The Week That Wasn't: February Flop Folds Into March Madness

This was a generally unsightly week for stocks. All of the major indices suffered losses, despite a late-Friday rally that boosted three of the four to positive, the notable exception, the stoic Dow Jones Industrial Average.

Taking a three percent hit for the week, the Dow suffered its third weekly setback in the last five, the most recent being the second-largest of the year, following the debacle from the first week in February. The other averages were down smaller percentages, the least of which was the NASDAQ, with just over one percent to the downside, staggered by the S&P (-2.04%) and the NYSE Composite (-2.53%).

Bonds were less volatile for the week as a whole, as the 10-year-note stabilized around 2.85%, finishing officially at 2.86%. Crude oil weakened, though not much, and gas prices eased a little as refiners switch over from winter to summer blends. With the US Dollar Index firming up early in the week, precious metals took it on the chin, but both gold and silver rebounded on Thursday and Friday as the short-lived dollar rally faded.

Most of the ballyhoo was over President Trump's announcement of tariffs on steel and aluminum imports, with a 25% fee on the former and a 10% duty on the latter. Critics mouthed off about rising prices on everything from automobiles to beer, though the effects are likely to be negligible. A 12-pack of beer is expected to cost about two cents more if duty-added aluminum is used, while a car contains roughly a ton of steel, which at $750 a ton, will amount to an additional $250 in the price of the already-bloated cost of a new vehicle.

Some countries are already crying foul, the loudest being Canada, from which the US imports the most steel, but many products from Canada, including lumber, are already highly regulated on the producer end, so even despite the NAFTA agreements, the US's neighbor to the North likely has little upon which to argue unfairness.

On the main, it was a poor week for stock holders, with mounting declines heading back toward the lows reached in the early days of February. The only index that can claim victory for the first two months of the year is the NASDAQ, holding tenuously onto a roughly three percent gain, with the S&P flat for the year, the Composite and Dow down the most, but none more than 2% for the annum.

Looking ahead, the FOMC is set to meet on March 16, with expectations of another 25 basis point hike to the federal funds rate. That is still disquieting to equity longs, and feeding into the ongoing rout in stocks. The week ahead will be indicative of the market's ability to digest another rate hike. So far, it's done well enough, but there is a point at which nearly risk-free yields will attract more money. Buoying up the stock market are massive buybacks, however, courtesy of the recent tax bill passed late last year. While companies that have been handing out bonuses have received most of the headlines, little to no reporting has been done on the same companies buying back even more of their own stock in an effort to assuage shareholders and keep their stock prices afloat at high tide.

How much money will be pumped back into stocks by the very owners and executives of said stocks is unknown, but eventually the tap will run dry and then interest rates will look more and more attractive. Without the buybacks of recent years, stocks would be more fairly valued, rather than being excessively overpriced as they have been for some time.

Sideways could be the most-favored direction for the next few weeks and months, with many experts calling for the eventual market blowout decline sometime in the third quarter (July-September), which would fit with the anti-Trump narrative leading into November's midterm elections.

Now the markets have not only become algo-driven and reactionary, but they are soon-to-be politically-charged as well.

Dow Jones Industrial Average March Scorecard:

Date	Close	Gain/Loss	Cum. G/L
3/1/18	24,608.98	-420.22	-420.22
3/2/18	24,538.06	-70.92	-491.14

At the Close, Friday, March 2, 2018:
Dow Jones Industrial Average: 24,538.06, -70.92 (-0.29%)
NASDAQ: 7,257.87, +77.31 (+1.08%)
S&P 500: 2,691.25, +13.58 (+0.51%)
NYSE Composite: 12,557.99, +39.26 (+0.31%)

For the Week:
Dow: -771.93 (-3.05%)
NASDAQ: -79.52 (-1.08%)
S&P 500: -56.05 (-2.04%)
NYSE Composite: -326.12 (-2.53%)

Stocks Continue Falling As March Commences With 420-Point Drop

After a brutal February, which took the Dow down by more than 1100 points, the first day of March suggested that more capital carnage may still be yet to come.

After a shaky positive start to the session, stocks quickly reversed course at midday after remarks by NY Fed head, William Dudley, and Fed Chair Jerome Powell signaled that the Fed would be pursuing three, and possibly, four, rate hikes in 2018. Accelerating the decline was the announcement by President Trump that he planned to impose 25% tariffs on imported steel and a 10% tag on imported aluminum.

Added to the losses of the last two sessions of February, Thursday's 420-point decline has ripped 1100 points off the Dow and futures are pointing to a lower open on Wall Street after stocks in Asia (NIKKEI, -542.83; Hang Seng, -460.80) were hit hard and European bourses have opened hard to the downside with Germany's DAX the biggest loser, down more than two percent at midday.

The Dow continues to cruise closer to correction territory, though it is still another 1000 points away, at 23,594, but, as seen in previous sessions, that amount of loss can occur in one or two sessions with relatively little resistance.

Current conditions suggest that economies globally are contracting, after a binge of easy credit field by central bank intervention and wanton money-printing for the past nine years. If the Fed and other central banks are convinced those policies must come to an end, an all-encompassing crash in the not-so-distant future is not out of the question.

Dow Jones Industrial Average March Scorecard:

Date	Close	Gain/Loss	Cum. G/L
3/1/18	24,608.98	-420.22	-420.22

At the Close, Thursday, March 1, 2018:
Dow Jones Industrial Average: 24,608.98, -420.22 (-1.68%)
NASDAQ: 7,180.56, -92.45 (-1.27%)
S&P 500: 2,677.67: -36.16 (-1.33%)
NYSE Composite: 12,518.73, -133.82 (-1.06%)

February Flush: Stocks Pounded As Worst Month Since January 2016 Ends

The Dow Industrials lost a total of just more than 1000 points for the month of February, which, on the surface, may sound like a big deal, but, in reality, it amounts to merely a four percent loss.

In other words, if one had $100,000 at the start of the month, it would be only $96,000 at the end. Not much to worry about, right?

Maybe so, but this month-long fall, rise, and fall had a number of interesting characteristics, and the supporting (or non-supporting) data is suggesting that whatever has shaken markets is not yet over, especially when the losses on the final day of the month were the fourth largest of the month and the biggest since the 1000+ point washout on February 8.

The entire month was marked by voracious levels of volatility. Out of 19 trading days, 15 featured closes more than 150 points higher or lower than in the previous session. Breadth continues to erode; Wednesday's advance-decline line showed losers outpacing gainers by a 5:2 margin. New 52-week lows are beginning to pile up while new highs are on the wane.

Economic data hasn't been very encouraging. Today's second revision of 4th quarter 2017 GDP came in at 2.5%, slightly lower than the 2.6% reported in January. New and existing home sales have slumped for two consecutive months, and today's Chicago's PMI reading of 61.9, was a six-month low, down from 65.7 in January.

Inflation appears to be picking up steam in some areas, slipping in others, and bond yields remain elevated in the near term. With the Fed set to raise the federal funds rate in March, there's little to make the case for a sustained continuation of the aging bull market, now approaching nine years since the Great Financial Crisis.

Wednesday's losses left the Dow down 4.6% from it's January all-time highs. It's not exactly a huge obstacle to overcome, but it's beginning to look more like a mountain than a molehill.

Dow Jones Industrial Average February Scorecard:

Date	Close	Gain/Loss	Cum. G/L
2/1/18	26,186.71	+37.32	+37.32
2/2/18	25,520.96	-665.75	-628.43
2/5/18	24,345.75	-1,175.21	-1,803.64
2/6/18	24,912.77	+567.02	-1,236.62
2/7/18	24,893.35	-19.42	-1,256.04
2/8/18	23,860.46	-1,032.89	-2288.93
2/9/18	24,190.90	+330.44	-1958.49
2/12/18	24,601.27	+410.37	-1548.12
2/13/18	24,640.45	+39.18	-1508.94
2/14/18	24,893.49	+253.04	-1255.90
2/15/18	25,200.37	+306.88	-949.02
2/16/18	25,219.38	+19.01	-930.01
2/20/18	24,964.75	-254.63	-1184.64
2/21/18	24,797.78	-166.97	-1351.61
2/22/18	24,962.48	+164.70	-1186.91
2/23/18	25,309.99	+347.51	-839.40
2/26/18	25,709.27	+399.28	-440.12
2/27/18	25,410.03	-299.24	-739.36
2/28/18	25,029.20	-380.83	-1120.19

At the Close, Wednesday, February 28, 2018:
Dow Jones Industrial Average: 25,029.20, -380.83 (-1.50%)
NASDAQ: 7,273.01, -57.35 (-0.78%)
S&P 500: 2,713.83, -30.45 (-1.11%)
NYSE Composite: 12,657.31, -161.91 (-1.26%)

Markets Get Spooked By Bullish Fed Chairman Jerome Powell

Stocks posted their biggest daily percentage losses since February 8 after comments by newly-appointed Fed Chairman Jerome Powell before the U.S. House of Representatives’ Financial Services Committee sent the major indices into a tailspin.

In his first congressional visit since replacing Janet Yellen, Powell's upbeat commentary on the health of the economy was taken by some to indicate that he may be in favor of four rate hikes this year, instead of the three already anticipated by the Street.

The key phrase from the new Chairman was, "my personal outlook for the economy has strengthened since December," which analysts thought to be a little too optimistic, which in turn could prompt the Fed to raise interest rates at a faster pace than previously thought.

With algos and ETFs fine-tuned to turn on every headline, Tuesday's downside move is largely the result of a market two-closely intertwined and concerned over daily news rather than as a discounting mechanism for future earnings. The current contract of markets - and its computer-driven near-instantaneous reactions - can cause sudden directional movement, just as it kept the lid on volatility over the previous nine years of seeming tranquility in a low-interest rate environment.

Nowadays, everything moves at once, like a stampeding herd, rather than taking a slower, cautionary, individual stock approach. Today's action also reinforced the notion that good news was bad, as the narrative that an improving economy may set the stage for quicker interest rate rises. The 10-year-note ended the day yielding 2.91%, not an alarming number, but one which is near the recent high end of the benchmark gauge.

Powell speaks before the Senate Banking Committee on Thursday, completing his mandated annual addresses to congress. After today's fandango, it's very likely that the Fed Chairman could backtrack a little, calming fears and sending stocks higher on the final day of trading for the month. It should be worth noting how Chairman Powell reacts and whether he plays to the market or remains true to his predetermined outlook.

Stocks would have to stage a monumental rally to finish February on the plus side. The Dow is down nearly 740 points since January 31.

Dow Jones Industrial Average February Scorecard:

Date	Close	Gain/Loss	Cum. G/L
2/1/18	26,186.71	+37.32	+37.32
2/2/18	25,520.96	-665.75	-628.43
2/5/18	24,345.75	-1,175.21	-1,803.64
2/6/18	24,912.77	+567.02	-1,236.62
2/7/18	24,893.35	-19.42	-1,256.04
2/8/18	23,860.46	-1,032.89	-2288.93
2/9/18	24,190.90	+330.44	-1958.49
2/12/18	24,601.27	+410.37	-1548.12
2/13/18	24,640.45	+39.18	-1508.94
2/14/18	24,893.49	+253.04	-1255.90
2/15/18	25,200.37	+306.88	-949.02
2/16/18	25,219.38	+19.01	-930.01
2/20/18	24,964.75	-254.63	-1184.64
2/21/18	24,797.78	-166.97	-1351.61
2/22/18	24,962.48	+164.70	-1186.91
2/23/18	25,309.99	+347.51	-839.40
2/26/18	25,709.27	+399.28	-440.12
2/27/18	25,410.03	-299.24	-739.36

At the Close, Tuesday, February 27, 2018:
Dow Jones Industrial Average: 25,410.03, -299.24 (-1.16%)
NASDAQ: 7,330.35, -91.11 (-1.23%)
S&P 500: 2,744.28, -35.32 (-1.27%)
NYSE Composite: 12,819.22, -180.40 (-1.39%)

Home Sales and Stocks Are Diverging?

Stocks staged an incredible rally on Monday set against a backdrop of the second straight monthly decline in both new and existing home sales.

Existing home sales for January were reported last Wednesday; new home sales came out on Monday morning and were far from encouraging, showing a January decline of 7.8% after December's 9.3% drop.

With a shrug, stock investors ignored yet another sign that the general economy is not operating at optimal efficiency. Apparently, the mindset is such that owning stocks is a better investment than owning a place to live. Maybe when Americans are all renters, they will be encouraged to buy even more stocks, to balance things out, so to speak.

Wall Street may have a mind of its own, though it appears that mind is being led by some very false rhetoric about the strength of the US - and global - economy.

Monday's big gains puts the Dow in position to erase all of the losses from earlier in the month. The NASDAQ is already back above where it began the month.

Dow Jones Industrial Average February Scorecard:

Date	Close	Gain/Loss	Cum. G/L
2/1/18	26,186.71	+37.32	+37.32
2/2/18	25,520.96	-665.75	-628.43
2/5/18	24,345.75	-1,175.21	-1,803.64
2/6/18	24,912.77	+567.02	-1,236.62
2/7/18	24,893.35	-19.42	-1,256.04
2/8/18	23,860.46	-1,032.89	-2288.93
2/9/18	24,190.90	+330.44	-1958.49
2/12/18	24,601.27	+410.37	-1548.12
2/13/18	24,640.45	+39.18	-1508.94
2/14/18	24,893.49	+253.04	-1255.90
2/15/18	25,200.37	+306.88	-949.02
2/16/18	25,219.38	+19.01	-930.01
2/20/18	24,964.75	-254.63	-1184.64
2/21/18	24,797.78	-166.97	-1351.61
2/22/18	24,962.48	+164.70	-1186.91
2/23/18	25,309.99	+347.51	-839.40
2/26/18	25,709.27	+399.28	-440.12

At the Close, Monday, January 26, 2018:
Dow Jones Industrial Average: 25,709.27, +399.28 (+1.58%)
NASDAQ: 7,421.46, +84.07 (+1.15%)
S&P 500: 2,779.60, +32.30 (+1.18%)
NYSE Composite: 12,999.62, +115.51 (+0.90%)