Live Markets U.s.: Steel stocks: Relatively fragile on the charts

Valecha Engineering

11/02/2019 18:54

* Nasdaq edges up; Dow, S&P nudge down
    * U.S. dollar index rises for 8th straight day

    Feb 11 (Reuters) - Welcome to the home for real-time
coverage of U.S. equity markets brought to you by Reuters stocks
reporters and anchored today by April Joyner. Reach her on
Messenger to share your thoughts on market moves:
april.joyner.thomsonreuters.com@reuters.net
    
    
    STEEL STOCKS: RELATIVELY FRAGILE ON THE CHARTS (1342
EST/1842 GMT)
    Steel stocks have been among the groups hit hard by ongoing
trade disputes and global growth concerns. More recently,
despite the VanEck Vectors Steel ETF's  SLX.P  bounce off its
late-2018 trough, it has lagged the S&P 500  .SPX  on a relative
strength basis. This as markets await the outcome of this week's
U.S.-China trade talks.  urn:newsml:reuters.com:*:nL3N20614C 
    Indeed, despite the SLX advancing to multi-year highs into
the early and middle parts of last year, the group ultimately
buckled after President Trump first announced tariffs in early
March. Highlighting the extent of steel stock underperformance
last year, the SLX lost nearly a quarter of its value in 2018
versus a SPDR S&P 500 ETF Trust  SPY.P  decline of just 6
percent. (Click on chart below.)
    More recently, since late December, the SLX/SPY ratio has
struggled to rise above a resistance line from last May, and in
fact is back down to test its low. Thus, this may be setting up
as a pivotal week for steel stocks on a relative basis, in the
event the ratio breaks out of its contracting range.
    Of note, the SLX has exposure to both U.S. and foreign-based
steel stocks. About 61 percent of the ETF's weighting was in
foreign companies versus 39 percent in the U.S. at the end of
January.
    
 
 
    
    (Terence Gabriel)
    *****
    
    MAKING INTERNATIONAL STOCKS GREAT AGAIN (1250 EST/1750 GMT)
    As investors await a U.S.-China trade agreement ahead of a
March 1 deadline, maybe they should be careful what they wish
for.
    According to Leuthold Group Chief Investment Strategist Jim
Paulsen, if President Donald Trump secures a deal that narrows
the U.S. trade deficit Wall Street will likely underperform
overseas stock markets.
    A chart by Paulsen, below, shows a strong relationship going
back to 1970 between changes in the trade deficit as a
percentage of GDP and the relative performance of U.S. stocks
versus foreign stocks. 
    "They might both go up or both go down, but the way you want
be tilted is toward international stocks if you think Trump's
going to win," said Paulsen.
    According to Paulsen, the U.S.-China trade dispute has
slowed foreign economies more than the U.S. economy and raised
the value of the dollar. So a reversal of those two factors
would provide greater relief for international stocks.
 
 
    (Sinéad Carew)
    *****  

    EARNINGS ESTIMATES FOR 2019 FAST SOURING (1101 EST/1601 GMT)
    The earnings forecast for the first quarter of 2019 turned
negative on Friday, according to IBES data from Refinitiv
 urn:newsml:reuters.com:*:nL1N2030V5, and today, it's ticked lower still.
    Analysts on average now project Q1 earnings to drop 0.2
percent year-over-year. A little over a month ago, on Jan. 1,
they had projected a 5.3-percent year-over-year increase for the
quarter.
    Morgan Stanley's strategists concur with the quickly souring
consensus view of prospects for 2019. "Our earnings recession
call is playing out even faster than we expected," they wrote in
a note on Monday. They now project earnings growth of just 1
percent for all of 2019.
    To boot, they say, curb your enthusiasm for the second half
of 2019. Analysts on average are still expecting a robust
9.5-percent earnings growth rate for the fourth quarter,
according to Refinitiv.
    But such a jump is unlikely, according to Morgan Stanley's
strategists, given the solid Q4 2018 earnings growth rate -
currently at 16.5 percent - and the absence of the tax-cut boost
that helped juice earnings last year.
    
    (April Joyner)
    *****
    
    DOW JONES INDUSTRIAL AVERAGE: UP OFF THE MAT (0915 EST/1415
GMT)
    The Dow Jones Industrial Average  .DJI  proved its
athleticism late last week. The Index went toe-to-toe with
support and emerged victorious. That said, waning shorter-term
momentum suggests there may be a few more rounds to come.
    Indeed, despite an intraday decline to 24,883.04 on Friday,
the DJI managed to recover enough to close back over its 100 and
200-day moving averages (DMA) (24,949 and 25,004.81 Friday
closes). That said, if the index is to resume its advance off
the late-December trough, it will need to quickly thrust above
last-week's high (25,439.04). However, one issue may be waning
daily momentum. The MACD is threatening to roll under its
January 2018 high and turn down.
    Another break of the 100-DMA may prove too much to bear as
the still open January 30 gap may then beckon. A drop to
24,674.87 is needed to close this window on the daily chart.
However, such a turn can lead to a weaker momentum picture, and
see the index threaten the 50-DMA (24,239.85). 
    Closing below the 50-DMA can suggest risk a bear trend from
the October peak is resuming as these intermediate and
longer-term moving averages will then remain in gear to the
downside.
 
 
    (Terence Gabriel)
    *****
    
    
    FUTURES POINT TO HIGHER OPEN (0908 EST/1308 GMT) 
    Wall Street's main indexes looked set to rise at open on
Monday as the latest round of trade talks between the world's
largest economies began in Beijing, while U.S. lawmakers
attempted to hammer out a deal to avoid another government
shutdown after talks collapsed Sunday.  .N 
    China struck an upbeat note on Monday as trade talks resumed
with the United States, but also expressed anger at a U.S. Navy
mission through the disputed South China Sea, casting a shadow
over the prospect for improved Beijing-Washington ties.
 urn:newsml:reuters.com:*:nL3N20614C
    Talks on border security funding collapsed after Democratic
and Republican lawmakers clashed over immigrant detention policy
as they worked to avert another U.S. government shutdown, a
Republican senator said on Sunday. urn:newsml:reuters.com:*:nL1N20503N
    
 
 
 
 (Sinéad Carew)
  *****  
    
    





   
        
    
    


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