Bull market crunch time, China stocks pop & MSG split: What to watch
Here are three things to watch as the trading week kicks off...
Number 1:
The calendar. With two trading days until the end of the first quarter, the S&P 500 (^GSPC) is within pennies of where it began the year.
The index is riding a streak of eight straight quarters of gains, so the next two days will determine if it stretches to nine. This wouldn’t nearly be the longest such stretch in memory: The market climbed for 14 consecutive quarters during the Clinton-era bull market nirvana from 1995 to 1998.
This is mostly stock market Rotisserie League stuff – collecting and debating statistical fragments for an excuse to have something to talk about.
But there is some significance to the scorecard at this moment, because if the index nudges higher it would mean the market was up for three straight quarters when total corporate profits declined.
This is the market we find ourselves in: Profit momentum has waned, stock buybacks haven’t been an automatic recipe for higher stock prices, but the market isn’t yet egregiously expensive, nothing else is much cheaper and the economic trend is OK for now.
We’ll start to hear a lot this week about how April is one of the strongest months of the year, historically. So the almanac, at least, is telling you not to get too nervous yet.
Number 2:
The China trade. Stocks in Shanghai again popped higher overnight, again on indications that the authorities there will gun the financial stimulus to support growth soon.
In our market, this action will be chased through a handful of exchange-traded funds that track the Shanghai A-shares market and have pulled in billions of fresh dollars of late.
The Deutsche Bank X-Trackers Harvest CSI 300 China fund (ASHR) is a favored vehicle for people here playing the Mainland momentum trade. It’s up more than 10% this year, 86% the past 12 months and looks to gain close to 3% in early trading today.
Make no mistake, though, this is mostly about momentum and hope of easier money flowing in China. The traditional accompaniments to a China resurgence are absent. Iron ore prices are plumbing new lows, as industrial goods in general go begging.
The Wall Street Journal over the weekend chronicled how the hobbyist individual traders are hyperactive again in China stocks. By some measures, this is the seventh liquidity-stoked bubble in the Shanghai market since the 1990s. They tend to run until the money masters in China clamp down with new regulations or start draining liquidity.
Neither seems imminent, but that’s the game you need to handicap if you want to stay at this betting window.
Number 3:
Nobody inside Madison Square Garden is cheering more loudly than its shareholders right now.
Sure, the Madison Square Garden Co.’s (MSG) New York Rangers are leading their division, but c’mon – that’s hockey and the playoffs have months to run. The current version of the Knicks is the most expensive mess in the history of the franchise.
But the parent company has been almost flawless for investors, wising a stunning 300% in the past five-plus years since being spun off from Cablevision Corp. (CVC).
Now, MSG is trying to repeat the game plan, announcing late Friday it would split again, separating the sports teams and arena from its cable networks.
Wall Street loves spinoffs of distinct businesses, and it loves playing with crazy estimates of what New York real estate is worth vis-à-vis the Garden itself. The stock will get a lift on the breakup news. But it’s not at all clear how much untapped value remains in this company after its stupendous stock performance of the last few years.
