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Good Morning……….Cloudy in the Northeast……….and warm in Cow Springs, AZ……….U.S. equity markets end mixed but did rally off their lows. “Losses for health care companies and banks left stocks lower, although a late push for technology and industrial companies helped the market avoid a steeper decline. The Dow Jones industrial average managed a tiny gain, thanks to a rise in Boeing, erasing an earlier loss of 393 points. The S&P 500 index slid 5 points, or 0.2 percent, to 2,629. The Dow edged up 5 points to 23,930. The Nasdaq fell 12 points, or 0.2 percent, to 7,088. Bond prices rose. The yield on the 10-year Treasury note fell to 2.95 percent.”……….Global equity markets are mixed overnight……….“Global stocks were mixed Friday ahead of April’s U.S. jobs report, capping what has broadly been a bad week for markets. The Stoxx Europe 600 rose 0.2% in early European trade, but futures pointed to an 0.1% opening fall for the S&P 500. In Asia, equities closed broadly lower for a second day. In commodities, oil prices edged down Friday, after climbing to fresh three-year highs this week amid expectations of further output cuts. Brent futures, the global benchmark, slid 0.5% to $73.27 a barrel. Gold prices fell 0.2% to $1,309.60.”……….U.S. futures pointing to a lower opening……….U.S. employment numbers……….+164,000 jobs added, 3.9% jobless rate (lowest since 2000), 62.8% participation rate……….U6 lowest since 2001……….“A more encompassing measure of unemployment that includes discouraged workers and those holding part-time positions for economic reasons fell to 7.8 percent, the lowest since July 2001.”……….Bill Gross thinks yields will not move much……….“If billionaire bond investor Bill Gross is right, most of this year’s excitement in the Treasury market is behind us and yields won’t see a substantial move from here. The Janus Henderson fund manager doesn’t see a blowout in yields to much above the 3 percent level, which was briefly pierced last week for the first time since 2014. However, the Federal Reserve’s commitment to gradually tighten monetary policy coupled with the U.S. government raising more cash by selling bonds will continue to weigh on prices. “Supply from the Treasury is a factor in addition to what the Fed might do in terms of a mild, bearish tone for U.S. Treasury bonds,” Gross told Bloomberg TV. “I would expect the 10-year to basically meander around 2.80 to perhaps 3.10 or 3.15 for the balance of the year. It’s a hibernating bear market, which means the bear is awake but not really growling.”……….Manager lowering high yield allocation……….“One of the world’s best high-yield bond investors is getting nervous about the riskier parts of the debt markets. The Absalon Global High Yield fund, which beat 97% of its peers in 2017, isn’t now “actively investing in CCC credits due to poor risk return characteristics.” “We’re sort of late cycle,” Klaus Blaabjerg, the chief portfolio manager, said in an interview Monday. “We don’t like too much leverage.” High-yield bonds rose last year but doubts about the credit cycle and higher volatility have cooled the market in 2018. The Bloomberg Barclays Global High Yield Index has lost 0.5% so far this year, after a 10% return last year. Mr. Blaabjerg, who oversees about 500 million euro ($600 million), predicts yield spreads will move sideways until the economic downturn hits, at least one year away. “The late-cycle view that we have fits pretty well with our overweight of high quality,” he said. “In fact, we have the highest average rating of the portfolio that we’ve ever had right now with an average rating of BB in the fund compared to B+ for the index.”……….Remember mom & pop are usually wrong……….“U.S. stock funds are on track for a third straight month of outflows as investors grow wary of the aging bull market. Investors pulled a combined $3.8 billion from U.S. stock exchange-traded funds and mutual funds in the week ended April 25, bringing April’s outflows to almost $8.4 billion, according to the Investment Company Institute. Since the start of February, $72 billion has been pulled from U.S. stock funds. Major indexes have wavered in recent sessions as rising interest rates and fears of a trade war weigh on markets, and investors debate whether corporate profits may be peaking. The Dow Jones Industrial Average has fallen 9.4% since reaching an all-time high in late January, and the S&P 500 has lost 7.7% since its January peak. “People have been afraid to buy into the bull market,” said Lisa Kirschner, director of research at Richard Bernstein Advisors, a New York-based firm. Demand for U.S. equities may be stronger than fund flows indicate. The outflows account for less than 1% of the money in U.S. equity funds, and there are other trends that drive fund investing, such as Baby Boomers shifting toward bonds as they retire” The Dow’s string of daily declines appears to be taking a toll on investors. Just 28% of individuals believe the stock market will be up six months from now, according to the American Association of Individual Investors’s most recent weekly survey, down from 37% the previous week and below the historical average of 39% going back to 1987. “This is a complicated thing” for investors, said Barry Bannister, head of institutional equity strategy at Stifel Financial. “We have domestic and geopolitical uncertainty, plateauing global growth…This is good for stock pickers. It’s not good for indexing.”……….These outflows of dollars from equity funds show why you are needed, to make sure your CPS are not trying to time the markets……….Weak markets coupled with a barrage of very slanted negative news articles written to make sure the Trumpster’s policies don’t look good put investors on the defensive……….It is not only what is written but also what is left out……….How many investors really know about the great Q1 ’18 earnings season we are having……….All the MSM wants to write & talk about is the “pending impeachment of Trump”……….We now have an added obligation to filter the news and make sure investors are making decisions based on all the facts……….You are needed……….Make the calls (AxV=G)

Pre Market Blog:

5/4/2018

After moving over 1% lower by mid-morning, S&P 500 futures (/ES) rallied back to close modestly higher. /ES fell below their 200 day moving average intraday, but once again found a way to close above this key support level. Over the past month, the overall market has traded within a 6% range, and is slightly down over that time period. Although more than 75% of S&P 500 companies have beat earnings expectations through the first quarter of the year, that has not shown up in the overall stock performance. A recent strengthening dollar has put pressure on U.S. multinational companies over the past few weeks. Tesla (TSLA) dropped over 5%, after the company reported better than expected earnings, but a higher cash burn rate and combative conference call spooked investors. This morning, U.S. stock futures (/ES) are modestly lower after a mixed jobs report and an ultra-low 3.9% unemployment rate. Earnings reports continue to march on, with Alibaba (BABA) and Celgene (CELG) reporting better than expected earnings results before the open today. Oil prices (/CL) are up slightly this morning, and investors will be looking at the mid-day release of the Baker-Hughes Rig Count for clues on direction going forward.

Long dated Treasuries (/ZB) have rallied over the past week, which has driven yields modestly lower over the last five days. The 10-year rate is at 2.92% after topping 3% on April 25th with more color around the Fed’s roadmap coming today from various speaking engagements from members. The market has taken some large intraday moves in stride. Any short term fears are being absorbed by the market, which has resulted in lower volatility levels over the past month indicative of the CBOE Volatility Index (VIX) not broaching the $20 level since April 11th.

Stock Stories:

Alibaba (BABA) – Earnings – The Chinese E-Commerce giant reported mixed results prior to the open today. The company beat earnings and revenue expectations, but their profit fell 29% from a year ago. The shares traded as high as $191.45 in the pre-market, but pulled back to near unchanged as of this writing.

Major Economic Reports:

7:30 am CT – Employment Situation
11:45 am CT – William Dudley Speaks
12:00 pm CT – Baker-Hughes Rig Count
2:00 pm CT – Treasury STRIPS

Notable Earnings:

Friday – 5/4:

Before Market: AON, AXL, BABA, CBOE, CELG, FRED, GOGO, IMGN, LNG, NWL, STWD, VIRT, VFC
After Market: N/A

Monday – 5/7:

Before Market: AMC, BBU, CAPL, CTSH, DFRG, MD, SSP, SYY, TSN, WBT, WLTW
After Market: ADUS, AFH, AIN, AIV, ANDV, ANDX, BKI, CARB, CBT, CRZO, FRPT, LMNX, MOS, NLS, NVGS, RBC, SUNS, TREX, Z

Research Attached:

Daily Thought:

“A champion needs a motivation above and beyond winning.”……….Pat Riley

Daily Financial Buzzword:

One Man Picture

A situation in which the bid quote and ask quote for a security is provided by a single source. A one man picture is a two-way price given by a broker to an investor.

The phrase relates to the level of information available to the investor, which the broker “paints” by describing the bid and ask price. In the case of a one man picture, the investor does not have many quote options and thus may not be able to obtain the ideal price.

By The Numbers:

In the years 2010-16 following the global real estate crisis, 46% of the new homes built in the United States had at least 4 bedrooms (source: Federal Reserve Bank of St. Louis).

Market Recaps:

DJIA 23930.15 5.17 0.02%
S&P 500 2629.73 -5.94 -0.23%
Nasdaq 7088.15 -12.75 -0.18%
Russell 2000 1546.73 -8.18 -0.53%
DJ Total Mkt 27295.30 -66.06