Are investors ready to hand the S&P 500 its ninth straight win?
It is a tricky call, as investors nervously await the unofficial start of first-quarter earnings on Friday and ahead of ‘Super Wednesday’, which will deliver (another) crucial Brexit EU summit, an ECB policy announcement, as well as Fed minutes all in one day.
However, right now, it is Europe that some investors are losing sleep over.
“With U.S. – China trade talks over for now, the focus is shifting back toward Europe in more ways than one, that’s a reason to think any rally could be hard to come by,” said Jasper Lawler, head of research at LCG, in a note. The U.S.’s fresh threat to slap the region with a bunch of tariffs is just one thing that could upset the bulls this week (see buzz for more).
Speaking of bulls, oil has been on a tear lately, which is throwing up yellow flags for our call of the day, from Justin Smirk, commodity analyst at Westpac Banking Corp.
U.S. oil hit a fresh five-month high on Monday, while Brent crude settled at its best since November, largely on concerns fresh fighting in Libya will cut off supplies from the oil producer, straining an already tight market. Easing U. S-China trade tensions were also helping. Oil futures, however, were showing signs of struggling to mount a fresh climb on Tuesday.
“In this market where you’re seeing better news on the trade front, but no resolution and discussions around this shock event coming out of Libya, it all suggests you should take a bit of care before you set the tone of this thing [as] a new one-direction rally upward,” Smirk told Bloomberg Television. “It seems to be supported by a lot of one-off events.”
Consider also that the bump in prices is stemming from strong growth in U.S. oil production, which hit a record 12 million barrels a day in February and is only expected to keep rising, he said. Those higher prices are giving frackers—a reference to a drilling technique that extracts oil from deep in the ground—the ability to find buyers for oil contracts further out. And with that they’ll keep producing oil, which in turn could be an eventual drag on price.
“So I'd be very cautious about saying this is the new start of a new strong rally,” said Smirk.
Goldman Sachs became the latest bullish voice on oil, boosting its Brent crude forecast to $72 a barrel for the second quarter in a note to clients dated April 8, though it expects a slip-back by year-end. But that puts Goldman in line with moves by rival investment banks lately.
For a better look at just how bold the oil bulls have become, here’s a chart from Saxo Bank’s head of commodity strategy, Ole Hansen, who follows the weekly the Commitments of Traders (COT) report from the U.S. Commodity Futures Trading Commission (CFTC).
That report can sometimes hint at future moves across major assets, as it shows how big institutional traders and small speculators are positioned for each commodity futures category. The above shows “nonstop buying of crude oil stretched to a sixth week,” and combined net long (bullish) positions on U.S. oil at the highest level since last November, noted Hansen.
Opinion: Rallying from December lows, stocks are at yet another inflection point
The market
Dow US:YMH9 S&P 500 US:ESH9 and Nasdaq US:NQH9 futures are flat. Tuesday’s session saw the Dow DJIA, -0.77% drop, but S&P 500 SPX, -0.57% log another win and the Nasdaq COMP, -0.29% rise modestly. More coverage in Market Snapshot
The dollar DXY, -0.16% is slipping, gold US:GCU8 is slightly up, and crude US:CLU8 is struggling to hold Monday’s highs.
Europe stocks SXXP, -0.36% ticked higher, while Asian equities struggled for traction.
The chart
As we get ready to face what some are calling the worst earnings quarter in years, our chart of the day from FactSet (h/t The Daily Shot) lays out the winners and losers pretty clearly. The worst performance is expected from the energy sector with a 20% drop in earnings growth forecast. A large part of that performance gloom stems from the fact the sector had a 98% earnings surge in the first quarter of last year, a tough number to compete with.
The buzz
European aviation parts, beverages and clothing are among potential targets of a tariff threat by the U.S. against European companies. That’s in retaliation for what the U.S. views as unfair subsidies for Boeing BA, -1.23% rival Airbus AIR, -2.05%
Netflix NFLX, +0.32% has reportedly postponed the release of feature film “Otherhood,” in the wake of star Felicity Huffman’s involvement in the college admission scandal.
Attorney General William Barr could face a grilling by members of Congress on Tuesday, over how he reviewed special counsel Robert Mueller’s Russia report.
Sony SNE, +0.04% soared in Tokyo on a report Daniel Loeb’s Third Point hedge fund is building up a stake in the Japanese electronic giant.
Data showed small-business optimism was little changed in March, with job openings still to come.
Theresa May will make a couple of Brexit pit stops in Paris and Berlin ahead of Wednesday’s big, important emergency EU summit. She’s trying to convince leaders in those countries to support her bid to extend Brexit to June 30.
The tweet
Congrats to new NCAA champs, Virginia, but too bad for one bold wager that would have paid out $300,000.
That moment when you win the #NationalChampionship
