Resistance breaks on equities this week as stocks move up. There was volatility throughout the week with near 30 point swings on the S&P 500. To add to volatility, Brexit uncertainty was at the forefront of news this week. The UK Parliament was unable to come up with a firm decision, setting up another vote for the coming week. If they continue to have 7 different voting options, this Brexit deal might get drawn out to the length of the US/China trade deal. There is still a lot of uncertainty in terms of a hard Brexit, even though Theresa May seems to believe that it will not happen.

Global economic data continues to come out weaker, European growth targets are underperforming and inflation readings continue to miss central bank targets. Yield curves continue to signal recession talks as US Treasury yields fall lower midweek along with inversion throughout yield spreads. In Europe, Turkish swap rates signaled potential contagion which affected emerging markets currencies. To counterbalance the glooming economic data, mainly out of Europe this week, US-China trade talks are apparently going well. this helped equities close stronger on the week reviving the losses. US Treasury Secretary Mnuchin ended the week on strong note Beijing. Negotiations went well and will continue in Washington DC in the coming week.

Boeing stalled to the downside as shared moved higher this week on the announcement of three software changes to take place on the 737 MAX. The Boeing team is acting fast and claimed that the new software would be installed within days of regulatory approval. LYFT’s IPO finally hit markets late morning at $72/share gapping higher. More information on this below. Apple also was in the news this week, announcing its streaming service implementation with the new Apple TV+ products. Apple also announced its Apple News+ new subscription and its digital credit card service, Apple Card. However on all of this news, Apple stock remained below its 200-day moving average with little movement on the announcements.

 

Here is a look of last week’s stock market on a daily basis (red vertical lines split days).

Stock Market and Sector Overview

Here is a break down of the weekly performance in various stock market sectors (top chart):

  • Energy stocks up 1.00%
  • Technology up 0.93%
  • Financials up 1.50%
  • Retail up 3.46%
  • Utilities down 0.50%

Overview of key markets last week (bottom chart):

  • Crude oil up 0.52%
  • S&P500 down 0.73%
  • Silver was udown 2.36%
  • Gold down 1.31%
  • US dollar up 0.95%

Economic data weakens, again. The Trade talks save the bulls.

Global economic data has been struggling over the past few weeks but the bulls are desperately clinging onto whatever good news they can muster. Weakness throughout Europe finds its way to the US as consumer spending missed its target of +0.3% (0.1%) and personal income missed its +0.3% target, coming out at +0.2%. New automobile sales faltered and with inflation adjustments, January spending on goods fell 0.2% month over month. Inflationary panic started to arise as well, as expected inflation fell along with spending. This could weigh down on the first quarter outlook. This economic data comes in line with the Fed’s stance to remain more patient in the coming year. With the newly adjusted rate decision expectations in coming quarters, the rate will most likely remain low.

On a more positive note, new homes sales in February surge and mortgage rates fall. New home sales beat expectations increasing 4.9% month over month as pending homes sales data for February disappointed. January data revised higher as well from a negative number to +8%. This positive news also comes with a hint of worry, the average price of new homes dropped by near 4% from last year. Supply also decreased which should help the average price of homes increase.

UMich confidence was steadily dropping as 2018 ended and the first quarter of 2019 began but this past week we got a beat of expectation and last months number. The March number came out at 98.4 while February’s was 93.8.

US trade talks helped the S&P 500 rally into the close and Mnuchin came out with better than expected news from his meetings in Beijing. Friday was the last trading day of the quarter which saw the best close to a quarter for global markets since 2012. The S&P 500 alone made the best gains in a quarter since 2009. Below is a chart of the first quarter of 2019, since January the S&P 500 has gained just under 14.5%. The best start to a year in decades.

Trade talk optimism helped bonds move higher as well, mitigating fears of inversion ever so slightly. To end the week on Friday, Mnuchin and Lighthizer were in Beijing going over both versions of the text of proposed deals. Making sure there was no difference between the English and Chinese version.

 

Zero Hedge image

The meeting was essential to the progression of the deal as the difference between both versions of the text were substantial. The Chinese version apparently omitted key promises made by Chinese officials and negotiators. After having ironed out key details, Mnuchin was proud to announce that there was a lot of progress made during his visit to Beijing which prompted US equities to break through the resistance level previously printed earlier in the week. In terms of the S&P 500 futures, the market closed just below the 2840 level on Friday. The talks will continue next week in Washington DC and if a similar meeting can be replicated in terms of progress, there will be a lot more bullishness in the equity market.

LYFT IPO out!

It’s finally out, the LYFT IPO hits the public market this Friday, March 29th just before noon. The stock, symbol: LYFT was supposed to go public at $72/share. The opening price was $87.24 and hit a peak of 88.58 just a minute after opening. Could this be the all-time high? Forever? That’s to be determined, the stock fell throughout the day down to $78.28, a 9.76% drop from the opening price, but still positive from where the IPO was set to open. The chart below is the whole Friday trading session of LYFT on a 1-minute time frame.

The company was valued at $24 billion based on a $72 share price while raising $2.3 billion late on Thursday for the initial public offering. The float on the IPO was 32.5 million shares, which was expected to exchange hands over and over again throughout the first trading session. Notice volume in the chart above, in the first two minutes alone there was substantial volume, A lot on the second wicked candle. In the first 20 minutes of trading alone 28 million shares had been traded.

LYFT makes the leap before its main competitor UBER, who is set to IPO later this spring, interesting. LYFT’s IPO was higher than expected and can open the doors for further “unicorn” companies to IPO at a “premium” to boot. While arch nemesis UBER is “considered” to be valued at $100 million or more, we’ll see when the IPO comes out. Let’s be realistic, the $911 million loss just last year cannot be THAT appetizing for investors. Albeit, LYFT co-founders Zimmer and Green are confident in their company and emphasized that it was not Wall Streets pressure that propelled them towards an IPO but rather the fact that they were made to make the leap internally.

But what can we really expect of LYFT’s IPO? It’s hard to say, getting into an IPO involves a lot of risks. TRADEPRO’s advice is, wait a few months, let price settle, let earnings present themselves, let financials come out to see where the company stands. This could be the lower LYFT ever trades, alternatively, it can be the highest it ever trades. Retrospectively, there is not enough technical price action or fundamental data to make a conscious decision.

Weekly Economic Calendar

Economic news this week starts early on Sunday but takes a break in terms of high impact news midweek. We close out the week with the much anticipated non-farm numbers on Friday.
Sunday- Chinese Manufacturing PMI data comes out. 
 
Monday- retail numbers and ISM manufacturing PMI out of the US. Poloz speaks out of Canada and the RBA rate statement hits. 
 
Tuesday- retail sales and annual budget release comes out of Australia and core durable goods orders out of the US. 
 
Wednesday and Thursday- No high impact data
 
Friday- employment numbers out of both Canada and the US premarket. 

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