RELIEF RALLY

Stocks opened higher this morning in an attempt to recover from a week-long 5% correction. The Dow is currently up 219 pts and the SPX is up 1.25%. Ten of eleven market sectors are in the green, led by tech (+1.9%), financials (+1.5%) and energy (1.7%). The VIX Index—a common gauge of fear among traders—fell back to 18.5. Oil prices also recovered after a series of attacks on Saudi oil tankers and pumping stations, presumably by Iran in retaliation for trade sanctions. WTI crude is back up around $61.80/barrel. Bonds are little changed this morning. The 10-year Treasury yield edged up to 2.42%.

Yesterday was the worst trading session of 2019 for stocks. Famed investor Jim Paulsen had this to say about today’s reversal: “You’ve got so many portfolios underweight risk” and they’re waiting for an opportunity to buy. That’s what’s driving this rally. His advice is to “take advantage of core leadership” in sectors such as technology, communications and consumer discretionary. In addition, financials also look very attractive. He characterized the trade war as a “little squabble” that will “turn out extremely well.”

Yesterday, President Trump confirmed he will meet with China’s President Xi Jinping at the G-20 Summit next month. In addition, it appears both sides are still involved in ongoing negotiations over trade. And today, President Trump lightened up on the inflammatory Tweets.

The National Federation of Independent Business (NFIB) released results from its monthly survey of small business leaders. The optimism index climbed to 103.5 in April from 101.8 in the prior month. That’s a welcome turnaround from a pretty rough fall and winter. We monitor several surveys of confidence among business leaders, and all of them spiked right around the last presidential election. But of course, slowing global economic growth, the Federal Reserve’s miscommunication and the government shutdown dented confidence last year. And while the last couple of months have been somewhat better, you can bet that the renewed trade war will cut into May’s survey results. Bloomberg believes another dip in confidence will be temporary, however.


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