Markets see-saw with high volatility in tech shares

Dow was off 9 in another wild day for stocks, advancers a little ahead of decliners & NAZ declined 59 (more below).  The MLP index was about even in the 236s & the REIT index continued fractionally higher to the 322s.  Junk bond funds were mixed & Treasuries crawled higher.  Oil is back in the 64s (more below) & gold tumbled 18 to 1329. 

AMJ (Alerian MLP Index tracking fund)

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Stocks fluctuated as megacap tech shares struggled to recover from a sharp selloff yesterday in the PM.  The $ rose while Treasury yields held below 2.8% as data showed American economic growth beat estimates.  Volatility measures spiked as the NAZ 100 Index swung from losses of as much as 1.8% to gains that reached 0.5%.  Netflix (NFLX) & Amazon (AMZN) were each off more than 3.5%, helping leave the gauge poised for its worst month in 2 years.  The S&P 500 Index was little changed, hovering just above its average price for the past 200 days, a level that’s set a line in the sand in the selloffs last week & in early Feb.  The 10-year yield rose slightly after dipping below 2.75% for the first time since early Feb.  Gold retreated with the ¥.  Crude slumped below $65 a barrel.  European equities advanced after Asian stocks posted broad declines.  Technology shares have suffered the most from investor jitters this month after leading much of the bull-market charge in global equities during the past few years.  Pressure is growing on the stocks amid speculation about a regulatory crackdown related to data privacy & antitrust concerns, US threats to forbid Chinese investments in the sector & a move by traders to lock in their gains after the NAZ 100 soared more than 60% in the 2 years through mid-Mar.

Tech Swings Spur Spike in Volatility; Dollar Gains: Markets Wrap

Walgreens (WBA) quarterly profit & sales beat estimates, as the drugstore chain's partnerships with pharmacy benefit managers over the past year helped it fill more prescriptions & mail orders.  The company, which has been focusing on its pharmacy business in the face of falling retail sales, added more than 20M members through its partnership with pharmacy benefit managers such Prime Therapeutics.  This helped fill 9.1% more prescriptions in the qtr and drive a 5.1% rise in pharmacy same-store sales.  The higher number of prescriptions also comes as the US faced its harshest flu season in decades, with flu-related doctor visits reaching a 20-year high.  Same-store sales at its retail business fell 2.7%.  WBA lifted its full-year adjusted EPS forecast to $5.85-6.05 from $5.45-$5.70.  Analysts were estimating $5.78 for the year.  The lift in forecast reflects a $350M  tax benefit for fiscal year 2018, an increase of about $150M from the company's previous estimate.  EPS attributable to the company rose to $1.36 from 98¢ a year earlier.  Excluding items, EPS was $1.73.  Net sales rose 12% to $33.02B, helped in part by the ongoing takeover of nearly 2K Rite Aid (RAD) stores.  Analysts were expecting EPS of $1.55 on revenue of $32.19B.  The stock rose 1.63.
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Walgreens pharmacy business drives profit, sales beat

Before this week, oil had recovered from Feb's losses after Pres Trump named hawkish officials to his gov, signaling the nation may pursue a more hard-line approach toward OPEC member Iran.  Still, fears remain that surging American shale production could thwart efforts by OPEC to reduce a global oversupply.  West Texas Intermediate crude for May delivery lost as much as $1.36 to $63.89 a barrel & Brent for May settlement dropped $1.04 to $69.07.  The global benchmark traded at a $5.06 premium to WTI.  The stockpile increase was the 4th in 5 weeks.  Inventories at the Cushing, Oklahoma, storage hub jumped 1.8M barrels, the most since a year ago.  Meanwhile gasoline supplies fell 3.47M barrels, according to the EIA.

• Oil Heads for Longest Slide in a Month as U.S. Supplies Expand

Pres Trump called for continued pressure against Kim Jong Un, after China said the North Korean leader expressed an openness to disarmament talks during a surprise visit to Beijing.  Trump struck an optimistic tone after the unexpected summit with Chinese President Xi Jinping, saying in a pair of early AM tweets that Kim might “do what is right for his people and for humanity” & give up his nuclear weapons.  “In the meantime, and unfortunately, maximum sanctions and pressure must be maintained at all cost!” Trump added.  Trump's tweets followed Chinese & North Korean statements confirming Kim's secretive 4-day swing thru China, his first foreign trip since taking power in 2011.  China's official Xinhua News Agency said Kim expressed an openness to discussing his weapons program during a planned May summit with Trump, while North Korean reports made no mention of denuclearization.  “North Korea sees an opportunity with these summits to message to the world that it’s not isolated and that it has diplomatic options,”  Mintaro Oba, a former State Dept official who worked on North Korean issues, said.  “The Kim-Xi summit is the latest step in that game.”  Kim's clandestine visit -- Chinese officials refused for 2 days to confirm reports of his motorcade & train movements -- shakes up the diplomatic landscape ahead of the potential Trump meeting.  Chinese media reports included Kim's first public remarks indicating he would discuss his nuclear arsenal with Trump, who has upended decades of US policy by agreeing to meet the North Korean leader without a clear disarmament plan.  The confirmation of Kim’s talks in Beijing helped reduce demand for haven assets, weakening the ¥.  The news had little impact on Asian equity markets, which fell after a selloff in technology shares spooked investors.  Kim also shored up his alliance with China, which has been strained since he came to power & executed his uncle, who was a key communications channel with Beijing.  His missile & nuclear tests have exasperated China, which has supported Trump’s “maximum pressure” campaign against Kim's weapons program.

Trump Urges Pressure Against North Korea After Kim’s China Trip

Tariff issues are taking a back seat to problems in tech, especially the high profile guys.  Facebook (FB) is facing its first major test regarding data breaches with a young leader has not been tested in difficult times.  Others are also getting hit with complaints from many directions which has brought on substantial selling, not common for them.  For example, AMZN is down 10% in the last couple of weeks.  Tariff problems have not gone away & they could affect the tech sector.  After going sideways near 25K for a couple of weeks, the Dow is currently drifting sideways around 24K.  The Dow is down 600 this week & in the red YTD.  Not good going forward.

Dow Jones Industrials

Markets slide lower despite an upgrade in GDP data

Dow fell 94, decliners slightly ahead of advancers & NAZ dropped a very big 90.  The MLP index rebounded 2+ to the 238s & the REIT index was up fractionally to the 322s.  Junk bond funds fluctuated & Treasuries had a modest gain in prices.  Oil slid lower to the 64s & gold sank 13 to 1334.

AMJ (Alerian MLP Index tracking fund)

CL=F

Crude Oil

64.59

-0.66

-1.0%

GC=F

Gold

1,331.00

-11.00

-0.8%

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Pres Trump’s push to rebalance global trade in America's favor has investors on edge, as his threats to impose import tariffs & curb foreign investment raise the specter of retaliation that could spark a global trade war.  The White House offensive is occurring on several fronts: it's renegotiating the North American Free Trade Agreement & has agreed to revise its bilateral trade pact with South Korea; it's in talks with nations & blocs that want exemptions from steel & aluminum tariffs & it's considering how to punish China for alleged theft of intellectual property.  Beijing has threatened to retaliate by imposing tariffs of its own.  The Trump administration’s tariffs on China will focus on high-tech industries where Beijing wants to lead, according to a senior White House trade adviser.  The list of products the US hits with tariffs will line up with technologies China identified in its “Made in China 2025” strategy, White House adviser Peter Navarro said.  “China in my view brazenly has released this China 2025 plan that basically told the rest of the world, ‘We’re going to dominate every single emerging industry of the future, and therefore your economies aren’t going to have a future,”’ Navarro added.  “It’s artificial intelligence, robotics, quantum computing.”

U.S. Tariffs on China to Target Tech, Navarro Says: Trade Update

A gauge of signed contracts to purchase previously-owned US homes increased in Feb for the first time in 3 months, highlighting uneven progress in the industry, according to data from the National Association of Realtors.  The index rose 3.1% M/M (est 2% gain) after a downwardly revised 5% decrease.  The gauge fell 4.4% Y/Y on an unadjusted basis after a 1.9% decline.  While the month-over-month gain shows demand for housing is still getting support from steady hiring, the market is facing several headwinds.  Buyers are up against a persistent shortage of affordable listings to choose from, property prices continue to climb & mortgage costs are rising.  What’s more, the Realtors group expects winter weather to weigh on demand in the Northeast.  The NAR currently projects 2018 home sales will match 2017's 5.51M.   The group expects the median selling price of a previously owned home to increase around 4.2% this year after 5.8% in 2017.  “The expanding economy and healthy job market are generating sizeable homebuyer demand, but the miniscule number of listings on the market and its adverse effect on affordability are squeezing buyers and suppressing overall activity,” Lawrence Yun, NAR's chief economist, said.  “Homeowners are already staying in their homes at an all-time high before selling and any situation where they remain put even longer only exacerbates the nation’s inventory crunch,” he added.  The NAR's 2017 Profile of Home Buyers & Sellers showed the median tenure a homeowner stayed in their house before selling was 10 years, the highest in records back to 1981.

U.S. Pending Home Sales Increase for First Time in Three Months

The US economy grew in Q4 at a faster pace than last estimated, helped by an upward revision to household spending on services & a smaller drag from inventories, according to the Commerce  Dept. GDP grew at a 2.9% annualized rate, (est 2.7%) revised from 2.5%.  Consumer spending, biggest part of the economy, grew 4% (est 3.8%) revised from 3.8%.  Before-tax corp pretax profits rose 2.7% Y/Y in the first estimate issued for Q4; climbed 5.3% in Q3.  Inventories subtracted 0.53 ppt from GDP growth, compared with prior estimate of 0.7 ppt drag.  Nonresidential fixed investment rose 6.8%, revised from 6.6% gain & reflecting a 6.3% jump in outlays for structures (prev est. 2.5%).  GDP, adjusted for inflation, rose 0.9% following 2.4% gain in Q3.  The revisions to GDP, the value of all goods & services produced in the US, indicate the economy was on a solid footing coming into the current qtr.  The report also included the first look at the health of corp America toward the end of 2017.  The gain in Q4 profits from a year earlier, together with lower corp taxes following the tax overhaul late last year, bodes well for business investment & employment.  Household purchases, which account for about 70% of the economy, also are likely to be supported in coming months by bigger after-tax paychecks and the robust labor market.  Continued gains in consumer spending & business investment will help to sustain the expansion even as GDP growth is projected to cool somewhat in Q1.  The Federal Reserve Bank of Atlanta’s GDPNow tracking estimate for the current qtr was at 1.8% as of Mar 23.  The latest forecast by economists called for a 2.5% pace.  While the survey shows consumer spending slowing to a 2.1% rate, Fed officials remain upbeat about the prospects for households.  Policy makers this month boosted their forecast for economic growth this year to 2.7% from 2.5% at their Dec meeting.  The expansion, in its 9th year, is poised to become the 2nd-longest on record later in 2018.  Price data in the GDP report showed inflation is hovering near the Fed's 2% goal.  Excluding food & energy, the central banks's preferred price index that is tied to personal spending rose at an unrevised 1.9% annualized rate.

U.S. Economic Growth Revised Higher on Spending, Inventories

Stocks have returned to meandering, looking for direction.  Tech stocks are weak again, nothing seems to be going right for them.  Even larger are trade issues & they are only in the first phase of bargaining.  Uncertainty is high, making investors, many are not used to watch stocks stocks struggle, very nervous.  The weak ones are selling.  The Dow has a very gloomy chart over the last 2 months (see below) & that has been seen in years.

Dow Jones Industrials