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March was a very strong month for the markets, and many bulls argued the trend would continue and new highs were soon to be achieved. But the markets have slowed as they approached the recent highs from December. SPX closed today at $2081, down $2 and RUT closed up $2 at $1131.
The recent highs in SPX were $2078 on 12/29, $2103 on 12/1, and $2110 on 11/3. Contrary to much of the hoopla in the financial press, SPX has barely reached the late December highs and appears to be losing its momentum. Thus far in this earnings season, earnings declines from year over year comparisons have been ignored. Bad news is good news. I don't see economic data worthy of recession fears, but I don't see booming economic data either.
Trading volume was modestly higher today, surprising for an option expiration Friday. Trading in the S&P 500 came in at 2.1 billion shares, remaining well off the 50 dma. Trading volume rose 4% on the NYSE and rose 2% on NASDAQ.
Volatility was largely unchanged with the VIX at 13.6% (down a tenth of a point).
The Empire manufacturing survey moved up in April to 9.6 from last month's 0.6. Industrial production continued to decline in March, down 0.6%, after declining 0.6% in February. Capacity utilization declined a bit to 74.8% for March, down from 75.3% in February.
SPX settled at $2083.83 today. RUT still had not posted its settlement price as I write this blog. You may download a spreadsheet of SPX and RUT settlement prices in the downloads section of my web site.
Data point for defunct bureaucracies: A friend of mine appealed a mistake in her property tax assessment and the tax assessor said she would have to wait for her refund until the next installment of taxes are paid in June because they are out of money...
I am going to mow the lawn for the first time this season this weekend. I know, I know. You've been mowing for a month already. We can't afford to grow grass here in Illinois.
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J.P. Morgan reported lower earnings this morning, but the picture wasn't as bad as analysts expected, so JPM traded higher and led the market higher. Analysts have been predicting lower earnings for the first quarter for the past several weeks, and JPM seemed to deliver on that prediction. But the bulls are determined to see the glass half full, so bad news became good news.
SPX gained $21 to close at $2081. RUT also traded higher, with a close at $1130, up $24. The VIX dropped a full point to 13.9%. Trading volume was up slightly with 2.5 billion shares of the S&P 500 stocks trading today, but remains below the 50 dma at 2.6B.
The Producer Price Index (PPI) reported a slight decline (-0.1%) for March, close to last month's -0.2%. Retail sales declined 0.3% in March. One of the mysteries of lower gas prices has been how little of that bonus has shown up in retail sales. Perhaps consumers are saving money for a rainy day?
Earnings reports for the banks continue tomorrow with several notable names including Bank of America and Wells Fargo. CitiGroup follows on Friday. Will the market continue to shrug off declining earnings and mediocre economic data? Maybe this is the bull market "climbing the wall of worry?"
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Markets hesitated today as Alcoa was set to kick off this earning season. SPX opened higher but couldn't hold the highs and closed down $6 at $2042. RUT lost $3 to $1094. Volatility rose about one full point with the VIX closing at 16.2%. Trading volume was basically flat with 2.1 billion shares of the S&P 500 trading today. Trading volume rose 7% on the NYSE, but fell 3% on NASDAQ.
Alcoa (AA) beat analyst earnings estimates but missed sales estimates, so shares were lower in after hours trading. Traders often watch AA for a guage of basic industrial strength. The big banks report later this week and will be watched for additional clues of overall economic strength. Analysts' earnings estimates have been revised downward significantly more than usual as the first quarter progressed, so more attention than usual is being paid to the sales and earnings data as well as the outlooks for the next quarter for the blue chip stocks.
Several members of the FOMC are speaking this week in advance of the beige book being released Wednesday. I am unsure all of this increased transparency is good for the markets. It seems to contribute to the daily price volatility.
If earnings do come in lower this quarter as analysts have predicted, today's market weakness may be the new normal for several weeks.
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The markets opened lower this morning but then bounced higher with SPX tacking on twenty dollars to close at $2062. RUT gained $11 to $1106. Volatility retreated with the VIX closing down 1.4 points to 14.9%. Trading volume popped higher with 2.4 billion shares of the S&P 500 companies trading. Trading volume on the NYSE rose 19% and volume rose 15% on NASDAQ.
No significant economic data was reported today. The Fed's beige book (minutes from the last meeting) will be issued tomorrow afternoon. Those minutes could be market moving, depending on the recorded discussions. Analysts are looking for clues for the timing of the next interest rate hike.
Even with today's large move, the trend of SPX remains sideways. A break above $2075 would be necessary to start to take the bulls' case seriously. I fail to see the economic data to make the case for a strong bull market. But the market could trade higher on the back of the Fed. That is why the beige book release is potentially significant.
J. P. Morgan reports earnings tomorrow morning. That could set the tone for the market opening tomorrow, but then the beige book takes over in the afternoon.
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Several reports of the decline of first quarter earnings have been receiving a lot of attention on Wall Street. FactSet summarized the changes of analyst earnings estimates for companies in the S&P 500 for the first quarter of 2016. The aggregation of the earnings estimates for all the companies in the index dropped by 9.6% during this period. By comparison, the average decline in quarterly earnings estimates over the past 10 years is 5.3%. Analysts don’t like what they are seeing in 2016 and this began to weigh on the market in this week's trading. SPX dropped $21 to close at $2045 and RUT lost $13, closing at $1096. Volatility rose with the VIX closing up 1.3 points to 15.4%.
Trading volume rose today with 2.5 billion shares of the S&P 500 companies trading. Trading volume rose 15% on the NYSE but was nearly flat on NASDAQ (up 0.4%).
The ISM services index came in at 54.5 for March, up from 53.4. JOLTS job openings dropped slightly in February, from 5.604 million to 5.445 million.
An article in IBD today speculated that the high tech sector may be particularly hard hit in this earnings season. FactSet's report issued last week, but that story is gaining visibility and worrying traders. All of the craziness of the presidential primaries probably isn't helping either.
