Markets Stumble

Investors spent much of late last week digesting Wednesday’s equity market reset in hopes that the Trump trade remains intact. Unfortunately, Thursday and Friday provided little in the way of encouragement as prices languished and the GOP’s efforts at repeal and replace failed miserably. Adding additional overhang to the market is crude oil pricing which remains susceptible to a trade lower. As a result, equity prices barely held on; closing within a fraction of Wednesday’s close. As I have mentioned over the past three weeks in this note, my sense is that the momentum trade that has rifled equity prices higher since early November has dissipated while equity market gains have stalled. Last week’s trade put a point on that. In many respects, the tapering off of the Trump rally is not at all unexpected, in fact it is due.

As mentioned above, the S&P 500 and Dow Industrials have both posted solid quarterly results thus far this year with one week of trading left in the period. Since the onset of 2017 we have received an additional rate hike by the Fed, solid quarterly economic results, better than expected Q4 EPS results and solid equity market gains for investors. This week with earnings season all but concluded and Q1 earnings season is still two weeks out, expect economic data and politics to dominate.

CNN Money Update: Trumponomics
The Trump stock market rally is under siege
by Matt Egan @mattmegan5
March 27, 2017: 4:46 PM ET

This Wednesday’s EIA Petroleum Status Report will be closely watched given that last week we saw crude inventories jump by 5M bbl. Increased US production as framed by the weekly Baker-Hughes Report, which stand at a cycle high, in conjunction with an increasingly ineffective OPEC production curb have driven energy prices lower acting as a wet blanket on the energy sector and the broader market. The Pending Home Sales data for February, due out Wednesday, is expected to rise by 1.8%. In that event, the housing sector should continue to outperform as we head deeper into the spring sales season.

flickr photo: Daniel Mennerich