump in oil prices. Crude fell 11% last week to $29.42 per barrel. In June 2014, it was $107. That continues to take a painful toll on both the energy stock sector, down 2% last week and 44% since mid-2014, and the broader market as well.

Bank stocks fell into a bear market last week—defined as a 20% drop or more from highs—as investors expect the Federal Reserve will slow down the pace of interest-rate hikes.

Last week, the Dow Jones Industrial Average fell 2.2 that was a 358-point fall for the Dow, to 15,988.08. The S&P 500 Index fell 42-points to 1880.33—and off 12% from highs. The NASDAQ fell 3.3%, to 4488.42.

The volatility caused by oil and China derives from the same investor concern: the state of domestic and global demand, says Peter Kenny, independent equity strategist at Kenny and Co. Last year, the slow-but-steady U.S. economy was the rock upon which the market’s high was built. Now, he adds, the latest U.S. numbers—whether gross domestic product, retail sales, or industrial production—seem to suggest a waning economy.

Kenny says he is cautious near-term, adding “It’s not unreasonable to think we’ll flirt with a bear market.” Some sectors are already there, such as bank stocks and small companies. For the bull to return, the market needs demand to improve, the Fed to hold off, and oil to stabilize, he says.

He’s not alone: “Without an improvement in oil prices and energy stocks, it becomes very difficult for this market to rally,” adds JonesTrading market strategist Yousef Abbasi.

Normally, a Monday holiday would be welcome after such a week, but Abbasi notes a slew of Chinese data will be issued next week, including GDP and industrial production on Monday evening in the U.S. “If it’s light, it could send global demand expectations lower again.” The fourth-quarter earnings report season will be in full swing next week, too.

Friday, December industrial production fell for a third straight month, the Fed said, off 0.4% from November, and dragged down by utilities and mild weather. It was worse than the -0.2% consensus.

Not everyone is gloomy. David Kelly, chief global strategist at JPMorgan Asset Management says he expects the market turmoil to last two weeks or so, adding investors shouldn’t succumb to emotional reactions during these violent swings. The correction needs fuel to keep going, he says, but the state of China, oil prices, the U.S. economy, corporate earnings, and equity valuations don’t support the downdraft.

(Source: Barrons Online)

Stock markets around the world slumped 6% right off the bat in 2016, and the two major U.S. indexes—the Dow Jones Industrial Average and Standard & Poor’s 500—suffered their worst opening week in history. The Dow is now in correction territory, off nearly 11% from its high, while the broader S&P 500 is a hairbreadth away, down 9.8% from highs set last May.

A 1.5% drop in the Chinese yuan and a 10% plunge in China’s stock markets combined last week with sliding oil prices to knock down every big equity market on the planet. That giant whooshing sound you heard? More than $2.2 trillion sucked out of global equity markets in just the first four trading days of the year, according to Bank of America Merrill Lynch chief investment strategist Michael Hartnett.

Chinese authorities engineered the largest reduction since August in the value of the yuan, much to the markets’ surprise. The move reignited concerns about China’s sagging economic growth, and left investors wondering if the currency will fall further.

Stock-trading halts and severe volatility in China’s market unnerved U.S. investors, but a panic it wasn’t.

In part, that’s because Friday’s report on U.S. job growth was far stronger than expected. The Labor Department said nonfarm payrolls rose by a hefty 292,000 in December. The unemployment rate was flat at 5%. U.S. stocks popped on the news, but later gave up their moderate gains.

The Dow lost 6.2%, or 1,079 points, last week, to 16.346.45, and the S&P dropped 122 points, to 1922.03. The average stock in the S&P 500 index is in a bear market—that is, down 22.6%, according to Bespoke Investment Group. Meanwhile, the Nasdaq plummeted 7.3%, to 4643.63. The MSCI World Index lost 6%.

Some investors consider the turmoil in China, which authorities have been at a loss to combat, to be on par with what the U.S. experienced in 2008, says Michael Yoshikami, CEO of Destination Wealth Management. “That isn’t my view,” he says. The correction and a continuing improvement in employment suggest consumer stocks, such as retailers—down 9% since mid-November—could be an opportunity, he adds. “The jobs data shows the U.S. economy is on track.”

Still, the uncertainty of China’s currency situation is nagging at sentiment, says Joe Saluzzi, co-head of trading at Themis Trading. How long will it last? Is it going to be a drip-drip-drip drop in the yuan or a big devaluation? Does it mean China’s growth continues to slow? “These are the questions being asked,” he says, “and no one knows the answers.”

(Source: Barrons Online)

When the whistle blew at the close of trading Thursday, New Year’s Eve, the stock market finished a disappointing week and year, with both posting a nearly 1% loss. In light of the optimism that rang in 2015, there was little joy on Wall Street.

The annual drop was the first since 2008. So much, too, for the traditional Santa Claus rally: Stocks fell 1.8% in December. In quiet, holiday-shortened trading last week, equities moved in lockstep with oil prices. Oil ended at $37.04 a barrel, down 3%, and off 31% for the year, not far from seven-year lows. The Dow Jones Industrial Average lost 0.7%, or 127 points, to 17,425.03 on the week. In 2015, the Dow limped to a negative 2.2% finish. The Nasdaq Composite Index, replete with strong tech stocks, fell 0.8% last week to 5007.41. For 2015, it finished in the black, up 5.7%.

Given the problems faced over the past 12 months—weak corporate earnings, declining commodity prices, and slow global growth—the fact “that the market finished essentially flat is a testament to its resilience,” avers Douglas Coté, chief market strategist at Voya Investments.

Energy was “the” story in 2015, according to Jonathan Golub, chief equity strategist at RBC Capital Markets. The price of oil “significantly affected both its own sector and the rest of the market.” It’s no coincidence, he adds, that the market’s poor 2015 performance reflected weak growth in the S&P 500 index’s earnings per share.

In 2015, stock gains weren’t shared evenly. The market-cap-weighted S&P 500 index was boosted disproportionately by a handful of successful big caps. Jessica Binder Graham, a Goldman Sachs analyst, identified how many points these performers contributed to the S&P 500 index level of 2044: Amazon (AMZN), 15.8; Alphabet (GOOGL/GOOG), formerly Google, 15.8; Microsoft (MSFT), 8; Facebook (FB), 6.5 points. If you exclude these names, along with four other big-cap gainers, the S&P 500 would have been down 4%.

The average S&P 500 index stock was down almost 4%, according to Bespoke Investment Group. The narrowness of 2015 gives pause for this year.

(Source: Barrons Online)