Does the Bull Market Still have Room to Run? Investors Look for Evidence

If earnings season is going to be the catalyst for higher stock prices, it certainly didn’t look like it on day one. Better than expected earnings from JP Morgan Chase and Citigroup on Friday did nothing, either for their own share prices or for the broader market. On the day, JP Morgan Chase skidded by 2.7 percent, while Citigroup lost 1.6 percent, as sluggish loan growth in the quarter sapped whatever enthusiasm there was for better bottom lines. Overall, the S&P 500 index itself fell 0.3 percent on Friday, although it did manage a 2.0 percent gain for the week.

Can Earnings and Economic Fundamentals Ease Trade Concerns?


Stocks once again succumbed to the rising trade tension between the U.S. and China, as the S&P 500 index fell 1.4 percent last week, with equal parts of the selling pressure coming at the start and at the end of the week on Monday and Friday. It was the third weekly decline in the last four, and leaves the index lower on the year by 2.6 percent. From its January 26 peak, the index is now lower by 9.3 percent. The good news is that the uptrend remains intact, as the index closed on Friday at 2604, just above its 200-day moving average at 2593, after having tested it several times during the week. Nevertheless, not even some soothing comments on Friday from Fed Chair Powell regarding the pace of rate hikes were enough to shift the focus away from trade.

Investors Look to Earnings to Reverse the Selloff in Stocks


After a robust start to the year, stocks reversed course midway to deliver the first negative quarter since 2015. The damage was relatively contained, as the S&P 500 index fell just 1.2 percent. But as the second quarter begins, stocks have been left searching for direction, so far unable to shake off the fears that sent them tumbling from their January highs. Tighter monetary policy, threat of a trade war, and regulatory rumblings in the direction of big tech continue to dampen sentiment at a time that otherwise would be a cause for optimism in the form of promised robust earnings growth.

Trade Worries Replace Tax Reform Euphoria

Last week stocks suffered their worst loss in two years. The S&P 500 Index fell 6.0 percent, as investors worried about a possible trade war, higher interest rates, the privacy of personal data and turnover in Washington. No sector was spared, although energy stocks held up fairly well. That was not the case elsewhere. Technology shares lost more than 7 percent, led by a 14 percent decline in Facebook after disclosure of the misuse of user personal data. Meanwhile, healthcare, materials and industrials each dropped more than 5 percent.