The economic calendar is normal, and we have a four-day trading week. Last week’s big stock decline will surely be on the minds of many. With measures and counter-measures, threats and rhetoric, the trade issue will command the attention of all. The punditry will be searching for signs of compromise, wondering: Can a trade war be avoided?  

Last Week Recap

Three weeks ago, WTWA asked whether a trade war was underway. I opined that there was plenty of room to pivot away from the initial actions against steel and aluminum. That is what happened. This week the question arises again, and in a more serious form.

The Story in One Chart

I always start my personal review of the week by looking at a great chart. The version of the S&P futures shows the action while the stock market is closed. The interactive version also lets you specify your choice of both time and intervals. Finally, there is a tag for significant news at various key points.

The decline for the week was about 6%, with a trading range only slightly higher. This is a resumption of the volatility seen earlier this month. It always seems even larger in market declines. You can stay anchored by data if you check out the actual and implied volatility each week in the Indicator Snapshot.

The News

Each week I break down events into good and bad. For our purposes, “good” has two components. The news must be market friendly and better than expectations. I avoid using my personal preferences in evaluating news – and you should, too.

WTWA is not about long-term concerns like debt. These are important, of course, but not our weekly subject unless there has been some major change.

The economic news was good, but the policy news was not. The market reacted to the latter. New Deal Democrat’s excellent update of high-frequency indicators is still positive but shows a little softening.

The Good

  • Existing home sales increased to a 5.54M annual rate improving from January and slightly beating expectations. Calculated Risk notes that inventory is low and falling year-over-year (down 8.1% in February). He has a special post on how to watch inventory. See also New Deal Democrat’s analysis of pricing and inventory.
  • New home sales registered a 618K annual rate and January was revised upward from 593K to 622K.
    Calculated Risk notes that the prior two months were also increased. The recent trend has been a bit sluggish, but Bill is not yet ready to blame interest rates or tax changes.
  • FOMC decision and conference.Calculated Riskwas expected and initially celebrated by stocks. Chairman Powell’s press conference was also well-received, so I score the Fed as market-friendly.
  • Rail traffic has improved, especially in what analyst Steven Hansen identifies as the “economically intuitive sectors.” He concludes that the growth rate is improving but does not yet portend an economic growth spurt.
  • Passage of a spending bill. Signed by the President after mentioning a possible veto, this averts another threat to close the government.
  • The Chemical Activity Barometer is still near the highs. Check out Davidson’s (via Todd Sullivan) discussion of how effective this indicator has been.
  • Durable goods orders increased 3.1% on the headline and 1.2% ex-transportation. Both doubled expectations in a big recovery from the January decline.
  • The hotel occupancy rate is strong and rising. Calculated Risk provides an interesting chart of the four-week average. It reflects seasonality and compares key years.
  • Leading indicators were up 0.6%, improving from 0.3% last month, beating expectations, and setting a new high. 
  • The Bad

  • Initial jobless claims increased to 229K from the prior week’s 226K. This report, still at a low level, reflects the week that will be part of the next payroll employment report.
  • Trade news. The main subject of this post.
  • Q1 GDP is now estimated at 1.8% growth according to the Atlanta Fed’s GDPNow.
  • The Ugly

    Facebook. Not protecting data. Not responding effectively. Not creating a convincing solution. Background – The Verge. Seriousness – Medium.

    A problem is that users and their data are the product for Facebook. Barron’s features the story, noting that the stock is cheap. The stock also qualified on the earnings screens for our team, but I think it is too soon. There is no way of knowing how many users will leave or how earnings will adjust. Even if you are not concerned about ethical considerations, there will be time to evaluate this choice.

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