The S&P 500 Gains on Positive Trade Deal Noise

Not much happened during the first week of April 2019 to shift the S&P 500 (Index: SPX) off of the upward trajectory it has tracked since bottoming in December 2018.

Moreover, over the last 10 weeks, it has largely fallen within the range of the red zone we added to our spaghetti forecast chart 10 weeks ago….

That’s not as impressive a forecasting achievement as it might seem however, since we’ve been experimenting with automatically updating the trajectory of our redzone range as expectations for the future have changed over that time.

Fortunately, the echo of past volatility in stock prices is starting to fade, where we only need to continue displaying the redzone forecast for just another two weeks. The following spaghetti forecast chart shows what our dividend futures-based model projects for the S&P 500 during 2019-Q2, where each indicated trajectory corresponds to investors looking forward to a different point of time in the future in setting their expectations.

Meanwhile, the news of the past week suggests that stock prices are perhaps being speculatively bid up in anticipation of a trade deal finally being worked out between the U.S. and China.

Monday, 1 April 2019

• Oil rises to 2019 highs as demand outlook improves
• China will continue to suspend extra tariffs on U.S. vehicles, auto parts
• Wall Street rallies on upbeat China, U.S. manufacturing data

• China stimulus gaining traction? China March factory activity grows for first time in four months, but exports weak
• U.S. manufacturing rebounds in March – ISM

Tuesday, 2 April 2019

• Oil hits 2019 high as supply squeeze looms; Brent nears $70 per barrel
• U.S. March and quarter one auto sales drop in weak start to 2019
• Wall Street treads water after rally, Walgreens slumps on profit warning

Wednesday, 3 April 2019

• Oil eases on U.S. crude stock build but holds near five-month high

• Bottlenecked: They can’t give it away: Texas natural gas at all-time negative lows

Bigger stimulus developing in China: China to cut more fees and service charges on July 1

• Gaining traction? China March services activity quickens to 14-month high in further sign of recovery: Caixin PMI

Results from falling mortgage rates: U.S. mortgage applications hit two-and-a-half year high

Stocks up on hopes for U.S.-China trade, soft Brexit

Thursday, 4 April 2019

• Brent oil briefly touches $70 per barrel on tight supply
• Bigger stimulus developing in China:

• China flags support for parallel car imports, used car markets
• China March new bank loans seen rebounding, further easing expected: Reuters poll

Trump says U.S. economy strong despite ‘destructive actions’ by Fed

• Fed’s Harker sees ‘at most’ one rate hike in 2019
• Still not listening to the markets: Fed’s Mester sees scope for U.S. rates to move ‘a bit higher’

S&P 500, Dow advance with trade talks in focus

Friday, 5 April 2019

• Oil prices rise 1.5 percent as strong U.S. economic data eases demand concerns
• U.S.-China trade talks ‘made progress’ but ‘significant work remains’: White House

• Trump says he won’t predict trade deal with china
• Biotech crops among sticking points in U.S.-China trade deal: sources

Trump urges Fed to lower U.S. interest rates

• Traders keep bets on Fed rate cut by early next year

S&P posts seven-day winning streak as jobs data allay economic fears

Elsewhere, Barry Ritholtz listed six positives and six negatives that were to be found in the week’s markets and economy-related news.