Follow the money is a line in the 1976 movie All the President’s Men, which has become a catchphrase, generally meaning that things can be uncovered or explained by examining and tracing the movement of money. To explain the movement in the stock market of late, rather than following the money, one should follow the tweets.
Last week’s market action started off on a down note after President Trump tweeted last Sunday night that trade talks are progressing “too slowly” and tariffs will “go up to 25%”. Stocks were trading notably lower to end the week on Friday as well, but rebounded after Treasury Secretary Mnuchin described trade talks as “constructive.” Stocks then hit session highs after Trump tweeted late in the day that “the United States and China have held candid and constructive conversations on the status of the trade relationship between both countries.”
Despite the Friday rebound though, the stock market still suffered its worst week of the year, with the Standard & Poor’s 500 Index losing 2.2%. Looking at the other major indices, the Dow Jones Industrial Average lost 2.1%, and the NASDAQ Composite dropped 3%.
Away from tweets about trade, the market will get another batch of corporate results to digest in the week ahead as earnings season is wrapping up. Companies reporting this week include Alibaba, Cisco, Macy’s, Walmart, Baidu, NVIDIA, Deere. According to data from FactSet, for the first quarter of 2019, 76% of companies in the S&P 500 have reported earnings above estimates, which is above the 5-year average.
Right now though, stocks are opening sharply lower as it’s all about the trade negotiations, with China announcing it is raising tariffs on some U.S. goods starting June 1. Trump tweeted to Chinese President Xi this morning “you had a great deal, almost completed, & you backed out!”
All the best,
Southport Station Financial Management, LLC