foxex: April is not Fooling

The Market Sum | Insight after the bell

By Caleb Silver, Editor in Chief

Monday's Headlines

1. U.S. Markets Rally into 2nd Quarter

Markets Close

Dow
26,258.42 +1.27%

S&P
2,867.19 +1.16%

Nasdaq
7,821.06 +1.19%

VIX
13.55 -1.17%

INV Anxiety Index
98.62 Neutral

US 10-Yr Yield
2.497 +3.44%

April Starts with a Bang

The second quarter took the baton from the first as global markets sprinted out of the gates. The catalyst was China, which delivered two manufacturing reports that exceeded forecasts.

The China PMI (Purchasing Managers Index), which is an official release from the Chinese government and the Caixin/Markit Survey, which surveys private companies, both showed robust manufacturing and purchasing activity, defying the reality of China's economic slowdown. Keep in mind, China, like the U.S. and the EU, has been stimulating its economy through its monetary policy and tax cuts. In early March, Chinese government officials announced tax cuts totaling $298 billion, as well as a cut to a value-added tax for transportation and construction sectors from 10% to 9%, and for manufacturers from 16% to 13%.

Guess what? Those things work! James has more on how this helped fire up the Shanghai Composite Index in our daily chart - but here's China's PMI since 2004 -- look all the way to the right to see the bump.

Higher Highs

"It's a market of stocks... not just a stock market." I quote our pal JC Parets whenever I get the chance because it makes me seem smarter than I am. Today is another good day to do that. Not only do we have the S&P 500 well above that 2800 resistance level and holding, we have multiple stocks hitting all-time highs today. It's a diverse group of stocks, which means there is strength across multiple sectors, which is a bullish trend.

In investing, 'the trend is your friend.' I'll stop with the investo-speak, I promise, but take a look at the list above. You'll see some recognizable names on there.

We see retail, biotech, railroads, payment companies, industrial construction and consumer goods all breaking out to record highs today.

Oil Prices are Gushing

If you thought stocks had a strong quarter, take a look at oil. West Texas Intermediate crude oil, the U.S. benchmark, rallied 32.4% in the first three months of the year, its best quarterly performance in a decade. Brent crude oil spiked 27%, also its best quarter since 2009.

Prices have spiked as OPEC and other non-affiliated oil producing nations like Russia have agreed to production cuts as the global economy has slowed, prices have faltered and uncertainty has swirled given the trade war between the U.S. and China. In the U.S. the rig count in the Gulf of Mexico fell for the sixth week in a row. We'll see reports on oil stockpiles in the U.S. on Wednesday and rig counts again on Friday.

More News:

Ford Stock at Cusp of New Uptrend

Good Time to Sell Wells Fargo Stock

The Fed Continues to Tighten by Reducing Its Balance Sheet

Happy Financial Literacy Month

April is Financial Literacy Month in the U.S. It's a made up thing, kind of like Valentine's Day, but it suits us just fine at Investopedia. The sad truth is that most people aren't financially literate, but they have financial products integrated into every aspect of their lives and have little to no idea how they work or impact their credit.

As is well documented, inadequate financial literacy leads to serious financial problems down the road for individuals and families.

40% of U.S. adults don't have enough savings to cover a $400 emergency.
The median retirement savings for Americans between ages 55 and 64 is $104,000, or $310 per month if it was invested in an annuity.
Average household credit card debt rose to $8,284, 25% higher than 2011, and at its highest level in a decade.
Student loan debt, at $1.5 trillion, is more than double what it was a decade ago.
The average student loan is $6,600 per student, annually.
Students with loans leave college with an average debt of $22,000.

There are 28 states in the U.S. that are trying to make financial literacy a high school requirement through legislation. We think that's a step in the right direction. We also think consumers and investors need to prove their understanding of a financial product before they are approved to use it, or have it used on them by a financial advisor.

The U.S., incidentally, ranks 14th in the world for financial literacy even though we have the most debt, and are in the top ten for highest debt per capita. FINRA, the financial regulator, issues a 3 question quiz every couple of years to gauge financial literacy among Americans. Only 37% of Americans were able to get all three questions correct.

Take it yourself and see how you do.

#StaySmart!

Chart of the Day: U.S. and China Stocks Break Out on Strong Manufacturing Data

Global stock markets were buoyed on Monday at the very beginning of the trading week, month, and quarter, as Chinese manufacturing data came out significantly better than expected. Markit's Caixin Manufacturing Purchasing Managers' Index (PMI) for March hit its highest level at 50.8 since June of last year. Prior to the release, consensus estimates were pointing to a neutral 50.0 reading (above 50.0 denotes an expansion while below 50.0 shows a contraction). Prior to Monday's manufacturing release, worries over slowing economic growth, especially in China, had placed pressure on global equity markets. China's highly positive PMI release alleviated these worries, at least for the time being, prompting stock indexes in Asia, Europe, and the U.S. to rally sharply.

Not to be outdone, both the U.K. and U.S. also released better-than-expected manufacturing data on Monday. The U.K.'s Manufacturing PMI hit its highest level, at 55.1, since April 2018. And the U.S. ISM Manufacturing PMI rose to 55.3 in March from the previous month's 54.2. All of this data reflect increased economic growth sentiment, at least in manufacturing.

The positive effect on equity markets on Monday was strong and consistent throughout the day. Major U.S. indexes like the S&P 500, Dow, and Nasdaq Composite all gapped up and gained over 1% on the day. The S&P 500 also broke out above recent highs.

As for the Shanghai Composite (SSEC), China's most prominent benchmark equity index, the Caixin PMI data on Monday helped prompt a strong +2.58% surge, which resulted in a clean breakout above the tight consolidation (or pennant pattern, as shown on the chart) that had been in place throughout March. This tentatively confirms a continuation of the sharp rebound and recovery that started at the beginning of the year. Another key technical pattern that supports a further bullish move is a major 'golden cross' (50-day moving average crossing above the 200-day moving average) that just occurred around two weeks ago. With any follow-through on Monday's breakout move, the next major target to the upside for the Shanghai Composite is around 3220 resistance.