|Day's Range||N/A - N/A|
Monetary policy has been eased and forward guidance has been strengthened via an open-ended QE [quantitative easing] program. The market implications from today’s measure will be dominated by the trend in global growth, something out of the ECB’s control.
It wasn't necessarily an unlucky Friday the 13th on Wall Street, but it was lackluster and indexes closed with minor change and growth stocks lost more ground.
Until last week, small-cap stocks’ underperformance was a frequently cited reason for bearish equity market forecasts. The Russell 2000 (RUT) popped 8.8% after sitting at a six-month low just a couple weeks ago. From Sept. 9-11, the Russell 2000 recorded three consecutive daily gains of more than 1% each, a rare feat.
Guess we'll see, but there is no doubt, that with trade headlines swirling, a more aggressive (than I expected) ECB, and the Fed ready to step to the plate next week, all with markets teetering on, but not quite at what I see as technically over-bought conditions. On the other hand, trading volume was notably lower at both of New York's major exchanges despite the churn... in fact far lower than on more positive trading days earlier this week.
Still, we believe the energy sector is setting up another great trade opportunity for skilled technical traders. Watch how this sets up below $46 and watch for deeper price moves below $45. Once the momentum base is set up, the upside price move should be very clean and fairly quick.
The stock market battled as Trump delayed the tariff increases, and the European Central Bank cut interest rates for the first time since 2016.
The surprises included Oracle Corporation (NYSE: ORCL) announcing earnings a day early (see more below) and President Trump tweeting that new tariffs on China would be delayed two weeks in what he called a “gesture of goodwill.” Stock futures seemed to get a lift from the trade announcement, especially coming after yesterday’s news that China would exempt some U.S. products from its tariff list. In what had to be one of the more widely anticipated moves in recent history, the European Central Bank (ECB) probably surprised few if anyone today when it lowered its deposit rate by 10 basis points and announced new quantitative easing (QE).
The S&P 500 index (SPX) jumped to close just above 3,000 on Wednesday, its eighth gain in the last 10 sessions, and the Dow Jones Industrial Average (DJIA) rose for the sixth straight session to end solidly above 27,000. The Nasdaq Composite index (COMP) is less than 2% off its record peak, and the small-cap Russell 2000 index (RUT) and the bellwether Dow Jones Transportation Average (DJT) , which lagged the other averages, have rallied sharply in recent weeks. This comes amid worries about yield curve inversions, recession (60% of Americans think one’s coming in the next 12 months, according to the latest ABC News/Washington Post poll), trade tensions, negative interest rates in Europe and Japan, and slumping global economies.
U.S. stocks close higher Wednesday, as global equities rose amid optimism over trade disputes and expectations for additional central-bank stimulus.
After being trounced by its large-cap brethren, small-capitalization stocks, as measured by the Russell 2000 index, have outperformed the Dow Jones Industrial Average and the S&P 500 index handily recently, further highlighting a shift in investor bets that has played out over the past several sessions.
The Dow Jones Industrial Average on Wednesday matched its longest win streak since June and small-capitalization stocks surged by 2% as hope of easy-money policies provided a boost for stock buying. The European Central Bank will deliver a policy decision on Thursday morning, which could influence the Federal Reserve's actions next week, market participants said. The Dow closed up 228 points, or 0.9%, at 27,137, marking its sixth straight gain, the longest win streak since a similar rally ended June 10 and putting blue-chips 0.8% away from its July 15 record at 27,359. The S&P 500 closed at a psychologically important level above 3,000, up 0.7% at 3,000.93, putting the broad-market benchmark also 0.8% shy of its recent high on July 26, while the Nasdaq Composite Index rose 1.1% to 8,170, putting the index about 1.9% short of its recent peak. But the best performance has been among small-caps, as measured by the Russell 2000 index , which was up more than 2% on Wednesday and has gained 4.6% so far this week, besting all three main stock benchmarks for the day and week.
If stocks do get a boost, it will likely be in sync with a bond market that remains under pressure. Weakness in bonds might bode well for Financial stocks again today, so we’ll see if they can help lead the way. The other theme today might be sector rotation (see more below).
(Bloomberg) -- The Phillips Curve is in doubt, the bond market is distorted and a tweet from President Donald Trump can shift the trajectory of global markets in a matter of seconds.In a world where traditional touchstones of fund strategies are being challenged by unprecedented economic-policy uncertainty, investors are seeking information not tapped before or better ways to sift through it. Some are stepping up the use of machine-learning to capture market sentiment on everything from the trade war to recessions. Whether these strategies are more effective than conventional methods remains to be seen, but they’re already paying off for some funds.In a Bleecker Street loft in downtown Manhattan, Vasant Dhar, the founder of a $400 million hedge fund and a pioneer of AI investing, finds his computer-driven trading is just the thing for the Trump era. He uses a program that captures not just securities prices, economic data and news sentiment but also market fears -- studying patterns of volatility. In Boston, Eaton Vance Corp. has a four-person data science team studying anonymous credit-card spending information, customer sentiment from social media and ETF flows on top of the fundamental work of its equity portfolio managers.“At times, the market has been behaving like a naive schizophrenic that puts all faith in only the most recent trade tweet,” said Eddie Perkin, chief equity investment officer at Eaton Vance. “As humans, we know we have intellectual biases that can lead us to flawed decision-making such as reacting to false signals from the market. We have built our investment processes to address this and help keep us out of trouble.” The approach has helped Eaton Vance’s Small-Cap Fund gain 22% year-to-date, almost double the Russell 2000 Index’s 11.6% increase.A lot that markets relied on in the past has been turned on its head. The challenge to the Phillips curve -- the notion of a trade-off between low unemployment and higher inflation -- is clear, with Federal Reserve Chairman Jerome Powell saying in Zurich last week that it’s “not what it was.” Many say the bond yield curve, once a barometer for economic outlook, has lost its predictive edge after central banks’ unprecedented monetary stimulus. A U.S. president who makes major policy announcements through tweets has many funds scrambling to account for the heightened turmoil.The U.S.-China trade war, Brexit and political tensions in Hong Kong are just some of the points of global uncertainty that could cause further market turmoil. Trillions in government-debt purchases by central banks have driven the term premium -- or the extra compensation investors required to own long maturities rather than roll over a shorter-dated obligation -- to record lows. More than $15 trillion in global bonds now have yields below zero and the voracious search for safety has sent Treasury yields plunging.The level of global policy uncertainty is not only palpable to investors but also measurable. A global composite index of economic-policy uncertainty of 20 countries hovers near a record high reached in December.Against that backdrop, analysts at JPMorgan Chase & Co. have created an index to gauge the impact of Trump’s tweets on U.S. interest rates, which they say is on the rise. The ‘Volfefe Index’, named after Trump’s mysterious ‘covfefe’ tweet, suggests that the president’s posts are having a statistically significant impact on Treasury yields. Quants at Citigroup Inc. are sending currency-market clients notes analyzing Trump’s missives on Twitter.“I don’t think a lot of people are systemically hedging their trade-factors exposures,” said Basil Qunibi at Atom Investors LP, a hedge fund in Austin, Texas, he founded. “That explains the fact that when there is a tweet or a significant change in tariffs or the trade war overall, people tend to react in a pretty aggressive way.”The Dow Jones Industrial Average slid as much as 600 points on Aug. 23 amid a Trump tirade after China imposed new tariffs on American goods. Trump followed with tariffs on roughly $110 billion in Chinese imports on Sept. 1.Trade woes have added headwinds to the Fed’s struggle to get inflation toward its 2% target even amid a robust U.S. labor market, which includes an unemployment rate hovering around half-century lows. The European Central Bank is so concerned about its failure to lift inflation, it’s seen announcing a large stimulus package on Thursday.For people like economist-turned-investor Stephen Jen, who’s the chief executive officer of Eurizon SLJ Capital, the market is right to pay attention to Trump’s tweets because the U.S. president tends to do what he says. Jen’s more worried that central banks may have failed to catch up with the structural changes in inflation, which is increasingly being influenced by globalization, technology, and demographics. That’s due in large in part to players like Amazon.com and Alibaba Group Holding Ltd. who source and deliver all over the world.“Inflation is now a global variable, not a local variable, and it should be dealt with in a global context,” said Jen. “We are now left with a situation where central banks are still committed to inflation targeting they set up 20 years ago. Their navigation system may be outdated, and we might end up being an 18-wheeler that gets stuck in a small village.”Falling inflation expectations, plunging bond rates and flatter yield curves all point to mounting doubts in financial markets over whether monetary policy makers have what it takes to reflate their economies and avert a global recession.Uncertainty has become a global whack-a-mole game, with the temporary calm in one hot spot merely being surpassed by blow ups in others.As the geopolitical twists and turns and the streams of tweets from Trump roil markets, in his loft in Manhattan, Dhar, who’s also a professor of data science and artificial intelligence at New York University, is pleased that some years ago he put computers in full control of the Adaptive Quant Trading program that he developed for his hedge fund SCT Capital Management LLC.“You just can’t figure out what will happen with the trade war,” he said. “It doesn’t mean you’re not concerned, but you’re not chasing your own tail and wondering what to do next and what’s Trump going to say, what’s he going to tweet. That stuff factors into the fund’s positioning but indirectly through the patterns it sees in prices and volatilities.”\--With assistance from Nishant Kumar.To contact the reporters on this story: Liz Capo McCormick in New York at email@example.com;Anchalee Worrachate in London at firstname.lastname@example.orgTo contact the editors responsible for this story: Benjamin Purvis at email@example.com, ;Samuel Potter at firstname.lastname@example.org, Vidya RootFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Stocks actually spent most of the session under pressure, but a late session rally helped the S&P; 500 and Dow erase those early losses. The late surge was fueled by a recovery in industrial, energy and health care stocks. Higher U.S. Treasury yields helped bank stocks post solid gains.
U.S. stock benchmarks closed mostly higher Tuesday, delivering a late-session jolt higher, backed by gains in energy and materials as bond yields jumped. Meanwhile, small-capitalization stocks delivered a marked outperformance against large caps, underscoring a rotation that appeared to be playing out in the market over the past few sessions, away from higher momentum stocks. The Dow Jones Industrial Average finished nearly 74 points at 26,909, booking a fifth straight gain, which would be its best streak since a six-session climb ended June 10. The S&P 500 index closed less than 0.1% higher at 2,979, buoyed by a surge in the energy sector , up 1.3%, and materials , which gained 1%, offsetting selling in information tech , down 0.5%, and consumer-staples shares , off 0.6%. The Nasdaq Composite Index finished down less than 0.1% to close at 8,084. All three benchmarks took a late burst higher in the final minutes of Tuesday trade. Separately, the small-capitalization oriented Russell 2000 index climbed over 1% on the day, surpassing the other major benchmarks. The moves come as the 10-year Treasury yield climbed more than 10 basis points to 1.72%. Bond yields rise as prices fall. In corporate news, Apple Inc. (TICKER:AAPL) shares gained 2.5% as it announced new model iPhones and other products at its annual launch event Tuesday afternoon.
Small-capitalization stocks rallied Tuesday, with the Russell 2000 index rising about 13 points, or 0.9%, to 1,538, above its 50-day moving average of 1,527.18. If gains hold, it would be the first time the index closed above the 50-day trend since August 1. While the large-cap S&P 500 index sits about 2% from its record high close of 3,025.86 set on July 26, the Russell 2000 remains 11.7% below its record close of 1,740.75, set on Aug. 31, 2018. The struggles of small-cap stocks have been pointed to by stock-market bears as evidence that U.S. corporations are broadly struggling, even as large-cap companies that dominate the S&P 500 have seen their valuations rise.
U.S. stocks showed breakouts and attempted breakouts Tuesday. JPMorgan, Air Lease and Conn's tried for breakouts. Legg Mason broke out, but in low volume.
Everyone is talking about the great rotation out of growth and into value stocks. Can it last? Will it last? I wish I knew the answer. What I can tell you is that value has been out-performing growth, using two of the Russell 2000 exchange-traded funds -- the Russell 2000 Value exchange-traded fund vs.
Investor Michael Burry, who was featured in the film "The Big Short" and made a killing betting against collateralized debt obligations during the 2008 crisis, recently claimed that the popularity of index funds is creating a bubble.
China waived import tariffs on 16 U.S. goods. This is the first time Beijing issued exemptions since the trade war began. Charles Schwab Chief Investment Strategist Liz Ann Sonders joins Yahoo Finance's Adam Shapiro, Julie Hyman, and Scott Gamm to discuss.
Yahoo Finance's Alexis Christoforous, Brian Sozzi and Jared Blikre discuss what's moving the markets with Keith Fitz-Gerald, Money Map Press Chief Investment Strategist and Sarah House, Wells Fargo Securities Senior Economist around Wednesday's opening bell.