Market in a Minute: April 8-12, 2019
by Rich and Sheila Jamison
Stocks and the Treasury yields rose on signs of stabilization in the global economy and inflation. The Dow Jones Industrial Average slipped, but too little to show up in the table. The yield curve further “un-inverted.”
WTI crude oil climbed again, hitting $64.15/barrel amid supply disruptions in Libya. Volatility (i.e., the VIX) fell to 12.0 from 12.8 a week ago.
Treasury secretary Mnuchin said that a method for enforcing a trade deal has been agreed to. Some details remain to be worked out, including the disposition of the existing tariffs. China wants them ended immediately. We prefer to phase them out. Mnuchin offered no timetable for a finished deal, adding he hoped it would be completed quickly.
Unemployment claims fell to their lowest level since October 1969, a time when the labor market was much smaller. Data show that while the pace of job gains has slowed recently, it still can absorb new workforce entrants.
The FOMC March meeting minutes disclosed that most members expect the economic outlook suggests no interest rate hikes for the rest of 2019. They commented that inflation has not picked up in response to strong labor market conditions or short-term upward price pressure from tariff increases.
Q1 earnings season kicked off in earnest. Analysts now forecast a 4.5% year-over-year drop in S&P 500 Index earnings per share, the first year-over-year decline in EPS in three years. They see the tax reform tailwind as dissipated, margins coming under pressure and dollar strength remaining as a headwind. Still, JPMorgan reported record revenue and net income.
Chevron announced it is paying $33 billion to acquire Anadarko Petroleum. The news fueled (get it?) gains in many smaller energy companies.
Disney surged to a new-all time high after announcing its new Disney+ streaming service.
The IMF lowered its global economic growth outlook. It trimmed its forecast to 3.3%, down from January’s 3.5%. Slowing growth in China, US/China trade conflict spillover and tighter financial conditions contributed. However, it expects growth to rebound in the second half of 2019.
Brexit has been postponed … again. The European Council granted the UK a second Article 50 extension. British Parliament now has to pass an EU-accepted agreement by October 31. As we’ve seen repeatedly, this likely will not be a walk in the park for Prime Minister Theresa May.
China appears to be perking up as the government's stimulus efforts begin to gain traction. Credit growth surged with total bank lending reaching a record 13.7% in Q1 and March export growth rebound sharply – thought the Lunar New Year’s seasonal distortions continue to muddy the data. The general view is that the world's second-largest economy is showing signs of stabilization after a sharp slowdown in 2018.
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