April 25, 2019

The market is starting to hit resistance in the 2935 area on the S&P 500. We do expect a pause and a modest selloff. This should be viewed as an opportunity to add to your positions, as we expect the second quarter to be a period of consolidation followed by a 3rd and 4th quarter rally into year end.

04-25-2019 SPY

 

Stocks moved very little during the holiday-shortened week (markets were closed in observance of Good Friday). The large caps of the Dow inched up a little over 0.5%, while the S&P 500 dropped less than 0.1%. With light trading, the Cboe Volatility Index® fell to an eight-month low last week. Favorable earnings reports helped push industrial shares higher, offset by dipping healthcare stocks. The yield on 10-year Treasuries stayed stagnant last week. Year-to-date, each of the benchmark indexes mentioned here are comfortably ahead of their respective 2018 closing values, led by the Nasdaq, followed by the Russell 2000, the S&P 500, the Dow, and the Global Dow.

In what is hopefully a sign of a strengthening economy, retail sales increased 1.6% in March and are up 3.6% over March 2018. This is the largest monthly increase since September 2017. Excluding motor vehicles and gas station sales, retail sales advanced 0.9% last month. Certain retailers enjoyed a boost in sales, including motor vehicle and parts dealers (3.1%), furniture and home furnishing stores (1.7%), clothing stores (2.0%), and gas stations (3.5%). Online retail sales increased 1.2% in March and are up 11.6% over the past 12 months.

  • Durable goods orders rebounded 2.7% in March, the most in seven months, and above the consensus of 0.8%, led by civilian aircraft and other transportation.
  • Ex-transportation orders gained a modest 0.4%.
  • Nondefense capital goods orders ex-aircraft, or core business orders, climbed 1.3%, its third straight gain, and the most since last July.
  • The increase was led by computer and electronic products, particularly communications equipment orders which jumped 9.0%, the most since January 2015.
  • On a smoothed y/y basis, however, durable goods orders eased to 4.2%, the least since May 2017, consistent with slower manufacturing output growth.
  • Core orders edged up modestly to 4.2% y/y, but remain in a longer-term downtrend, indicating softer capex demand.

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