April 17, 2017

Stocks opened higher morning (Dow 102 pts; SPX .5%). Most market sectors and industries are in the green, led by real estate, banks, transports and semiconductors. Today the market is ignoring North Korea, the French election, Syria, etc. The VIX Index  is backing down to 15. The dollar and commodities are slightly lower today. The exception is copper, up 1% after some better-than-expected economic news out of China. US Bonds are continuing to rally as yields head lower. The 5-year and 10-year Treasury yields are down to 1.76% and 2,23%, respectively. Those yields are 5-month lows. 

Hedge fund manager Leon Cooperman, in a letter to clients, addressed the current directionless stock market. “It is time for the US equity market to rest.” He now believes stocks will be roughly flat this year due to full valuation, geopolitical concerns and domestic political uncertainty. He said his base-case outlook is that the bull market will persist “for quite a while longer” and that stocks will outperform bonds as interest rates head higher. But again, he expects the market to tread water in the near term. 

A research report published by Raymond James suggests homebuilder stocks are poised for further gains. The firm notes February pending home sales were up 5.5%, and of course pending sales are an early read on closed transactions, which rose 9% in March. In addition, orders to build new luxury homes “nearly tripled” in February. The firm’s research suggests the 2017 “spring selling season is off to a robust and better-than-expected start for most US homebuilders…” 

First quarter earnings season is underway. Wall Street analysts currently expect aggregate profits for S&P 500 companies to report 8.5% earnings growth compared with the fourth quarter of 2016. 

The Consumer Price Index (CPI) slowed to 2.4% y/y growth in March vs. 2.7% in the prior month. This is a closely-watched gauge of retail price inflation throughout the economy. It looks like inflation slowed down pretty much across the board in March, with price declines in communications (i.e. cell phone plans), apparel, auto, etc. By now it’s pretty clear that the economy was fairly weak in the first quarter. There is virtually  no way the Fed will raise interest rates again until growth picks up (maybe in the second half of the year). 

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