Market Sentiment Update
Sentiment declined 6 points to 68 last week and the S&P 500 posted a loss of 0.7% on the holiday shortened week. The small cap Russell 2000 index declined 1.5%.
The release of the FOMC minutes on Tuesday set a negative tone for the week. The notes indicate that several members do not think that further quantitative easing is necessary. Europe has also entered the limelight again as underwhelming demand for a bond auction in Spain has increased concern that it will ultimately need funding similar to Greece.
The employment report was released on Friday despite the equity markets being closed for Good Friday. The economy added just 120k jobs last month, well below of the 205k expected. Many economists are attributing the shortfall to the warm winter weather boosting or pulling forward the previous month’s job creations. This shortfall has the markets starting the week with losses. Earnings season starts Tuesday with Alcoa reporting after the market close. Google, Wells Fargo, and JP Morgan will set the tone later in the week with important early reports on the first quarter.
We remain invested in equities as the BAMSI is positive.
I will be on CNBC's Fast Money Half-Time show again tomorrow, Tuesday, April 10th at 12:00 pm Eastern / 9:00 am Pacific giving commentary on stocks and the market.
Market Sentiment Update
Sentiment declined 2 points to 74 last week. The S&P 500 posted a gain of 0.9% on the week to finish the first quarter up 12%. The NASDAQ posted a gain of 18.7% and the Dow rose 8.1% in what was the best first quarter for S&P 500 since 1998 and since 1991 for the NASDAQ.
Sector leadership continues to highlight the most economically sensitive sectors. Early cycle sectors like financials, consumer discretionary and technology were the top performers on the quarter. It is interesting to note that the energy sector was near the bottom with only a 3.4% gain. This sector has been a favorite for institutional managers over the last 5 years and the recent performance might indicate that it has finally become a crowded trade.
Economic data continues to improve at a modest pace. Looking ahead, we have several economic releases this week with the employment report coming on Friday when the equity market is closed. Next week will be the official start of earnings season with Alcoa reporting on Tuesday, April 10th. The warmest winter in 20 years is likely to have helped retail sales. It will be interesting to note how many companies admit to the weather benefit in contrast the consistent blame that Mother Nature gets in normal quarters.
We remain invested in equities as the BAMSI is positive.
I will be on CNBC's Fast Money Half-Time show again tomorrow, Tuesday, April 3rd at 12:00 pm Eastern / 9:00 am Pacific giving commentary on stocks and the market.
Market Sentiment Update
Sentiment added 1 point to 76 and the S&P 500 posted a small loss of 0.5% last week. The small cap Russell 2000 was flat and the NASDAQ advanced 0.4% after Apple confirmed that it will start paying a dividend.
Markets are on pace to post the best quarter since Q3 2009 as investors continue to look for risk in their portfolios. Equities returns have outpaced fixed income in the last six months despite little in the way of fund flows out of fixed income investments. This suggests that the retail investor has not fully participated in the recent gains.
Oil declined last week and the energy sector traded 3% lower as the Iran conflict fears have subsided and now there is concern of too much supply. This helped the resilient consumer and financial sectors to continue recent leadership. Looking ahead, GDP and durable goods are anticipated to confirm the modest improvement in the economic data this week.
We remain invested in equities as the BAMSI is positive.
Market Sentiment Update
The Baker Avenue Market Sentiment Indicator (BAMSI) was unchanged on the week at 75 despite an up week for the major market indices. Better than expected retail sales data and the Federal Reserve's announcement of interest rate policy helped fueled the gains.
Since the BAMSI turned positive in early November, the market has had strong gains of 13%. Technical and fundamental indicators suggest there is potentially more upside for the market.
Volatility continues to make new lows for the year as measured by the Volatility Index (VIX). Cyclical sectors are outperforming non-cyclical sectors of the economy like staples and utilities. Investor sentiment as measured by the American Association of Individual Investors (AAII) is bullish, but not at levels of euphoria which typically signal market tops. Valuations also appear to be reasonable as the S&P 500 still trades below its historical average earnings multiple.
With that said, market risks still remain as the situation in Europe remains far from being resolved and the U.S. economy continues to muddle along. While the BAMSI is positive we will remain invested, but we will continue to closely monitor conditions and risk levels in the market.
Market Sentiment Update
The Baker Avenue Market Sentiment Indicator (BAMSI) declined 7 points to 75 on a relatively flat week for the major market indices. Although the employment data on Friday was better than estimates, Greece dominated the headlines again as payouts for credit default swaps were triggered on Greek bonds.
We may see more pronounced market moves this week as the latest retail sales data is released on Tuesday and the Federal Reserve announces its latest decision on interest rate policy. While the market expects the Fed to leave rates unchanged, it will likely focus on the Fed's commentary regarding the strength of the economic recovery and whether the Fed is willing to undertake new stimulative initiatives.
On Thursday, the Fed is widely expected to release the data on the latest "stress test" on 19 U.S. banks regarding how they might fare through a deep recession and second housing crisis. Financials are likely to see some volatility on this release.
Although the BAMSI declined this week, it remains firmly in positive territory and we remain invested in equities.
I will be on CNBC's Fast Money Half-Time show Tuesday, March 13 at 12:00 pm Eastern / 9:00 am Pacific giving commentary on stocks and the market.
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If you understand that a 'football' is kicked and not thrown, and 'cricket' is not an insect, you might enjoy the insights into financial markets, modern culture, politics and sports from the perspective of an Englishman living in New York.