| Insight after the bell
By Caleb Silver, Editor in Chief Friday's Headlines 1. Shutdown temporarily over as stocks make it five weeks in a row Markets Close
Year-to-Date
 Markets Today U.S. Markets ripped higher today as President Trump and Congress agreed on a deal to re-open the government for three weeks while they work on a broader agreement. Markets were already well into the green before news of the agreement spread, but found another leg-up as the news was confirmed. U.S. markets have posted gains for five straight weeks, cutting into the steep losses from last December. Our markets tally up above has the latest year-to-date stats.
The shutdown, the longest in history, lasted 34 days and left 800,000 federal workers without pay. It also compromised several branches of the federal government including air traffic control, causing delays and flight cancellations at the nation's busiest airports. While investors have largely ignored the shutdown as stocks have rallied since the beginning of the year, there were widespread concerns that it would impact economic growth in the U.S. if it continued.
That risk remains if President Trump and Congress can't agree on a more comprehensive deal over the next 21 days. They are all politically motivated to do that, but, as we know, it's complicated. We've covered it a lot in this note, but to put a fine point on it for now, Bank of America's research team estimates that the drag on the U.S. economy is roughly 1% per month that it drags on. Here it is in chart form:  Tech Stocks Lead Tech companies have been among the leaders of the five-week market rally. As we discussed yesterday, chip stocks have been in the driver's seat (except for Intel) given strong earnings and outlooks for 2019. That was also the case today, as most of the top gainers were either chip makers or suppliers to chip companies.
Don't sleep on Apple, though. The Mac maker has now regained most of the losses it suffered over the past few months - particularly the 10% drop on January 2nd, when it lowered revenue projections for 2019 due to slack demand from China. Shares of AAPL climbed 3% today and the stock has serious momentum going into next week when it is scheduled to report earnings.
(P.S. The Mac had a big birthday this week, turning 35 on January 24th. Here is the backstory) Here's AAPL over the past month. Mind the Dip!  What's Next Speaking of next week, we'll get a heavy dose of tech earnings from Apple, Microsoft, Amazon, and Facebook, to name a few.
Revenues and earnings for the group are expected to grow 6.5% and 13.8%, according to analysts' estimates compiled by Credit Suisse. 88% of technology companies reporting results thus far have exceeded earnings forecasts.
Here are our primers on what to expect from a few of these companies next week. We'll post the rest on Monday.
What to expect from Apple earnings What to expect from Microsoft earnings
Big Week for Brexit British Prime Minister Theresa May will face another grilling by Parliament next Tuesday when British MPs air out their opinions on the current Brexit deal which has the UK withdrawing from the EU on March 29th. There has been talk of a potential delay to the March 29th deadline by some members of Parliament, but all options are on the table. Today, Queen Elizabeth sent a veiled message to the UK's political leaders, urging them to find 'common ground'. That hasn't been so easy.
This note from the Goldman Sachs Economics team got our attention, though.
GS Economics thinks that there is a 50% chance of a later, softer Brexit. They still see the most likely outcome as the ratification of an EU Withdrawal Agreement but likely with an extension of Article 50 from March to the end of June and greater scope for a rethink of the Prime Minister's "red lines." However, the distribution of risks around Brexit outcomes is widening. They assign a 40% probability to a reversal of Brexit via a second referendum or general election and a 10% probability to a "no deal" Brexit (European Daily: Later, Softer but Still Brexit).
If Goldman is right, we might very well see a delay to Brexit and possibly even a reversal. Buckle up.
Here's the history behind Article 50 of the Lisbon treaty, which kicked off the two year plan to have the UK exit the EU in the first place.
Economic Reports Beyond earnings, next week will be heavy on economic reports and a Federal Reserve meeting here in the U.S.
The Federal Open Market Committee meets on January 30th on interest rates and other matters. Fed Chair Jerome Powell and other governors have basically tipped their hats that they will take a 'wait and see approach' before raising rates again. According to the CME's FedWatch, almost no one is expecting them to raise rates at this meeting, and that's a pretty safe bet.
We'll also get the January jobs report on Friday. That would've been interrupted by the shutdown, but not anymore. The government shutdown may have impacted the amount of jobs added in January, but it was really federal workers, 800,000 of them, that bore the brunt of the stalemate. Expect the unemployment rate to remain the same at 3.9%.
We'll also get a reading on Consumer Confidence and Consumer Spending Thursday and Friday. Both have been strong of late, and lower gas prices have helped. Remember, consumer spending is two thirds of the U.S. economy, so strength is a good sign for markets. Todays Headlines The Hidden Automation Agenda of the Davos Elite (NYT) When people in Davos talk about automation, their answers depend on their audience. But the global elite want automation - and fast. YouTube to Curb Its Referrals to Conspiracy Theories and Other False Claims (WSJ) Good news for Alphabet. Amazon Is Pushing Facial Technology That a Study Says Could Be Biased (NYT) Exactly what it sounds like and a good thing to know about. Yes, it's a tech heavy headline day, but only because we think attention should be directed towards the industry.
Chart of the Day: S&P 500 and Gold in the Week Ahead  The market's week ahead looks bright, tentatively. But there are still several major causes for concern that could derail equity markets in the midst of the current rebound. China will continue to play a key role with respect to investors' risk appetite. More specifically, ongoing developments in U.S.-China trade negotiations and the very concerning economic slowdown in China will remain at the forefront of investors' minds.
Meanwhile, President Trump announced a deal on Friday that would temporarily end the U.S. government shutdown for three weeks as negotiations over border security continue. At least for the time being, any pressure on the markets coming from the prolonged shutdown has been alleviated.
Friday's market close marked the fifth straight week of gains for all three major indexes - the DJIA, S&P 500, and Nasdaq Composite. This past week has also been the first one since early October in which the S&P 500 (as shown on the chart) has been consistently above its 50-day moving average. That said, the benchmark index remains well under its more closely-watched 200-day moving average and is still struggling to extend the sharp rebound and recovery that has been happening since mid-December. The S&P 500 continues to trade nearly 10% below its September peak, and has substantially more ground to cover before it can potentially resume the bullish trend that had been on until October. We could continue to see some choppy, news-driven price action next week, as there are many possible catalysts for major market moves, including: a slew of company earnings releases, possible developments in U.S.-China trade negotiations, another round of Brexit talks in UK Parliament, the ongoing U.S. government debate on border security tied to another possible U.S. government shutdown, and the monthly U.S. jobs report next Friday. If the S&P 500 can remain afloat above its 50-day moving average amid these and other potential catalysts, we could see an extension of the stock recovery next week. 
In other news, the chart of gold is showing a rather dramatic surge on Friday, which is due in large part to the sharp drop in the U.S. dollar. Since gold is most often denominated in U.S. dollars, gold and the dollar are inversely correlated. As a result, when the dollar rises in value, gold prices tend to fall, and vice versa. Another factor providing gold a tailwind has been the recent sustained fall in interest rates, as shown in the U.S. Treasury 10-year yield since November. When interest rates fall, non-interest-bearing gold has less competition from from interest-bearing instruments, and gold prices tend to rise. The chart of gold shows a recent 'golden cross,' which is a bullish pattern marked by the 50-day moving average crossing above the 200-day moving average. If interest rates remain subdued due to continued dovishness from the Federal Reserve, and the strong U.S. dollar continues to soften, gold could be given a further boost. How can we improve the Market Sum? Tell us at marketsum@investopedia.com
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Friday, January 25, 2019
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