Tag Archives: North Korea

The Kindest Quarter Arrives for a Stock Market That Nothing Can Rattle

Theories abound as to why the fourth quarter is so often the best one for equity bulls. Fund managers need to catch up, holiday spending spreads cheer, investors celebrate the January effect in December.

Or maybe it’s just dumb luck. Whatever the case, the S&P 500 Index has risen seven times in the last eight years between October and December. And while calendar effects just took a beating with a volatility-free September, betting against any form of momentum remains a losing trade until proven otherwise.

Indeed, equities just capped an eighth straight quarter of gains, the longest winning streak since the start of 2015. The S&P 500 climbed 4 percent as corporate earnings posted the first back-to-back double-digit advance in six years, helping stocks endure mounting tension with North Korea, a deadly U.S. hurricane season and escalating political turmoil.

Along the way, returns have started to spread out as money shifted from high-flying tech giants to laggards such as small-cap and value shares. The rotation, spurred by higher bond yields, accelerated this week as President Donald Trump and Republican congressional leaders released a framework for overhauling the U.S. tax code.

All four major major U.S. equity gauges — the S&P 500, Nasdaq Composite Index, Dow Jones Industrial Average and Russell 2000 Index — ended September with year-to-date gains gains of at least 9 percent. The last time that happened, in 2013, the S&P 500 rallied an additional 9.9 percent.

In fact, betting on a sloppy close to any year has been a losing proposition since the global financial crisis ended. The S&P 500 rose an average 6.2 percent in the fourth quarter since 2009. Matching that return would lift the index to 2,676 by December from Friday’s close of 2,519.36.

“Seasonality is a starting consideration but never an end to itself,” Stifel Nicolaus & Coo. chief equity strategist Barry Bannister, wrote in a note Thursday. He raised his year-end S&P 500 target 100 points to 2,600, citing catalysts including Trump’s fiscal plans and stronger global growth.

Not everyone is as bullish. Ten of 18 Wall Street strategists surveyed by Bloomberg see the S&P 500 ending the year at 2,500 or below. David Kostin at Goldman Sachs Group Inc. reiterated his call for 2,400, saying the start of the Fed’s balance sheet reduction will result in higher bond yields, weighing on equities.

Others see the rotation into small-caps and banks weakening the bear case for stocks. Jason Hunter, an analyst who watches charts to predict markets at JPMorgan Chase & Co., has expected the summer swoon in tech stocks to lead to a market correction. The breakout in the Russell 2000 doesn’t bode well for that cautious call, he said, adding he’s watching whether the new leadership groups can power through resistant levels.

The latest rally has revived a buy signal from a century-old charting technique. The Dow Jones Transportation Average rose for eight days in a row, climbing to all-time highs and helping the group catch up with the rally in the industrial measure after they spent the last two months diverging from each other.

That’s a relief to adherents to the Dow Theory, an investment approach that stems from observations Charles Dow made a century ago and holds that moves in transportation stocks must be “confirmed” by industrials, and vice versa, to be sustained.

Where should investors put their money heading into the final months of the year? Gina Martin Adams, chief equity strategist at Bloomberg Intelligence, says technology and consumer-discretionary stocks are the two sectors that tend to enjoy seasonal tailwinds because of holiday spending.

Chris Harvey, a strategist at Wells Fargo, recommends investors favor the recent Trump trade, such as small-caps. “We’re placing more faith in a rotation rather than an upward market ‘pop’,” he wrote in a note.

    Read more: http://www.bloomberg.com/news/articles/2017-09-29/kindest-quarter-arrives-for-stock-market-that-nothing-can-rattle

    Stocks in Asia Head Lower as Haven Rally Subsides: Markets Wrap

    Financial markets showed signs of stabilizing after a fresh trigger from North Korea had sent money into haven assets, with focus returning to comments from central bank policy makers.

    Stocks in Asia fell, though declines were modest, as gains in gold and the yen petered out. North Korea had injected a note of caution to markets on Monday after its foreign minister declared that the nation can shoot down U.S. warplanes. Focus remains on Chinese property developers, as one of the world’s most extreme stock rallies gets a reality check.

    North Korean Foreign Minister Ri Yong Ho described President Donald Trump’s recent comments as tantamount to a declaration of war. The White House denied it has declared war on Pyongyang, while China’s ambassador to the UN told Reuters the situation is "getting too dangerous."

    “This does represent a significant escalation in rhetoric and raises the risk of a tactical misstep,” said Tapas Strickland, a Sydney-based economist at National Australia Bank Ltd.

    A speech by Federal Reserve Chair Janet Yellen on Tuesday will be parsed as policy makers continue to disagree on whether to raise U.S. interest rates again this year. New York Fed President William Dudley argued the U.S. central bank should stick with its strategy of gradual monetary policy tightening, a view echoed by Yellen. Meanwhile, Chicago Fed President Charles Evans urged caution as did Minneapolis Fed President Neel Kashkari. Investors see a roughly 60 percent chance that rates will be increased again in December following moves in March and June.

    Terminal subscribers can read more in our Markets Live blog.

    What to watch out for this week:

    • Later in the week, Bank of England Governor Mark Carney speaks, as does soon-to-depart Fed Vice Chairman Stanley Fischer.
    • European Union chief Brexit negotiator Michel Barnier and U.K. counterpart David Davis begin their next round of negotiations.
    • Household spending last month in the U.S. probably posted the smallest gain since February as motor-vehicle sales shifted into a lower gear, economists forecast government figures to show.
    • The euro-area inflation rate may have accelerated a touch to 1.6 percent in September from 1.5 percent but the core will probably remain at 1.2 percent when data is out on Friday.

    Here are the main moves in markets:

    Stocks

    • Japan’s Topix index was slightly lower as of 11:05 a.m. in Tokyo. South Korea’s Kospi index fell and Australia’s S&P/ASX 200 Index were little changed.
    • Hong Kong’s Hang Seng Index was down 0.1 percent after slumping 1.4 percent on Monday as Chinese property developers tumbled on fresh mainland home curbs.
    • Futures on the S&P 500 Index fell 0.1 percent. The underlying gauge lost 0.2 percent, while the Nasdaq Composite Index declined 0.9 percent following a selloff in technology stocks.

    Currencies

    • The Bloomberg Dollar Spot Index was down less than 0.1 percent after climbing 0.4 percent to the highest in more than three weeks.
    • The yen was little changed at 111.65. It gained 0.2 percent on Monday.
    • The won fell 0.4 percent to 1,136.58 per dollar.
    • The euro was at $1.1860 after falling 0.9 percent.
    • The Australian dollar bought 79.44 U.S. cents. The New Zealand dollar dropped 0.3 percent, adding to a 0.9 percent slide on Monday.

    Bonds

    • The yield on 10-year Treasuries was at 2.22 percent, maintaining a three basis point drop on Monday.
    • Australia’s 10-year bonds yield fell three basis points to 2.77 percent.

    Commodities

    • Gold was steady at $1,311.26 an ounce, after jumping 1 percent on Monday.
    • West Texas Intermediate crude edged lower to $52.16 a barrel after rising 3.1 percent on Monday to the highest since April. Turkey threatened to shut down Kurdish crude shipments through its territory.

      Read more: http://www.bloomberg.com/news/articles/2017-09-25/havens-climb-on-north-korea-as-stocks-point-lower-markets-wrap

      Stocks Drop as Tech Gets Hit, Bonds Rise on Korea: Markets Wrap

      U.S. stocks fell as selling in large-cap technology shares intensified, while Treasuries advanced with gold after North Korea ratcheted up tensions with America.

      The Nasdaq 100 Index posted its steepest loss in five weeks, with the FANG cohort of megacaps leading declines. Small-cap shares fared better as investors continued to rotate into the year’s laggards. Haven assets advanced after North Korean Foreign Minister Ri Yong-Ho described President Donald Trump’s recent comments as tantamount to a declaration of war.

      “Without a doubt, North Korea is hovering over the market, but it sort of zigs and zags onto the scene,” said Quincy Krosby, chief market strategist at Prudential Financial Inc. “What you are seeing is those tech names pulling back. The fact is that right now, you have a fully valued market and little catalysts at this point to push the market higher. ”

      Ri, speaking in New York Monday, also declared that North Korea can shoot down U.S. warplanes as part of its right to self-defense under the United Nations charter, adding to weeks of rhetoric that has intermittently rattled financial markets. U.S. markets also kept an eye on the latest domestic political developments, with the most recent effort to overhaul the health-care system on life support and a Republican tax proposal still lacking details.

      Elections dominated trading overseas. The Stoxx Europe 600 Index climbed, and the euro weakened after Chancellor Angela Merkel won Germany’s election, while the country’s main far-right party had a surprisingly strong result. The process of building a new government could take weeks, so markets may well move on from the result quickly.

      “Investors were expecting a victory for Angela Merkel, but there has been a surprise in the relatively poor performance of the CDU and SPD, who suffered their worst results since 1949,” Nick Peters, multi asset portfolio manager at Fidelity International, wrote in a note.

      The yen stayed weaker as Japan’s prime minister unveiled a fresh stimulus package and said he’ll dissolve the lower house of parliament ahead of a general election. Most government bonds advanced.

      Terminal subscribers can read more in our Markets Live blog.

      What to watch out for this week:

      • Fed Chair Janet Yellen speaks in Cleveland on Tuesday. Later in the week, Bank of England Governor Mark Carney speaks, as does soon-to-depart Fed Vice Chairman Stanley Fischer.
      • European Union chief Brexit negotiator Michel Barnier and U.K. counterpart David Davis begin their next round of negotiations.
      • Household spending last month in the U.S. probably posted the smallest gain since February as motor-vehicle sales shifted into a lower gear, economists forecast government figures to show.
      • The euro-area inflation rate may have accelerated a touch to 1.6 percent in September from 1.5 percent but the core will probably remain at 1.2 percent on Friday.

      Here are the main moves in markets:

      Stocks

      • The S&P 500 Index fell 0.2 percent to 2,496.66, the Nasdaq Composite Index lost 0.9 percent, the Dow Jones Industrial Average slid 0.2 percent and the Russell 2000 gained less than 0.1 percent after rising to a record high earlier in the session.
      • Stoxx Europe 600 climbed 0.2 percent to the highest since July.
      • The MSCI All-Country World Index declined 0.4 percent to the lowest in two weeks.

      Currencies

      • The Bloomberg Dollar Spot Index climbed 0.4 percent to the highest in more than three weeks.
      • The euro dipped 0.9 percent to $1.1847, the weakest in a month.
      • The British pound slipped 0.3 percent to $1.3466.

      Bonds

      • The yield on 10-year Treasuries dropped three basis points to 2.2198 percent.
      • Germany’s 10-year yield declined five basis points to 0.399 percent.
      • Britain’s 10-year yield fell two basis points to 1.334 percent.

      Commodities

      • Gold jumped 1 percent to $1,310.25 an ounce.
      • West Texas Intermediate crude rose 3 percent to $52.18 a barrel, the highest since April.

      Asia

      • Japan’s Topix index advanced 0.5 percent at the close in Tokyo. Australia’s S&P/ASX 200 Index ended virtually unchanged and South Korea’s Kospi index slid 0.4 percent.
      • The Hang Seng Index in Hong Kong fell 1.4 percent with Chinese property developers slumping after several cities on the mainland tightened rules on home sales.
      • The Japanese yen fell 0.2 percent to 112.22 per dollar.

        Read more: http://www.bloomberg.com/news/articles/2017-09-24/euro-weaker-with-kiwi-dollar-as-politics-dominate-markets-wrap