Stock Market Today: January 7th - 11th, 2019

Welcome Stockaholics to the trading week of January 7th!

This past week saw the following moves in the S&P:



Major Indices End of Week:




Major Futures Markets on Friday:



Economic Calendar for the Week Ahead:



Sector Performance WTD, MTD, YTD:








What to Watch in the Week Ahead:

• Monday

Earnings - Commercial Metals, Steve Madden

10:00 a.m. ISM nonmanufacturing

10:00 a.m. Factory orders

12:40 p.m. Atlanta Fed President Raphael Bostic

• Tuesday

Earnings – Helen of Troy, Lindsay, Smart Global

6:00 a.m. NFIB survey

8:30 a.m. International trade

10:00 a.m. JOLTs

3:00 p.m. Consumer credit

• Wednesday

Earnings – Bed Bath and Beyond, KB Home, PriceSmart, Progress Software, Constellation Brands, Lennar, Schnitzer Steel, Acuity Brands, WD-40

8:20 a.m. Atlanta Fed President Raphael Bostic

9:00 a.m. Chicago Fed President Charles Evans

11:30 a.m. Boston Fed President Eric Rosengren

1:00 p.m. 10-year auction

2:00 p.m. FOMC minutes

• Thursday

Earnings – Synnex

8:30 a.m. Initial claims

8:35 a.m. Richmond Fed President Thomas Barkin

10:00 a.m. Wholesale trade

12:00 p.m. Fed Chairman Jerome Powell speaks at the Economics Club of Washington D.C.

12:40 p.m. St. Louis Fed President James Bullard

1:00 p.m. 30-year auction

1:00 p.m. Chicago Fed's Evans

5:30 p.m. Fed Vice Chair Richard Clarida

• Friday

Earnings - Infosys

8:30 a.m. CPI

2:00 p.m. Federal budget

 

Stocks Soar On Powell Promise, Jobs Juice
One day after a broad-based, stomach-churning drop in the market, the result of rising economic fears following Apple's revenue guidance cut and a plunge in the ISM manufacturing index coupled with jitters over the latest FX-market flash crash, stocks staged a powerful comeback, recouping all of their Thursday losses, on the back of renewed optimism over US trade negotiations with China, a Chinese RRR cut and a powerful intervention by Beijing's plunge protection team in Chinese stocks, and a stellar jobs report.

“The strong December jobs report is a net positive for stocks because investors’ biggest concern has been slowing growth,” said FTSE Russell managing director Alec Young. "December’s strong job gains help ease that concern. It’s hard to square recession worries with the strongest job growth we’ve seen in years" Young added after payrolls not only surged by over 300K but average hourly earnings surprised to the upside and rose by the most since 2009, signalling that inflation is anything but dead.




But the biggest catalyst for today's rally was today's statement by Chairman Powell which eased much of the market's fears that the Fed put is dead and buried.

Speaking on a panel with Janet Yellen and Ben Bernanke, Powell said central-bank policy is flexible and officials are “listening carefully” to the financial markets. Critically for traders worried about shrinking liquidity in the economy, Powell also signaled a willingness to consider changes to the Fed’s gradual run-off of its balance-sheet in any policy review.

That was enough to unleash the animal spirits, with stocks surging after Powell's comments which many saw were directed squarely at the market.



“The Powell/Yellen/Bernanke show had a simple purpose: re-assure the market that the Fed is not in disarray and that it will act to protect the market on a further downtick than what we saw in December,” WallachBeth strategist Ilya Feygin told Bloomberg. “The Fed will likely keep rates on hold for a while until it has more confidence in the data.”

And while Powell wasn't explicitly dovish, the fact that he wasn't hawkish was more than enough to unleash a powerful rally that sent the Dow over 800 points at one time, and closing 747 points higher undoing all of Thursday's losses...



...with the S&P rising 3.4% and back above 2,500, the Nasdaq closed up 4.3% and most other sector also solidly in the green on what has nonetheless been a relatively low-volume rally.




While today's rally will be a welcome - if temporary - relief to bulls, and certainly to president Trump who delights in a rising stock market which he sees as a barometer of his performance, the unprecedented volatility in the market now appears to be a constant feature with the the S&P 500 now trading in an intraday range of more than 2% on 15 of the last 21 days, the most since 2011 according to Bloomberg. Whether anyone other than algo traders can "trade" such a rollercoaster market remains to be seen.



The surge in stocks, driven by a dovish take on Powell, also helped push Treasury yields sharply higher...



... with the yield on the 10Y rising the most in percentage terms in two years.



Curiously, even as selling of equity volatility returned with a bang, with the VIX tumbling to the 20 level which has been the average for much of the past three months...



... bond market volatility as measured by the MOVE index has been far stickier, in what may prove to be a bigger headache for the Fed unless it is somehow able to stabilize the jittery nerves of bond traders.



One surprising outlier that was missing from today's euphoria, however, was the dollar which continued its recent slide, and after it initially spiked following the strong jobs report, it tumbled anew after Powell's dovish comments despite the powerful rally in Treasury yields.



According to some this odd weakness in the dollar was the result of a fund rotation into carry currencies, with the Bloomberg EM Carry Index reaching its strongest level since July, in the process undoing all of the carry trade "flash crash" pain from late on Wednesday.



Another surprising tangent is that even with the dollar plunge, gold tumbled and was down sharply on the day if off the lows, even after gold futures hit $1300 overnight. One explanation is that gold was not responding to the dollar as much as to the unwind of the "flight to safety" trade. However, even with today's drop, gold is back to levels last seen back in June.



And while they did nothing for gold, Powell's dovish reversal and the plunge in the dollar did help boost the commodity sector, and oil especially, which has continued its impressive move higher after a powerful, if unexplained, move on Wednesday sent WTI surging, with the levitation continuing ever since.



Finally, even with Friday’s surge, the market gains did little to dent the recent rout that has hit global equities in the past month, with major indexes off well over 10 percent from previous highs and the S&P on the verge of a bear market as recently as ten days ago. Meanwhile, in a sign that fears about a slowdown persist, treasury yields that topped 3.2% two months ago are now 60 bps lower as investors reassess the prospects for growth in 2019.

Finally, before traders read too much into today's rally, recall what Trump's economic advisor Kevin Hassett warned yesterday, namely that "it’s not going to be just Apple,” adding that "there are a heck of a lot of U.S. companies that have sales in China that are going to be watching their earnings being downgraded next year until we get a deal with China."

For now, however, at least until the next major bearish surprise, stocks close out the day and the week with a powerful rally that has, at least for the time being, put concerns about an imminent US recession on mute.

 

Here are the percentage changes for the major indices for WTD, MTD, QTD & YTD in 2019-



S&P sectors for the past week-

 

Next Week’s Economic Indicators – 1/4/19
Jan 4, 2019

This week saw a mix of manufacturing and labor data with results spanning from huge beats to horrible misses. While most manufacturing data saw sizeable misses, on the bright side, labor data had strong beats in the second half of the week. Dallas Fed Manufacturing Activity started the week on a sour note. As the last US release of 2018, it came in well below expectations and even further below the previous period at a meager –5.1. Markets took Tuesday off to celebrate New Years Day, and on Wednesday we came back to a better, but still weaker, manufacturing reading with the Markit Manufacturing purchase managers index seeing a drop of only 0.1. Thursday saw the ISM release of their manufacturing data which saw broad—but predictable given recent regional Fed indices—declines that far exceeded most forecasts. Despite weak manufacturing sector data in the first half of the week, some positive labor data helped to end the week on a high note. On Thursday ADP released their employment change data for December with a huge surprise to the upside showing 271K additional jobs created. The BLS’s Nonfarm Payrolls report (which typically moves in tandem with the ADP numbers) saw a nice surprise to the upside on Friday as well further reinforcing evidence of a strong labor market.



Despite being the first full week coming back from the holidays, next week will be a bit quieter. Whereas this week saw 19 releases, next week will only have 14; none of which will likely be major market movers like the manufacturing or NFP data we just saw. The only release on Monday will be the ISM Non-Manufacturing Index which, like its manufacturing counterpart, is expected to decline although it is also expected to remain at very strong levels. On Tuesday we get a variety of indicators including small business optimism, trade balance data, JOLTS job openings, and consumer credit. Mortgage applications will be the only release scheduled for Wednesday. Thursday will see weekly claims and consumer comfort data alongside wholesale inventories and sales for December. We cap off next week with CPI and the monthly budget statement which will surely be impacted by the government shutdown.



While on the topic of the shutdown, there are a number of indicators that were scheduled to release in the time since the shutdown began but have been postponed due to the closure of the agencies in charge of the data. Below is a list of these indicators. Their release is contingent on the government reopening.



Will Santa Save January?
Posted by lplresearch

In the end, the S&P 500 Index lost 9.2% in the historically bullish month of December, for the worst-performing December since 1931. From continued trade worries to algorithmic and high frequency trading, from the global economic slowdown to the Federal Reserve (Fed) being too hawkish for the markets’ liking, pick a reason and Santa didn’t visit in 2018.


Or did he? The Santa Claus Rally everyone talks about isn’t really for the entire month of December–it’s only the last five trading days of the year and the first two trading days of the following year (December 24, 26, 27, 28, and 31 and January 2 and 3). This is also known as the “December Effect,” first noted by Yale Hirsh in his Stock Trader’s Almanac in 1972.

With a day to go, the S&P 500 is up an impressive 3.9% during this historically bullish seven-day period. Looking at all possible seven-day periods, this is actually the seven-day stretch most likely to be positive. Believe in Santa yet?



“In the rare instance that the market gets a lump of coal instead of a Santa Claus Rally, it usually means there could be weakness in January. In fact, the past five times Santa didn’t show, stocks dropped in January,” explained LPL Senior Market Strategist Ryan Detrick.

As the LPL Chart of the Day shows, over the past 20 years, five have received coal and sure enough, January closed lower every single time. With Santa showing up in 2018, could this be a sign of better times ahead for the bulls?



Market Fears and Economic Realities
Posted by lplresearch

Recent Federal Reserve (Fed) rhetoric has spooked financial markets, especially as uncertainty has clouded investors’ horizons. But we still believe the fundamental U.S. economic landscape is compelling, and despite market concerns, an important measure of market interest rates suggests that monetary policy remains accommodative.

As shown in the LPL Chart of the Day, inflation-adjusted interest rates are still comparatively low and well below levels that historically have preceded economic recessions. Currently, the real fed funds rate sits at 0.3% (based on year-over-year core Consumer Price Index [CPI] growth of 2.2%), below the 1.3% real interest rate we’ve averaged since the end of 1970. During that same period, the real interest rate reached an average high of 4.2% before the U.S. economy entered a recession, significantly above where rates are today.



“There is a disconnect between U.S. economic data and pessimism priced into financial markets,” said LPL Research Chief Investment Strategist John Lynch. “The U.S. economy is strong enough to operate at current rates, and we expect the Fed to be pragmatic and flexible enough to guide us to a soft landing.”

This has been one of the most challenging market environments to navigate since the end of the Great Recession. However, we believe strong fundamentals are still in place, and the Fed’s plans remain supportive to the economic environment. While the uncertainty has been uncomfortable, the Fed remains data-dependent, leading us to expect two rate hikes in 2019. We elaborate more on our predictions for this year in our 2019 Outlook, Fundamental: How to Focus on What Really Matters in the Markets.

Why January is still the most important month

Devised by Yale Hirsch in 1972, the January Barometer (JB) has registered ten major errors since 1950 for an 85.5% accuracy ratio. This indicator adheres to propensity that as the S&P 500 goes in January, so goes the year. Of the ten major errors Vietnam affected 1966 and 1968. 1982 saw the start of a major bull market in August. Two January rate cuts and 9/11 affected 2001.The market in January 2003 was held down by the anticipation of military action in Iraq. The second worst bear market since 1900 ended in March of 2009 and Federal Reserve intervention influenced 2010 and 2014. In 2016, DJIA slipped into an official Ned Davis bear market in January. Last year, 2018, became the tenth major error overall and the seventh since 2001 as a hawkish Fed, a trade war and slowing global growth concerns resulted in the worst fourth quarter performance by S&P 500 since 2008. Including the eight flat years yields a .739 batting average.

Let’s compare the January Barometer to all other “Monthly Barometers.” For the accompanying table we went back to 1938 for the S&P 500 and DJIA — the year in which the January Barometer came to life — and back to 1971 for NASDAQ when that index took its current form.

The accuracy ratios listed are based on whether or not the given month’s move — up or down — was followed by a move in the same direction for the whole period. For example, in the 81 years of data for the S&P 500 for the January Barometer, 61 years moved in the same direction for 75.3% accuracy.

The Calendar Year ratio is based on the month’s percent change and the whole year’s percent change; i.e., we compare December 2017’s percent change to the change for 2017 as a whole. By contrast the 11-month ratio compares the month’s move to the move of the following eleven months. February’s change is compared to the change from March to January. The 12-month change compares the month’s change to the following twelve months. February’s change is compared to the change from March to the next February.

Though the January Barometer is based on the S&P 500 we thought it would clear the air to look at the other two major averages as well. You can see for yourself in the table that no other month comes close to January in forecasting prowess over the longer term.

There are a few interesting anomalies to point out though. On a calendar year basis DJIA in January is slightly better than the S&P. 2011 is a perfect example of how the DJIA just edges out for the year while the S&P does not. For NASDAQ April, September and November stick out as well on a calendar year basis, but these months are well into the year, and the point is to know how the year might pan out following January, not April, September or November. And no other month has any basis for being a barometer. January is loaded with reasons.

Being the first month of the year it is the time when people readjust their portfolios, rethink their outlook for the coming year and try to make a fresh start. There is also an increase in cash that flows into the market in January, making market direction even more important. Then there is all the information Wall Street has to digest: The State of the Union Address, FOMC meeting, 4th quarter GDP, earnings and the plethora of other economic and market data.

Myths Dispelled

In recent years new myths and/or areas of confusion have come to light. One of the biggest errors is the notion that the January Barometer is a standalone indicator that can be used to base all of your investment decisions for the coming year on. This is simply not true and we have never claimed that the January Barometer should or could be used in this manner. The January Barometer is intended to be used in conjunction with all available data deemed relevant to either confirm or call into question your assessment of the market. No single indicator is 100% accurate so no single indicator should ever be considered in a vacuum. The January Barometer is not an exception to this.

Another myth is that the January Barometer is completely useless. Those that believe this like to point out that simply expecting the market to be higher by the end of the year is just as accurate as the January Barometer. Statistically, they are just about right. In the 81-year history examined in this article, there were only 24 full-year declines. So yes, the S&P 500 has posted annual gains 70.4% of the time since 1938. What is missing from this argument is the fact that when January was positive, the full year was also positive 86.0% of the time and when January was down the year was down 58.1% of the time. These are not the near perfect outcomes that true statisticians prefer, but once again, the January Barometer was not intended to be used in a vacuum.

Typical January Trading: Strength Early and That’s Been About It Recently

Historically, the New Year has started out well with modest gains the first few trading days of January. Since 1980, DJIA has averaged a 0.30% gain on the first trading day of the year. S&P 500 has averaged 0.21% and NASDAQ 0.22%. Similar to slightly better average gains have been observed on the second trading day of January, but after that consistent gains have become elusive. January’s performance over the more recent 21-year period has been rather lackluster. Strength is still present, on average, at the start of the month, but quickly fades after the second or third trading day. Afterwards, the trend is sideways to lower, a brief pause mid-month and then more sideways to lower trading through the end of the month. Weakness is most pronounced just after mid-month, beginning around the 12th trading day of January.

Fed Funds Futures Put Hikes Back On The Table
Jan 4, 2019

After yesterday’s weak economic data, lowered guidance from Apple, and a 2%+ drop for the S&P 500, pricing for the future path of the Fed Funds rate reached an extreme level of negativity, with every futures contract trading lower in price than the current one. This meant that the market probability of cuts was greater than that of hikes for every forward period. Given Fed expectations of two rate hikes per the statement of economic projections at the December Fed meeting, that is a market that is very much fighting the Fed!

After today’s strong jobs number, however, futures markets have shifted a little more hawkish, as shown in the chart below. The dark blue line shows the Fed Funds curve as of yesterday, while the light blue line shows the curve today.


Below we show the implicit probability of a Fed hike at each meeting this year. We assume that only the March, June, September, and December meetings are live. As shown in the chart below, while markets are still pricing greater chance of cut than hike at three meetings this year, June’s meeting date has shifted back towards hikes. Both cut and hike pricing are very tentative from one meeting to the next, but the pricing is still biased towards reductions in the Fed Funds rate rather than continued hikes.



Just because the markets are forecasting a given Fed outcome doesn’t mean that’s what will happen. Below, we compare the overnight Fed Funds rate’s actual value to what the forward market prices for it a year before. As shown, it’s actually very unusual for the market to price Fed policy intentions correctly. That doesn’t mean that the current pricing for cuts over the next year will necessarily be wrong, but it does illustrate that just because the market prices something doesn’t mean it’s a certain outcome. If it was, investing sure wouldn’t be much fun!



Highest Dividend Yielders in the S&P 500
Jan 4, 2019

Dividend yields have risen nicely as stock prices have fallen over the last few months. There are currently 39 non-REIT stocks in the S&P 500 that yield more than 4.5% per year. We list these 39 high yielders below broken out by sector.

CenturyLink (CTL) has the highest yield in the S&P 500 at 13.93%. Another Communication Services sector stock — AT&T — is now yielding nearly 7%.

In the Consumer Discretionary sector, L Brands (LB) leads with a 9.07% yield, followed by Ford Motor (F) at 7.71%. Five Consumer Staples stocks have yields above 5% — COTY, PM, MO, KHC, and GIS.

Oneok (OKE) and Williams (WMB) have the highest yields in the Energy sector at 6%+, while Invesco (IVZ) has the highest yield in the Financial sector at 7.3%.

Just one Health Care stock (ABBV) and one Industrials stock (NLSN) made the list of 4.5%+ yielders, while three Materials stocks are on the list — IP, LYB, and WRK.

Six Technology stocks in the S&P 500 have yields above 4.5%, with Seagate (STX) leading the way at 6.9%. Finally, in the Utilities sector, three stocks made the cut — all with yields above 5%. PPL Corp (PPL) has the highest yield of the three at 5.86%.

 

Stock Market Analysis Video for January 4th, 2019
Video from AlphaTrends Brian Shannon


ShadowTrader Video Weekly 1.6.19
Video from ShadowTrader Peter Reznicek
(VIDEO NOT YET UP!)

 

Here are the current major indices pullback/correction levels from ATHs as of week ending 1.4.19-


Here is also the pullback/correction levels from current prices-


...and here are the rally levels from current prices-

 

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Here are the upcoming IPO's for this week-

(NONE.)

 

Stockaholics come join us on our stock market competitions for this upcoming trading week ahead!-

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• Stockaholics Daily Stock Pick Challenge & SPX Sentiment Poll for Monday (1/7) <-- click there to cast your daily market vote and stock pick!

• Stockaholics Weekly Stock Picking Contest & SPX Sentiment Poll (1/7-1/11) <-- click there to cast your weekly market vote and stock picks!

• Stockaholics Weekly T/A Charting Challenge (1/7-1/11) <-- click there to participate!

========================================================================================================

It would be pretty sweet to see some of you join us and participate on these!

I hope you all have a fantastic weekend ahead!

 

​

Here are the most anticipated ERs for this upcoming week ahead (I'll also have the weekly earnings calendar posted in here as well once it's out)

***Check mark next to the stock symbols denotes confirmed earnings release date & time***

Monday 1.7.19 Before Market Open:

Spoiler: CLICK HERE TO VIEW MONDAY'S AM EARNINGS TIMES & ESTIMATES!

Monday 1.7.19 After Market Close:

Spoiler: CLICK HERE TO VIEW MONDAY'S PM EARNINGS TIMES & ESTIMATES!

NONE.

Tuesday 1.8.19 Before Market Open:

Spoiler: CLICK HERE TO VIEW TUESDAY'S AM EARNINGS TIMES & ESTIMATES!

Tuesday 1.8.19 After Market Close:

Spoiler: CLICK HERE TO VIEW TUESDAY'S PM EARNINGS TIMES & ESTIMATES!

Wednesday 1.9.19 Before Market Open:

Spoiler: CLICK HERE TO VIEW WEDNESDAY'S AM EARNINGS TIMES & ESTIMATES!

Wednesday 1.9.19 After Market Close:

Spoiler: CLICK HERE TO VIEW WEDNESDAY'S PM EARNINGS TIMES & ESTIMATES!

Thursday 1.10.19 Before Market Open:

Spoiler: CLICK HERE TO VIEW THURSDAY'S AM EARNINGS TIMES & ESTIMATES!

Thursday 1.10.19 After Market Close:

Spoiler: CLICK HERE TO VIEW THURSDAY'S PM EARNINGS TIMES & ESTIMATES!

Friday 1.11.19 Before Market Open:

Spoiler: CLICK HERE TO VIEW FRIDAY'S AM EARNINGS TIMES & ESTIMATES!

Friday 1.11.19 After Market Close:

Spoiler: CLICK HERE TO VIEW FRIDAY'S PM EARNINGS TIMES & ESTIMATES!

NONE.

 

Here is a look at this upcoming week's Global Economic & Policy Calendar-

 

And as promised here is the most anticipated earnings calendar for this upcoming trading week ahead-
($STZ $BBBY $SGH $LEN $KBH $CMC $FCEL $HELE $AYI $AZZ $LNN $SCHN $SNX $MSM $PLUG $WDFC $EXFO $GBX $PSMT $SAR $INFY $FC $NTIC $KSHB $VOXX $SLP $MPAA)


If you guys want to view the full earnings post please see this thread here-

• Most Anticipated Earnings Releases for the week beginning January 7th, 2019 <-- click there to view!