Stocks Fall Four Straight Days

Stocks Fall - Extend Losing Streak

The stock market sold off for the 4th straight time on Thursday. S&P 500 fell 0.81%, Nasdaq fell 1.13%, and Russell 2000 fell 0.86%. Personally, I find the headline that the stock market fell on fears of an economic slowdown humorous. 

There were plenty of bad economic reports in January and February, yet stocks rallied. The concept of a slowdown has been apparent in economic reports for the past 6 months. ECRI leading index’s yearly growth has been negative for a few months.

The slowdown isn’t new; the economic surprise index has been negative for a couple of weeks. What’s new is stocks being very overbought. They overcorrected to the sharp decline last year which was itself an overreaction. 

Stocks Fall - Stocks should be below the September record high until the slowdown ends.

Stocks got less overbought with the decline on Thursday as the VIX increased 5.4% and the CNN fear and greed index fell 4 points to 59 which still signals greed. I’m not bullish yet as the S&P 500 is only down slightly less than 2% since Friday’s close. However, I am much less bearish now. 

The only positive sector was utilities on Thursday as it increased 0.26%. Worst 2 sectors were financials and consumer discretionary which fell 1.06% and 1.37%. It was a broad-based decline.

Treasury yields continued to plummet on Thursday as the 10-year yield fell 4 basis points to 2.64% (it’s now at 2.63%) and the 2-year yield fell 5 basis points to 2.47%. The bond market clearly believes the economy is slowing and inflation will be weak. Now the 2-year yield is only 7 basis points higher than the Fed funds rate and 9 basis points above its year to date low (the lowest yield since May 2018).   

Stocks Fall - Costco Reports Great Earnings

Costco is the first S&P 500 firm to report earnings. The bulk of earnings season starts in 2 months. However, it’s interesting to see how this important retailer did to see if the consumer is still spending. Costco is the 4th biggest retailer based on 2017 sales, which means it is a solid indicator of the health of the consumer.

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