Government Shutdown Causes Q1 GDP Growth Estimates To Fall

Government Shutdown - 5 Day Winning Streak

The stock market is on fire as the S&P 500 is on a 5 day winning streak. It was up 0.45% on Thursday. The 14 day RSI has gone from below 20 on December 24th to 52.08.

It’s on its way to signaling the market is overbought. CNN fear and greed index increased from 27 to 31. Put to call ratio is now signaling greed is back. S&P 500 is up 3.58% for the year.

This rally is based on the fact that the U.S. economy isn’t going into a recession soon and the Fed is now dovish. Nasdaq was up 0.42% and the Russell 2000 was up 0.46% as this rally has lifted the whole market.

I can’t see how the market reaches a new high with Germany about to go into a recession and China slowing quickly. The market’s near term direction will be determined by earnings season which will start to heat up next week.

Major banks report next week with Citigroup reporting on Monday, Wells Fargo and JP Morgan reporting on Tuesday, and Bank of America reporting on Wednesday.

Government Shutdown - Retailers Underperform

As I mentioned in my previous article, the retailers had a rough Thursday.

XRT retail ETF fell 1.6%. One of the beleaguered retailers I didn’t mention was Kohl’s. Its stock fell 4.68%. Its holiday sales growth was only 1.2% after it grew 7% in 2017.

Even with this low sales growth, the firm increased its 2018 EPS guidance from $5.35-$5.55 to $5.50-$5.55.

The December retail sales report is supposed to come out on Wednesday, but I’m not 100% sure if it will because of the government shutdown.

We did get the Redbook same store sales report because it is calculated by a private company. It showed year over year growth of 8.9% in the week of January 5th. This growth is over twice the rate seen at the start of last year.

Some of the reports like factory orders, international trade, and wholesale trade haven’t come out because of the shutdown.

However, stats like the jobless claims, JOLTS, and BLS monthly jobs report have been released. All the data that hasn’t been released will come out when the partial shutdown ends.

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