S&P 500 Breaks Out of Redzone

After last week’s failed breakout attempt, the second week of February 2019 saw the level of the S&P 500 (Index: SPX) broke out above our redzone forecast range on Friday, 15 February 2019, boosted by the speculation of improved prospects for a trade deal being reached between the U.S. and China.

The other big news of the week is that there seems to be a growing consensus at the Fed for no further rate hikes in 2019. In fact, the CME Group’s FedWatch Tool is suggesting that investors are giving small, but increased odds of a rate cut in December 2019, though the much greater probability at this point of time is for rates to be held steady at today’s Federal Funds Rate target range of 2.25% to 2.50%.

Here’s the other headlines of the week that stood apart from the regular noise from the news cycle….

Monday, 11 February 2019

• Oil prices fall 1 percent; slow progress in trade talks counters OPEC cuts
• Fed’s Bowman says she is comfortable with policy stance
• Wall Street wavers as investors eye trade talks, growth fears

Tuesday, 12 February 2019

• Oil gains 1 percent after Saudi Arabia pledges more output cuts
• Bigger trouble developing in China: Debt guarantee tangle: China’s private firms hit by default contagion
• Fed to finalize plans to end balance sheet runoff ‘at coming meetings’: Mester

• Denial: No evidence that Fed’s balance sheet is behind market swings: Mester

Wall Street advances on trade hopes, deal to avert government shutdown

• Trump says he could let China trade deal deadline slip, ‘not inclined to
• With Shutdown Looming, Border Deal Is Reached ‘in Principle’

Wednesday, 13 February 2019

• Oil gains on Saudi output cuts; rally limited by U.S. output

• U.S. Gulf Coast crude prices rise on falling imports, rising Cushing supply

Despite falling rates, U.S. mortgage applications fall again

Fed’s Mester sees limited inflation risk from rising wages

Trump: China trade talks going ‘very well’ before high-level parley

Wall Street advances on trade hopes, tame inflation data

Thursday, 14 February 2019

• Weakest U.S. retail sales since 2009 cast pall over economy
• Fed’s Brainard says balance sheet trimming should end this year
• Oil prices edge higher as Wall Street recoups losses

Friday, 15 February 2019

• Oil rises over 2 percent to 2019 highs on tightening supplies
• Bigger trouble developing in China:

• China’s producer prices slow for seventh straight month, raising deflation fears
• Bigger stimulus developing in China: China’s banks throw open spigots in January, lend record 3.23 trillion yuan

Trump says may extend March 1 deadline for China trade deal

• China says reached consensus on some key issues during U.S. trade talks

Sputtering auto production sinks U.S. manufacturing output

Fed policymakers see one U.S. rate hike, or none, as growth slows

• Fed’s Bostic: Soft data doesn’t change view of above-trend U.S. growth
• Fed’s Daly sees no case for rate hike this year: WSJ interview

Progress in U.S.-China trade talks sparks world stock rally

Elsewhere, Barry Ritholtz scanned the week’s markets and economy-related news to identify the positives and negatives, finding six of each, though we wonder if one of the positives (flat inflation) is really a negative….