All of yesterday’s hopes that trade war fears were subsiding went down the drain on Friday, as did prospects for a second straight weekly advance in the major indices.
Last night, President Trump threw another log on the fire by suggesting $100 billion in extra tariffs on Chinese goods. That’s not what the market wanted to hear as it was expecting that the U.
Another thing the market didn’t want to hear came from Fed Chair Jerome Powell, who made it clear that the Committee won’t change its plans to gradually raise rates because of a volatile stock market. Therefore, the dreaded possibility of a fourth cut in 2018 is still on the table.
As if these issues weren’t enough, the jobs report said that the economy added only 103,000 jobs last month, which was well below expectations and the smallest increase since the fall of last year. However, the trade and Fed news still took a bigger bite out of the market on Friday.
The Dow dropped by 2.34% (or about 572 points) in the session to 23932.8. The index came well off its lows of the day at more than 700 points, but it is back in correction territory. It was down 0.7% for the week. The NASDAQ was off by 2.28% to 6915.1 and the S&P slipped 2.19% to 2604.5, marking weekly pullbacks of more than 2% and 1.4%, respectively.
This marked the second stiff selloff of the week, as Monday also saw the indices take sharp declines. However, the middle three days were all positive, which meant the market entered Friday’s action on the positive side and with a possibility for a second consecutive week in the green. But it wasn’t to be. Earnings season gets started soon and its expected to be a good one, so hopefully the market can get these losses back if the trade terrors calm down.
Today's Portfolio Highlights:
Stocks Under $10:Shares of Syndax Pharma (SNDX) got clobbered on Friday, which convinced Brian Bolan to sell this biotech and secure a more than 16% return. When the editor first bought this stock in January, he was taking a chance on a company that had yet to post any revenues. Despite today’s plunge, the move paid off as shown by the double-digit return in less than three months. There’s data coming out soon for SNDX, but Brian thought the best move was to take the profit now.
Counterstrike: "The market was holding up ok, but then two things happened that forced the bulls to throw in the towel. First was the Mnuchin interview on CNBC. He said we were in now was not a trade war, when asked further he said: “There is potential for a trade war, but we aren't there yet; administration objective is not to get into a trade war”. To me this says that there will be more of an escalation from Washington than a pull back in trade war thought. To me the administration doesn’t care for the stock market at this point.
"The market started ticking lower and then waited for Powell to talk. Things didn’t get any better, as he reiterated a continued rise in rates. This was a fear for the market in the past and the double whammy from Powell and Mnuchin really brought in the selling.
"Next week might be do or die for the bulls. If we get below todays lows I could see much more downside. If we see a big move lower we will have to exit some stocks, go to cash and reevaluate. We need to continue to expect a lot of volatility and a lot of headlines out of Washington. Earnings start soon, so that will add an even extra element to all of this."-- Jeremy Mullin
Surprise Trader: "It’s alright to make fun of the situation, especially when you can recognize it for what it is. This is posturing. Textbook Art of the Deal stuff. I don’t think either side honestly believes anything substantive with come of these threats back and forth. But the market, well the market is a risk function. When there are new risks or increased risks that come to the table you know what happens? Risk is adjusted, re-priced, and the market takes a hit.
"I think there’s a real risk of a gap down on Monday. Let’s hope this trade war rhetoric dies down before the weekend is over. We got a reprieve once already. I bet we get another soon. You can only cry “Wolf” so many times before the market figures it out."-- Dave Bartosiak, who also heads Blockchain Innovatorsand Momentum Trader.
Have a Great Weekend,
Jim Giaquinto