Weighing The Week Ahead: Why Is The Market So Quiet?

The economic calendar is light so attention will again focus on Q1 earnings reports. Non-financial news will, no doubt, take center stage. The biggest market story seems to be the lack of action, as shown in our updates below. That might be fine for you and for me, but not for the punditry. They are all scratching their heads in wonderment, asking: Why is it so quiet?

Last Week Recap

In last week’s installment of WTWA, I suggested that the general focus would be on Q1 earnings and possible confirmation of recent economic data. There was a lot of competition from important non-financial news, but the earnings stories got plenty of play.

The Story in One Chart

I always start my personal review of the week by looking at a great chart. This week I am featuring Jill Mislinski, who packs a lot of relevant information into the weekly chart without sacrificing clarity.

In an amazingly quiet week, the market was unchanged and the overall trading range less than one percent. As always, our indicator snapshot in the quant section below summarizes volatility and the VIX index in various time frames.

Personal Note

I was delighted to learn that my company, NewArc Investments, Inc. and I were in the top 25 of Advisor Perspective’s list of Venerated Voices. We are honored to be in such impressive company.

Noteworthy

Education is one of the best ways to fight fraud. Pricenomics asks, What Kind of Online Fraud is Growing the Fastest?
The post includes the expected provocative charts including this one.

#10 probably explains the changing demographic of those wanting to friend me on Facebook. Mrs. OldProf, glancing over my shoulder, commented that they did not look like the typical bridge player.

The News

Each week I break down events into good and bad. For our purposes, “good” has two components. The news must be market friendly and better than expectations. I avoid using my personal preferences in evaluating news – and you should, too.

When relevant, I include expectations (E) and the prior reading (P).

New Deal Democrat’s high frequency indicators are an important part of our regular research. Long-term indicators have improved to positive, as has the nowcast. Short-term indicators remain negative. NDD is watching the data to see if the weakness will spread or whether it reflects a rebound from the “mini-recession” caused by the government shutdown.

The Good

  • The Empire State manufacturing index registered 10.1, beating expectations of 9.0. The Philly Fed index of 8.5 missed the consensus of 11.0. I am analyzing the usefulness of various economic indicators and did a post on regional Fed measures here.
  • Leading economic indicators increased 0.4%, in line with expectations but an improvement over February’s reading of 0.1%.
  • Mortgage purchase applications are strong.

  • Initial jobless claims hit another new low of 192K versus expectations of 208K.
  • Upbeat reports from China provided encouragement about the state of worldwide economic growth. The Daily Shot, a regular morning read for me, had a nice chart pack covering several key indicators. I drew upon this for a brief comment of my ownMarc Chandler analyzes the data and notes that many will be skeptical. James Picerno analyzes the data as well as the trade deal potential.

  • Retail sales for March jumped 1.6% trouncing expectations of 0.9% and offering some relief for those worried about the -0.2% decline in February. The ex-auto result of 1.2% was also strong, beating expectations of 0.7%.
  • Earnings Season is mostly positive. As I warned last week, people can find what they seek in earnings data, especially with mixed results.

    • Q1 now looks like a YoY growth of 3-4%. There are still some downward estimate revisions, but at a slower pace. Check out the always valuable analysis from earnings guru Brian Gilmartin.
    • Earnings beats are good, revenue beats weaker than normal, and the stock reaction to a beat is better than average. John Butters (FactSet) has comprehensive coverage.
    • Companies related to the overall economy look better than most. Honeywell (HON) is one example (Barron’s) and United Rentals (URI) is another. We’ll have better sector information over the next two weeks.
    • David Templeton (HORAN) writes, The Tax Cut And Jobs Act Is Distorting 2019 Estimated Earnings Growth. He astutely suggests a 2019 versus 2017 comparison, annualizing the change. This chart shows the value of such an approach.

The Bad

  • Industrial production for March declined -0.1% versus expectations of a 0.2% gain and a prior of 0.1%.
  • The Architecture billings index dipped to 47.8 in March from 50.3 in February. The AIA wonders if this is weather related. (Calculated Risk)
  • Wholesale inventories grew only 0.2% in February. (E 0.4%) The January result was also downwardly revised from 1.4% to 1.2%.
  • Business inventories were also a bit light, in February, increasing 0.3% versus an expected 0.4% and January’s 0.9% gain.
  • Rail traffic is still in contraction, although there is some improvement. Steven Hansen emphasizes annual changes in the four-week rolling average of the “economically intuitive” traffic, GEI). New Deal Democrat suggests that the widened Panama Canal is changing freight patterns, resulting in less rail traffic and more trucking.
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