State of the Stock Market Analysis for the Week Ending on April 29, 2018 Good Finish to Politically Charged Week 4-29-18)
It was an interesting week on Wall Street with good earnings and not so good earnings, but the stock market held up very well. For all of the worry about 3.0% interest rates for the 10-year U.S. Treasury, it did not create a stock market meltdown at all. For what was a rough week for the stock market the Dow Jones Industrial Average was down 0.6%, the Nasdaq was down 0.4%, and the S&P 500 basically finished flat. That is a good finish to a politically-charged week and a lot of mixed earnings numbers.
The big economic news that we saw on Friday was first quarter GDP number that came in at 2.3%, and while that topped estimates of 2.0%, it was a number that was way down from the fourth quarter’s 2.9%. It raised the question that we might be in a decelerating economy, which might have investors worried. It is just one economic report, but it is one of the big reports that affect investor sentiment and the broader economic outlook for the country and our future.
The Federal Reserve is hinting heavily at rate hikes through the rest of the year, and that actually might be a plus. Near-zero rates for the past nine years might not be the best thing for an economy, so we will see what happens as rates, both short-term and long-term, edge higher. The criticism is that the low, near-zero rates created a gigantic misallocation of capital across the globe. This is a tough question for even the best economists and strategists, but it will be debated for quite a while.
As for our near-term,”real” economy, it was great to see Friday’s Consumer Sentiment report rise to 98.8 versus the previous 97.8 and expectations of 98.0. It shows that optimism is still there, which bodes well for the economy and the stock market. The earnings reports from Facebook and Amazon are also pluses despite the privacy issues that are being raised. Thus, this stock market “correction” might reverse course sooner than we bulls think. Corrections of 10% are healthy for any bull market, so maybe we can see a bounce.
As for the political situation in Washington DC, it is a mess, but investors do not seem all that rattled. That is great for the major indices, as they continue to hold up well. We commented on Facebook’s Mark Zuckerberg and his impressive answers on Capitol Hill. He was cool as a cucumber when asked how Facebook makes money without charging “subscribers.” Zuckerberg’s answer was awesome. To quote, “Well, Senator, we sell a lot of ads.” It was a fun moment in to see an old Senator challenge a tech guy. Have a great weekend!
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