Market Recap - S&P 500 registers first monthly decline in 2019 as investors dump equities and buy Treasuries

The S&P 500 lost 2.6% this week and 6.6% this month, registering its first monthly decline in 2019. Lingering U.S.-China trade tensions and a surprise 5% tariff rate on Mexico from President Trump contributed to broad-based efforts to de-risk and seek safety in U.S. Treasuries.

The Dow Jones Industrial Average (-3.0%), the Nasdaq Composite (-2.4%), and the Russell 2000 (-3.2%) finished with monthly losses of 6.7%, 7.9%, and 7.9%.

No S&P 500 sector finished higher this week, and nine sectors finished with losses between 2.1% (materials) and 4.5% (energy). The negative disposition sent the S&P 500 below its 200-day moving average (2776) to close the week.

Another week came and went with no progress on the U.S.-China trade front. Instead, tensions appeared to escalate following negative developments throughout the week:

• Chinese state media suggested that Beijing could use its dominant position in rare earth minerals to restrict exports.

• Beijing reportedly put U.S. soybean purchases on hold in May.

• China said it is drafting a list of "unreliable" foreign companies that harm the interests of its firms, increasing speculation about Chinese retaliation against the U.S.

The big headline on Friday, which helped accelerate weekly losses was President Trump announcing a 5% tariff rate on all goods imported from Mexico starting on June 10. The tariff rate will increase incrementally during the summer and reach 25% on Oct. 1 unless Mexico takes actions to curb the flow of undocumented migrants entering the U.S.

Investors continued to de-risk from the stock market, and bolster demand for U.S. Treasuries, fearful that these trade tensions will engender slower economic growth and lower earnings prospects. The 8.8% weekly drop in WTI crude ($53.48/bbl, -$5.14) also reflected concerns that slower growth will weaken end demand.

The 2-yr yield dropped 20 basis points to 1.94%, and the 10-yr yield dropped 18 basis points to 2.14%. For the month, the 2-yr yield fell 33 basis points, and the 10-yr yield fell 37 basis points. The U.S. Dollar Index advanced 0.2% to 97.76 this week.

Strikingly, 3-month yield finished 21 basis points higher than the 10-yr yield, widening this difference to its largest since the financial crisis. This term spread, according to research from the Federal Reserve Bank of San Francisco, is the most reliable predictor of a recession among the different term spreads.

Market Recap - Cyclical assets slide on trade uncertainty

The S&P 500 lost 1.2% this week, as trade and growth concerns sent investors fleeing from cyclical assets and seeking shelter in U.S. Treasuries and low-beta stocks.

The blue-chip Dow Jones Industrial Average lost 0.7%, the tech-laden Nasdaq Composite lost 2.3%, and the small-cap Russell 2000 lost 1.4%.

The S&P 500 information technology (-2.8%) and the Philadelphia Semiconductor Index (-6.4%) underperformed on efforts to de-risk amid concerns that China could retaliate against U.S. tech companies. The S&P 500 energy sector lost 3.4%, as oil prices ($58.62/bbl, -$4.11, -6.6%) had their worst week in 2019. Concerns about global growth and end-demand contributed to the weakness in oil.

On the other hand, the defensive-oriented health care (+1.2%), utilities (+1.7%), and real estate (+0.3%) sectors outperformed.

It was a bit of a messy week leading up to these results, although a bit of good news did help tame selling interest.

Summing up the bad:

• Several companies around the world reportedly began to suspend business or cut ties with China’s Huawei Technologies.
• The U.S. is reportedly considering blacklisting several more Chinese firms after it put restrictions on Huawei last week.
• Trade rhetoric out of China grew more aggressive and nationalistic, while the U.S. reiterated that Huawei poses national security risks.
• Preliminary manufacturing data for the eurozone remained weak. 

Summing up the good:

• The U.S. granted Huawei a 90-day reprieve to continue to work with U.S. companies to service existing networks and mobile devices.
• Both sides appeared committed in striking a trade deal. President Trump said a solution to the Huawei matter could be included in a final deal.
• The minutes from the Apr. 30-May 1 FOMC meeting indicated that interest rates will remain low.

The takeaway is that the market appeared exhausted from the deluge of trade headlines that could swing from positive to negative on any given day. At the same time, the uncertainty in the outcome, and duration, of a trade dispute fed into concerns about economic growth and corporate earnings prospects.

U.S. Treasuries advanced in a flight for safety, driving yields lower in a curve-flattening trade. The 2-yr yield dropped eight basis points to 2.16%, and the 10-yr yield dropped 14 basis points to 2.32%. The U.S. Dollar Index declined 0.4% to 97.58.

Earnings reports were retail-heavy this week. Home Depot (HD), Target (TGT), TJX Companies (TJX), L Brands (LB), and AutoZone (AZO) advanced following their results. Kohl’s (KSS), Lowe’s (LOW), Nordstrom (JWN), Urban Outfitters (URBN), Foot Locker (FL), and Best Buy (BBY) all dropped sharply following their results/guidance.

Market Recap - Stocks Decline as Trade Tensions Escalate

The S&P 500 Lost 0.8% This Week, As Trade Tensions Escalated Between The U.S. And China. The Benchmark Index Was On Pace For A Relatively Flat Week Despite The Negative Developments, Until News On Friday That Talks Have Stalled Sent Stocks Lower.

The Dow Jones Industrial Average lost 0.7%, the Nasdaq Composite lost 1.3%, and the Russell 2000 lost 2.4%.

China on Monday increased the tariff rate on $60 billion of U.S. imports to a floating range of 5-25%, from 5-10%, effective June 1. President Trump on Wednesday signed an executive order to protect U.S. technology from "foreign adversaries" that pose a threat to national security. Many viewed this as an attempt to weaken China's Huawei Technologies.

The former sent the S&P 500 down 2.4% on Monday and back below its 50-day moving average. The latter sent the Philadelphia Semiconductor Index (-5.2%) into the red, while every sector in the S&P 500 finished higher despite the negative implications.

In fact, the S&P 500 rallied all the way back to break-even at one point on Friday but hope for a flat week was dampened after CNBC reported that U.S.-China trade talks have stalled. Although not surprising given the negative rhetoric coming out of China and the prior developments, it did stoke concerns about potential retaliation from China. The S&P 500 finished the week below its 50-day moving average.

The S&P 500 financials (-2.1%), industrials (-1.9%), information technology (-1.1%), and consumer discretionary (-1.1%) sectors underperformed the broader market. The real estate (+1.4%), utilities (+1.2%), consumer staples (+0.9%), and communication services (+0.3%) sectors were the lone groups to finish higher.

Prior to the news, the market appeared to have decided that Monday's drop was a good buying opportunity. It took good news with stride, and it brushed off bad news. No news was reportedly good news.

Reports surfaced that the White House was going delay auto tariffs by up to six months and that it was close to resolving a tariff dispute with Canada and Mexico pertaining to aluminum and steel. The news assured investors that the U.S. would not be distracted in its trade talks with China by also having to deal with other tariff disputes. Both were confirmed on Friday with aluminum and steel tariffs agreed to be removed within 48 hours.

The reaction to economic data was no different. The good: housing starts picked up in April, initial jobless claims remained at historically low levels, and consumer sentiment hit its highest level in 15 years. The bad: retail sales and industrial production in the U.S. and China both came in weaker-than-expected for April.

U.S. Treasuries alternated between up and down days, but in the end, yields finished lower in a curve-flattening trade. The 2-yr yield declined three basis points to 2.21%, and the 10-yr yield declined seven basis points to 2.39%. The U.S. Dollar Index increased 0.7% to 97.99. WTI crude rose 1.7% to 62.73/bbl on increased tensions in the Middle East.

Market Recap - Stocks Fall in a Week Dominated By Trade Headlines

The S&P 500 lost 2.2% this week on U.S.-China trade uncertainty, although a major reversal on Friday helped pare losses. The Dow Jones Industrial Average lost 2.1%, the Nasdaq Composite lost 3.0%, and the Russell 2000 lost 2.5%.

All 11 S&P 500 sectors finished lower with the trade sensitive information technology (-3.6%), materials (-2.8%), and industrial (-2.8%) sectors leading the retreat. The Philadelphia Semiconductor Index lost 5.9%.

The stock market entered the week near all-time highs before President Trump rattled global equity markets when he said he was going to increase the tariff rate on $200 of Chinese imports to 25% from 10%, effective at the end of the week. Slow trade progress and China reneging on its prior commitments prompted the President to take a hard-lined stance.

Beijing vowed retaliatory tariffs, but it still sent its chief negotiator, Vice Premier Liu He, to Washington to continue talks. Investors sought to de-risk from a richly-valued stock market, although each intraday low was met with renewed buying interest.

The trade angst also sent U.S. Treasuries higher in a flight for safety and boosted the CBOE Volatility Index (VIX) to 23.38 at its high from Friday’s closing level of 12.87. Both cooled down, though, as equities gained traction at the end of the week. The 2-yr yield declined eight basis points to 2.24%, and the 10-yr yield declined seven basis points to 2.46%. The VIX ended the week at 16.04.

President Trump’s tariff hike went into effect Friday, and he said there was no need to rush a trade deal, which sent stocks to their lowest levels of the week. Positive-sounding trade rhetoric, however, from Treasury Secretary Steven Mnuchin and China’s Vice Premier about the week’s trade discussions helped stocks stage a recovery.

Nothing was set in terms of next steps, but the U.S. is reportedly giving China three to four more weeks to reach a trade deal. President Trump also said the tariffs may or may not be removed depending on the outcome but is prepared to levy 25% tariffs on an additional $325 billion of Chinese imports.

In corporate news, Uber (UBER) made its highly-anticipated public debut on Friday, opening at $42 per share. That was below its IPO price of $45, which was already at the lower end of the $44 to $50 range. Chevron (CVX) decided to not provide a counteroffer to Occidental Petroleum’s (OXY) revised proposal to acquire Anadarko Petroleum (APC).

Market Recap - Upbeat U.S. Data and Strength in Mega-Cap Stocks Lift S&P 500 and Nasdaq to New Closing Records

The S&P 500 (+1.2%) and Nasdaq Composite (+1.9%) each posted solid gains this week while setting new closing highs in the process. Strength in the U.S. economy and solid earnings reports from megacap companies contributed to the week’s upside bias.

The Dow Jones Industrial Average declined 0.1% following disappointing results/guidance from 3M (MMM), Intel (INTC), and Exxon Mobil (XOM).

U.S. economic data this week showed healthy pickups in new home sales and durable goods orders for March. The advance estimate for first quarter GDP also topped expectations, increasing 3.2% (Briefing.com consensus 1.9%), while the GDP Price Deflator showed prices moderate more than expected.

Upbeat data, tame inflation, and strong earnings results from mega-cap companies like Amazon (AMZN), Facebook (FB), and Microsoft (MSFT), helped contribute to gains in most sectors. The health care sector (+3.7%) led the pace, bouncing back from last week’s 4.4% decline.

The narrative overseas, however, remains gloomy. 3M and Intel each called attention to a slowdown in demand from China while foreign economic data corroborated slowing growth expectations. South Korea’s first quarter GDP contracted by 0.3%, and Germany’s Ifo Business Climate Index remained on the decline. The Bank of Japan also expects rates to be kept at extremely low levels until at least the spring of 2020.

Weakness in 3M and UPS (UPS), meanwhile, contributed to the underperformance of the S&P 500 industrials sector (-1.0%), while Intel helped lead the Philadelphia Semiconductor Index (-0.7%) lower. The S&P 500 energy sector (-1.3%) also underperformed following weakness in Exxon Mobil and lower oil prices ($63.23/ bbl, -$-0.80, -1.3%).

Oil prices started the week on a higher note after the U.S. decided to end its waivers for countries to import oil from Iran. Prices reeled in following President Trump telling OPEC to keep fuel costs down on Friday.

U.S. Treasuries finished higher in a curve-steepening trade, driven by muted inflation and dovish monetary policy from central banks. The 2-yr yield declined 11 basis points to 2.27%, and the 10-yr yield declined five basis points to 2.51%. The U.S. Dollar Index rose 0.6% to 98.03.

Market Recap - Mixed Week on Wall Street as Continued Weakness in Health Care Curbs Earnings Enthusiasm

The S&P 500 declined 0.1% in this abbreviated trading week, as heavy selling in the health care sector (-4.4%) outweighed a round of generally positive earnings reports.

Overall price action was tame, though, which was reflective of a tired market after a massive rally this year. Despite the decline, the S&P 500 finished just above the 2900 level.

The Dow Jones Industrial Average increased 0.6%, and the Nasdaq Composite increased 0.2%. The Russell 2000 underperformed with a loss of 1.2%.

The first full week of the first quarter earnings-reporting season provided investors with a slew of earnings beats from widely-held companies. Most stocks reacted favorably, but the overall market response to the good news was muted, likely due to the sense that much of the good news had already been priced in.

Investors, meanwhile, continued to reduce exposure to the The S&P 500 declined 0.1% in this abbreviated trading week, as heavy selling in the health care sector (-4.4%) outweighed a round of generally positive earnings reports. Week Ending 4/19/19 beaten-up health care sector, which fell into negative territory for the year. The space remains under political pressure to curb rising health care costs, which is likely to continue throughout the 2020 presidential campaign trail. The sense that there would be an opportunity cost in remaining in the sector overshadowed positive earnings reports from UnitedHealth (UNH), Johnson & Johnson (JNJ), and Abbott Labs (ABT).

The semiconductor industry, though, continued to be an area of strength for the stock market. The Philadelphia Semiconductor Index rose 4.1%, and many of its components also contributed to the outperformance of the S&P 500 information technology sector (+1.3%).

The semiconductor space received a boost from news that Apple (AAPL) and Qualcomm (QCOM) settled their royalty dispute and agreed to a six-year licensing deal on Tuesday. Shares of Qualcomm surged 39.7% from Monday’s closing price. Intel (INTC) followed up with a well-received announcement that it will drop out of the 5G smartphone modem business.

The S&P 500 industrials sector (+1.3%) outperformed alongside the tech sector following a batch of earnings beats. Some of those beats came from Union Pacific (UNP), Honeywell (HON), Danaher (DHR), United Rentals (URI), and CSX Corp. (CSX).

U.S. Treasuries finished lower this week, pushing yields higher across the curve. The 2-yr yield increased four basis points to 2.38%, and the 10-yr yield increased six basis points to 2.56%. The U.S. Dollar Index increased 0.5% to 97.46. WTI crude increased 0.2% to $64.03/bbl.

Market Recap - S&P 500 Breaks Above 2900 With A Little Help From JPMorgan Chase And Walt Disney

The S&P 500 Increased 0.5% This Week, As A Strong Earnings Report From JPMorgan Chase (JPM) And A Positive Response To Walt Disney's (DIS) Upcoming New Streaming Service Helped The Broader Market Overcome Weakness From The Health Care Stocks.

The Nasdaq Composite increased 0.6%, and the Russell 2000 increased 0.1%. The Dow Jones Industrial Average declined 0.1%, pulled lower by shares of UnitedHealth (UNH) and Chevron (CVX).

The broader market appeared to be in limbo leading up to the start of the first quarter earnings-reporting season on Friday. The market received a persistent reminder about slowing growth from the International Monetary Fund, but moderating inflation data and assurance from the Federal Reserve and the European Central Bank to keep rates on hold kept stocks steady.

The lack of new catalysts also kept the S&P 500 drifting below the 2900 level, which had been an area of resistance for the benchmark index. Fortunately for the S&P 500, Friday came with the firepower necessary to finally break, and close, above the level for the first time since early October.

JPMorgan reported record revenue and net income for the first quarter. Disney surged to a new-all time high after impressing investors with its new Disney+ streaming service the evening prior. Chevron announced plans to acquire Anadarko Petroleum (APC) for $33 billion, fueling gains in many of the smaller energy companies. Lastly, solid export activity out of China for March helped contribute to the notion the Chinese economy has bottomed.

JPMorgan's strong earnings report was a major contributor to the renewed leadership from the S&P 500 financial sector (+2.1%). Disney's 11.5% gain on Friday was an added boost to the outperformance of the S&P 500 communication services sector (+1.6%).

On the downside, the S&P 500 health care sector (-2.4%) remained out of favor. Continued uncertainty about the fate of the Affordable Care Act and increasing threats from lawmakers to curb rising drug costs weighed heavily on the space.

U.S. Treasuries lost ground this week, pushing yields higher across the curve. The 2-yr yield increased five basis points to 2.39%, and the 10-yr yield increased six basis points to 2.56%. The U.S. Dollar Index lost 0.5% to 96.96. WTI crude rose 1.3% to $63.91/bbl.

Market Recap - Stock Rally Carries Over Into Second Quarter

The S&P 500 Gained 2.1% To Start The Second Quarter This Week, Extending Its Winning Streak To Seven Straight Sessions And Setting A New Closing High For The Year. Investor Sentiment Was Boosted By Positive Manufacturing Data, Progressing U.S.-China Trade Talks, And A Goldilocks Employment Situation Report For March.

The Dow Jones Industrial Average gained 1.9%, the Nasdaq Composite gained 2.7%, and the Russell 2000 gained 2.8%.

The S&P 500 materials (+4.3%), financials (+3.3%), and consumer discretionary (+3.2%) sectors led the broader market higher. Conversely, the defensive-oriented consumer staples (-1.0%) and utilities (-0.2%) sectors were the lone groups that finished lower.

Stocks rallied to begin the week, catalyzed by better-than-expected manufacturing activity for March out of the U.S. and China. The data helped reinforce the idea that global economic activity could be close to, or near, a bottom, which could potentially lead to a pickup in earnings growth later in the year.

The broader market drifted higher throughout the week while U.S.-China trade talks appeared to progress favorably in Washington. Key issues like forced technology transfers and enforcement mechanisms have yet to be resolved, though. President Trump said it will be known probably in the next four weeks or so if a deal gets done.

Friday's release of the Employment Situation Report for March showed job growth rebound without stirring concerns about inflation, which provided more fuel for the rally. Overall, the report exposed February's weak payrolls data as an aberration and helped drive the notion that the economic expansion in the U.S. still has room to run.

Leadership from the growth-oriented Dow Jones Transportation Average (+3.1%) and the Philadelphia Semiconductor Index (+5.9%) reflected this growth optimism. Delta Air Lines (DAL) led the airline, and transport, stocks higher after providing upbeat results and guidance. Semiconductor stocks received a boost from a Digitimes report suggesting Taiwan Semi (TSM), which is the largest contract semiconductor foundry, is seeing a rebound in chip orders.

Walgreens (WBA) and Tesla (TSLA), on the other hand, were left out of the rally. Walgreens disappointed investors with its earnings results and guidance; Tesla, meanwhile, reported a steep decline in Q1 deliveries and said the results will negatively affect the company's Q1 net income.

U.S. Treasuries pulled back this week, driving yields higher across the curve. The 2-yr yield increased seven basis points to 2.34%, and the 10-yr yield increased nine basis points to 2.50%. The U.S. Dollar Index increased 0.1% to 97.40. WTI crude rose 4.9% to $63.10/bbl, hitting a five-month high.

Market Recap - Investors Look Past Growth Worries, Wall Street Mounts Historic Quarter

The S&P 500 bounced back this week, gaining 1.2% to cap off its best quarter (+13.1%) since 2009. Leadership from the recently-battered industrial sector (+2.9%) helped the market overcome lingering growth concerns.

The Dow Jones Industrial Average (+1.7%), the Nasdaq Composite (+1.1%), and the Russell 2000 (+2.3%) finished with quarterly gains of 11.2%, 16.5%, and 14.2%, respectively.

The S&P 500 industrials (+2.9%), consumer discretionary (+1.9%), and consumer staples (+1.6%) sectors led the broader market higher. Conversely, the utilities (-0.5%) and communication services (-0.5%) sectors were the lone groups to finish with losses.

Continued weakness in the eurozone contributed to a slow start for the broader market. Burgeoning concerns about growth sent the yield on the benchmark 10-yr German bund into negative territory. Dwindling growth expectations, and the hunt for yields, likely sent investors flocking to the U.S. Treasury market, sending yields even lower.

The 2-yr yield and the 10-yr yield declined five basis points each to 2.27% and 2.41%, respectively. Strikingly, the 2-yr yield dropped 23 basis points this month, while the 10-yr yield dropped 30 basis points this month. The U.S. Dollar Index advanced 0.6% to 97.27.

It should be noted, though, that the 2-yr yield was at 2.16% at its low, and the 10-yr yield was at 2.34% at its low this week. Once Treasuries cooled off in the back half of the week, equities tacked on a bulk of their gains.

The relatively low yields appear to be helping the U.S. housing market, which should offer a measure of support for the economy. Mortgage applications continued to increase, new home sales increased last month, and homebuilders KB Home (KBH) and Lennar (LEN) provided investors with an upbeat outlook for the sector.

In other key news, U.S. and China held "constructive" trade talks in Beijing; UK Prime Minister Theresa May's Brexit deal was shut down for the third time; and Fed Governor Randal Quarles believes further rate hikes may be necessary, as he remains optimistic about economic growth.

Separately, Uber Technologies (UBER), Centene (CNC), and Thermo Fisher (TMO) were some of the more notable companies that made sizable acquisitions this week. Lyft (LYFT), meanwhile, made its highly-anticipated market debut on Friday.

Market Recap - Fed Leans More Dovish, U.S. Treasury Yields Drop, Growth Concerns Grow

The S&P 500 lost 0.8% this week in a tale of two trading narratives. The first narrative lifted the S&P 500 to a new 2019 high on the notion that low U.S. Treasury yields and a dovish Fed were a boon for risk assets.

However, the week's gains were wiped out on Friday amid renewed worries that the market continues to get ahead of itself in pricing in a better economic outlook than what economic data indicate.

The Dow Jones Industrial Average lost 1.3%, and the Nasdaq Composite lost 0.6%. The Russell 2000 underperformed with a steep loss of 3.1%

The S&P 500 financial sector (-4.9%) was the week's outright laggard, pressured by concerns that the compression in spreads will lead to weak net interest margins for lenders. Conversely, the consumer discretionary (+1.2%), real estate (+0.9%), and consumer staples (+0.7%) sectors outperformed.

On Wednesday, the Federal Open Market Committee left the target range for the fed funds rate unchanged at 2.25-2.50%; signaled that it does not expect any rate hikes now in 2019 versus two rate hikes expected at the time of the December 2018 meeting; and said it will begin tapering its balance sheet runoff in May with an end date of Sept. 30.

The Fed's pivot to an even more dovish mindset made it clear that the market doesn't have to fear the Fed like it did in the fourth quarter. At the same time, however, some viewed the pivot as a dim outlook for economic growth that won't translate well for earnings growth.

Nevertheless, the indication for no rate hikes in 2019 (and only one in 2020) sent U.S. Treasury yields noticeably lower across the curve, which was further accentuated by growth concerns.

The 2-yr yield dropped 12 basis points to 2.32%, and the 10-yr yield dropped 13 basis points to 2.46%. The U.S. Dollar Index increased 0.1% to 96.65. WTI crude increased 0.8% to $59.01/bbl.

Growth concerns were reinforced by an earnings warning from FedEx (FDX), disappointing manufacturing data out of Europe, and declining exports out of Japan and South Korea. FedEx called attention to slowing international macroeconomic conditions and weaker global trade growth trends. Nike (NKE) didn't help ease concerns after reporting underwhelming growth in North American sales.

In other macro developments, China confirmed trade negotiations with the U.S. will continue in Beijing next week and in Washington in early April. EU leaders offered to delay the Brexit date until May 22 if British lawmakers approve Prime Minister Theresa May's deal next week.