S&P 500 Continues to Levitate on Trade Deal Optimism

For a week that was crammed with as much news as it was, not much changed for the S&P 500 (Index: SPX), as the index continued hovering just above the top end of our redzone forecast range for a second week.

We’re getting to an interesting point of time for the stock market, because we’re running out of 2019-Q1 for investors to focus upon, where the quarter will be effectively over in just two weeks where dividend futures contracts are concerned.

That simple fact means a countdown clock has started ticking for when investors might shift their attention toward a different point of time in the future. If you can anticipate which point of time they’ll shift their attention toward, you can use our spaghetti forecast chart to antipate the direction that stock prices will move.

Right now, its suggesting that investors are mostly focused on the current quarter, but have shifted a portion of their attention toward 2019-Q2, which is how we would describe what the level of the S&P 500 hovering just above our redzone forecast range is communicating.

If we were to pick just one factor that might explain the S&P 500′s continued levitation during the final week of February 2019, we’d point to the continuing hints that a U.S.-China trade deal may soon be struck, which we touched on in last week’s analysis. But judge the week’s market-moving news headlines for yourself and if you’re reading this article on a site that republishes our RSS news feed that allows comments, please let us know if you find a more compelling explanation….

Monday, 25 February 2019

• Oil falls more than 3 percent as Trump blames OPEC for ‘too high’ prices
• Bigger stimulus developing in China: China orders banks, insurers to sharply step up lending to private firms
• Bigger stimulus developing in the U.S.?: Fed’s ‘hotter’ economy can boost jobs, Kaplan says
• Not quite getting it yet, but not as out-of-touch as Fed’s Mester: Fed’s Bostic Expects One Rate Rise This Year, Another in 2020
• Trade deal in the offing?

• Trump delays tariff hike on Chinese goods, citing trade talk progress
• Trump says ‘signing summit’ with Xi for U.S.-China deal possible soon

Wall Street rises after Trump stirs China trade hopes again

Tuesday, 26 February 2019

• Oil edges up as OPEC ignores Trump pushback on prices
• Bigger trouble developing in China: China February factory activity seen shrinking for third month: Reuters poll
• Fed’s Powell says ‘no rush’ to hike rates in ‘solid’ but slowing economy

• Powell says economic theory of unlimited borrowing supported by Ocasio-Cortez is just ‘wrong’
• Fed’s Bullard says not ready to call for a rate cut: Fox Business

Wall St. edges lower in choppy session

Wednesday, 27 February 2019

• Bigger trouble developing in China: Hot-rolled mess: China’s steelmakers hit the skids as car sales slow
• Final deal negotiations? U.S. wants regular meetings to ensure trade deal enforcement: Lighthizer
• Fed to stop shrinking portfolio this year, Powell says
• Wall Street steadies after Lighthizer, Powell, Cohen testimonies

Thursday, 28 February 2019

• Brent eases as trade talks drag, China’s economy shows weakness

• U.S. crude oil output falls in December for first time since May: EIA

Bigger trouble developing in China:

• China February factory activity shrinks to three-year low, export orders worst in a decade
• China consumers squeezed in 2018 as income gains slow, living costs rise
• Growing contagion? Japan’s factory output falls by most in a year as China demand slumps

Fed’s Powell: ‘Muted’ inflation gives room for wages to rise

• Fed’s Kaplan says it will take time to see how much U.S. economy is slowing
• Fed’s Clarida: Fed ‘especially’ tied to data as it pursues patient policy
• Fed’s Clarida: ‘No evidence’ wage gains increasing inflation pressure

U.S. stocks edge downward as Wall Street takes a pause

Friday, 1 March 2019

• Oil falls 2 percent as demand worries overtake supply cuts
• Bigger trouble developing in China (South Korea contagion edition?): South Korea exports suffer biggest slide in nearly three years as China sales sag
• Bigger stimulus developing in China: China looks to parliament for reassurances as economy slows
• Bostic: Markets may doubt Fed’s inflation commitment – Well, when they chronically keep undershooting their target…
• Trump asks China to lift tariffs on U.S. farm products
• Wall Street rises as trade optimism counters weak data

If you set out to identify six positives and six negatives in the bigger picture of the week’s economics and markets’ news, would you pick the same items as The Big Picture’s Barry Ritholtz?

Looking ahead, we’re going to break up our regular routine and feature the next edition of our S&P 500 chaos series later this week, just one week before 2019-Q1′s dividend futures contracts run out on 15 March 2019. That event will officially terminate the first half of our redzone forecast, where we assumed (mostly correctly) over a month and half ago that investors would be largely focused on the current quarter of 2019-Q1 during most of the quarter. We’re debating how we might modify the redzone forecast for the second half of its run when that assumption can no longer apply.