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Stocks Mixed as Retail, Trade Remain In Focus

Stocks Mixed as Retail, Trade Remain in Focus.

Tuesday, February 19, 2019, 12:31 PM, EST

Market Movers

  • Stocks reacting to European Union statement on retaliatory tariffs
  • Walmart results beat expectations and help the retail sector.
  • NAHB Housing Market Index was reported at 62 vs. 59 est.

Mike’s Commentary

Stocks today are slightly negative but off earlier lows on trade concerns. The European Union said it would retaliate promptly if the U.S. imposes tariffs on imported vehicles. This reminded traders that despite positive talk lately, there has been no resolution on trade discussions with China and no guarantee this will all devolve into a retaliatory tariff mess. Recall that on Christmas Eve the Dow traded briefly below 22,000.

Since then stocks have rallied, with the Dow up for eight straight weeks with 26,000 in its sights. The S&P is up 7 of 8 weeks owing to one 0.2% weekly loss during the week of January 21st. Much of this gain has been driven by the Fed’s more accommodative stance on rates, but at least part of the positive sentiment has to do with U.S./China trade talks, which resume again this week.

According to Bloomberg, Moody’s says the disruption from the imposition of up to 25% of tariffs on autos by the U.S. and the corresponding retaliatory actions from auto-trading partners would account for 2.8% of 2017 world imports and 0.6% of 2017 world GDP. Any hiccup here would likely ding stocks. In earnings news Walmart gained over 3% after beating on revenue and earnings with strong comparative store sales and a 43% gain in e-commerce sales.

Last week it was announced that U.S. retail sales for December fell 1.2%, the lowest monthly reading since 2009. The number was so low it caused some analysts to question the validity of the data, particularly in light of private reports that suggested that the holiday season was pretty strong. The strong WMT results added a few more comforting data points to the debate.

For earnings season so far, according to FactSet, 79% of the companies in the S&P 500 have reported results for Q4 2018 with 70% beating on EPS, slightly below the five-year average of (71%). Companies are reporting earnings that are 3.5% above the estimates, also below the five-year average (+4.8%). The percentage of companies reporting actual revenues above estimates (62%) is above the five-year average (60%), with revenues that are 1.1% above the estimates, also above the five-year average of 0.7%. Most of the earnings are behind us, the Fed is dovish again and the catalyst to move stocks higher will be developments – one way or another - on trade.

Sector performance is mixed today with six industry groups led by Consumer Staples and Discretionary stocks along with Utilities trading higher with five groups trading lower with Energy faring the worst despite oil adding $3/bbl. in the past week. Today we had the Children’s Heart Foundation NY Chapter ring the opening bell. The charity funds research into congenital heart defects among children. We don’t want to get preachy but listening to the stories sure adds a dose of perspective to our daily market focus.

Economic Calendar:

Date Time Event Survey 02/19/2019 10:00

NAHB Housing Market Index 5902/20/2019 07:00

MBA Mortgage Applications02/20/2019 14:00

FOMC Meeting Minutes 02/21/2019 08:30

Philadelphia Fed Business Outlook 1402/21/2019 08:30

Initial Jobless Claims 228,00002/21/2019 08:30

Continuing Claims 1.74 million 02/21/2019 08:30

Durable Goods Orders 1.70%02/21/2019 08:30

Durables Ex Transportation 0.30%02/21/2019 09:45

Markit US Manufacturing PMI 54.8--02/21/2019 10:00

Existing Home Sales 5.00 million 02/21/2019 10:00

Existing Home Sales MoM 0.20%

Sector Recap

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Brian’s Technical Take

In 2018, bitcoin experienced its worst annual performance on record with a decline of 74.3%. It’s one other year in the red occurred in 2014 with a decline of 57.5%. While 2018’s decline was approximately 16 percentage points worse, the overall cyclical declines for each period were nearly identical. And there are other similarities that may suggest THE lows for the cycle are in. From late 2013 into early 2015, bitcoin declined 86%, nearly identical to the 84% decline that ended at the recent lows made in mid-December 2018.

The duration of each cyclical correction was also very similar with the former taking 13.5 months while the latter took 12-months. In addition the prior cyclical low in 2015 bottomed right along its 200-week moving average, which is exactly where the December 2018 low bottomed (see red line). One only needs to look at where the S&P 500 stock index bottomed in December 2018 (hint: its 200-week sma) to know this moving average can often act as a cyclical low within a larger secular uptrend for any security type.

After the prior decline in 2014, bitcoin rallied 36%, 120% and 1,403% over the next three years. This certainly does not mean history is a lock to repeat, but at the very least we know this relatively new asset class has proven it can perform. So far this week bitcoin has gained 10.6% WTD which brings it back into the green for 2019 with a +7.3% YTD return. Yesterday’s 8% gain was its first close above its 50-day sma since early November, while todays modest 2% gain has moved above a 10-week resistance line.

These are minor achievements, but all great journeys start with a single step. While it is far too soon to declare THE cyclical lows have already been made for bitcoin, waiting for that moment to come, if it ever does, means you have missed much of the recovery. I do find interesting the similarities of both corrections in terms of percentage, duration, and the 200-week moving average which may suggest bitcoin is in the early stages of a new cyclical uptrend. Over the near term there are a number of resistance levels on the way up to the 4,500 line, however above there and the next major resistance is well above at 5,900. Small steps, bit by bit!

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Nasdaq's Market Intelligence Desk (MID) Team includes:

Charles Brown is Associate Vice President on The Market Intelligence Desk with over 20 years of equity capital markets experience. Charlie has extensive knowledge of equity trading on both floor and screen based marketplaces. Charlie assists with the management of The Market Intelligence Desk and works with Nasdaq listed companies providing them with insightful objective trading analysis.

Steven Brown is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq with over twenty years of experience in equities. With a focus on client retention he currently covers the Financial, Energy and Media sectors.

Christopher Dearborn is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq. Chris has over two decades of equity market experience including floor and screen based trading, corporate access, IPOs and asset allocation. Chris is responsible for providing timely, accurate and objective market and trading-related information to Nasdaq-listed companies.

Brian Joyce, CMT is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq. Before joining Nasdaq Brian spent 16 years as an institutional trader executing equity and options orders for both the buy side and sell side. He also provided trading ideas and wrote technical analysis commentary for an institutional research offering. Brian focuses on helping Nasdaq’s Financial, Healthcare and Transportation companies, among others, understand the trading in their stock. Brian is a Chartered Market Technician (CMT).

Michael Sokoll, CFA is Associate Vice President on the Market Intelligence Desk (MID) at Nasdaq with over 25 years of equity market experience. In this role, he manages a team of professionals responsible for providing NASDAQ-listed companies with real-time trading analysis and objective market information.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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