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It easily could be a tough day for stocks, as traders are worrying about “Spar-a-Lago” and moping about yesterday’s ugly finish.
Why exactly does the stock market keep wallowing below its March 1 peak?
Analysts have a list of potential culprits: the Donald Trump-Xi Jinping summit that starts today in Florida, fears that tax cuts won’t come soon, and the Fed’s plans to pare back its stockpile of bonds. Jefferies strategists, however, sound tired of the finger-pointing.
“Just as the rise in markets can be attributed to a whole host of reasons, so can declines,” say chief global equity strategist Sean Darby and his colleagues.
Nonetheless, they offer “the best excuse” for the recent selling — as well as where investors ought to hide out now, for our call of the day.
“Last quarter’s rally was built on large-cap, expensive stocks advancing at the expense of small-cap, cheap stocks,” say the Jeffries strategists. Now investors are uneasy about the even higher share prices for those big and costly plays, they suggest.
That doesn’t mean stock bulls need to cash out completely, they say, even as they warn that the “technical condition” of the S&P 500 looks precarious.
“The bottom line is that monetary conditions remain easy, the global economy was expanding well before Trump got elected, and real interest rates are negative,” Darby & Co. write. So all things considered, investors “should be rotating into lower-priced stocks, which are experiencing positive earnings revisions.”
The Jefferies team doesn’t name individual stocks in their note. But if you want to bet on those little and inexpensive stocks that the strategists have flagged as unloved, there’s an ETF for that. A bunch actually, such as the Vanguard Small-Cap Value ETF VBR, -0.85% and the iShares Russell 2000 Value ETF IWN, -1.18% .
Election through December 7:
December 8 through today:
— Irrelevant Investor (@michaelbatnick) April 5, 2017
Key market gauges
Futures for the Dow YMM7, +0.07% , S&P 500 ESM7, +0.05% and Nasdaq-100 NQM7, +0.07% are slightly higher, after the Dow DJIA, -0.20% , S&P SPX, -0.31% and Nasdaq Composite COMP, -0.58% all sold off into yesterday’s close.
It’s been mostly selling in Europe SXXP, -0.10% and Asia. Gold GCM7, +0.40% is gaining, and oil CLM7, +0.47% is also rising. The euro EURUSD, +0.0094% has bounced back from losses that came as ECB President Mario Draghi revealed a four-point checklist for when it’s time for a rate hike.
See the Market Snapshot column for the latest action.
Will Trump and Xi share a bucket of fried chicken and cheer Yum China’s YUMC, +0.79% latest earnings? They almost certainly won’t play golf at “Spar-a-Lago,” aka the new president’s most important meeting yet. Xi, that Communist Party animal, has been known to go for a beer.
A reading on weekly jobless claims is due before the open, helping to whet everyone’s appetite for tomorrow’s big report on nonfarm payrolls. Yesterday’s ADP release was piping hot, ICYMI.
“Do monetary policy frameworks need to be adjusted in a world of (potentially) low natural real interest rates? If so, how?”
If you often ask yourself those questions, you might be in luck. The San Francisco Fed’s John Williams and a German sidekick are tackling them around when the stock market opens.
Check out: MarketWatch’s Economic Calendar
“The pace of investments in the U.S. entrepreneurial ecosystem downshifted again in the first quarter of 2017 even as dollars invested bumped up due to several outsized deals,” says the latest Venture Monitor report from the National Venture Capital Association and PitchBook.
But don’t worry, the report adds: “This is not representative of a fundamental decline of venture funding of innovative startups, but rather a return to a more disciplined approach.”
Bezos speaks in Colorado Springs yesterday.
“My business model right now for Blue Origin is I sell about a billion a year of Amazon stock and I use it to fund Blue Origin.” — Amazon.com AMZN, +0.27% founder Jeff Bezos yesterday laid out his vision for his space-travel startup.
$16 billion — That is the amount in outdated European banknotes and coins that still has not been handed in and exchanged for euros EURUSD, +0.0094% , Bloomberg notes. Have you got old deutschmarks, French francs, Italian lira, etc.?
Principal resigns after student reporters highlighted her questionable credentials.
Pew: Babies born to Muslims will outnumber Christian births by 2035.
Smoking causes one in 10 deaths worldwide, study says.
A Kansan way to keep small businesses (and small towns) alive when biz owners retire.
In casting news, he’s played Batman, Moses and now…
— NBC News (@NBCNews) April 6, 2017
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