The S&P 500 in Week 3 of April 2017 (Really!)

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There’s an old saying among coders, the polite phrasing of which goes as follows: “To err is human; To really foul things up requires a computer.”

We definitely had a mischievous daemon do a number on us last week, where we managed to repeatedly refer to Week 2 of April 2017 as being Week 3 of April 2017, with all references to the week being consistent with a week further ahead in time than the week we were describing (now since fixed)!

So if your last contact with us was that post, and you’ve now come across this one, that’s why it seems like we’re talking about the third week of April 2017 again, when in reality, we really are reviewing Week 3 of April 2017 this time. Really!

So let’s start with the most significant observation we can offer about what happened to the forward-looking outlook of S&P 500 investors during the third week of April 2017, where we think that the news of the week combined with the onset of earnings season to shift investors more strongly toward focusing on the current quarter of 2017-Q2 as being the most likely period in which the Fed will next hike short term interest rates in the U.S. by what appears to be a 2-to-1 margin.

That’s a significant shift compared to what we’ve seen over the last several weeks, where that probability has ranged near the 50-50 mark, keeping within a narrow margin of an even split.

As for why that’s our thinking, here are the headlines we flagged during the week to provide the context in which stock prices reacted. You’ll notice that we’re starting to pick up news headlines related to the potential shutdown of portions of the federal government as early as Week 4 of April 2017, mainly because it’s another element of noise to add on top of the noise from other geopolitical concerns. Outside of noise, history indicates that particular event would be pretty much of a nonfactor where the stock market is concerned, where even a prolonged event would have little to no economic impact as well.

Monday, 17 April 2017

• Steel, stimulus drive China’s strongest economic growth since 2015
• Oil edges lower, trade thin as some cash in after three-week rally
• Fed’s Fischer says balance sheet plan will not affect Fed policy

• Fed’s Fischer sees no repeat of ‘taper tantrum’ this time around

Wall Street rallies in low volume led by banks, tech

Tuesday, 18 April 2017

• U.S. housing starts drop; automobiles undercut factory output
• Another Fed official backs paring bond holdings this year
• Oil dips, hits 11-day low as U.S. shale output seen surging
• British PM May calls for early election to strengthen Brexit hand

• Sterling soars; stocks and U.S. dollar off on geopolitical angst

Wall St. loses ground as Goldman, J&J slump

Wednesday, 19 April 2017

• Oil falls more than 3 percent; energy drags down global stocks
• Fed rate hikes likely ‘manageable’ for foreign economies: Fischer
• Fed should shed bonds soon, keep hiking rates: Rosengren
• IBM sends S&P 500, Dow lower; Nasdaq advances

Thursday, 20 April 2017

• Overnight: Oil prices claw back ground after sharp drop, buoyed by U.S. crude stock dip
• During the day: Oil prices mixed in choppy trade, rising U.S. production weighs
• Fed’s Kaplan: Three rate rises this year ‘still a good baseline’
• Wall St rallies on earnings; Nasdaq hits record

• Trump Wants $200 Billion for Infrastructure, Mulvaney Says
• White House eyes harder line on shutdown talks

Friday, 21 April 2017

This was a day that began and ended in France as a greater geopolitical concern….

• Oil off on supply fears; stocks slip before French election

• Oil dives, sending U.S. crude below $50 for first time in two weeks

Trump sets U.S. tax reform announcement, orders tax rule review

• Investors not yet ruffled by looming government shutdown
• Trump administration begins shutdown preparations

Fed vice chair still sees two more rate hikes this year: CNBC

• U.S. rates futures hold gains after Fed Fischer’s remarks

U.S. existing home sales surge 4.4 percent in March

Wall Street dips before French election, but up for week

That’s it for the overall context of the market’s forward-looking concerns this week, where we’ve definitely erred on the side of documenting the week’s high noise to signal ratio. Be sure to follow this link for Barry Ritholtz’s succinct summation of the week’s pluses and minuses for the U.S. economy and markets for that additional context and a touch more signal.

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