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If the momentum that helped propel the S&P to its best two-week stretch in a year is to continue, it’ll depend largely on a flood of economic numbers culminating with the jobs report at the end of the week.
It’ll also hinge on investors’ ability to rethink the nasty start to the week in China. Watch the China chatter grow after the central bank cut the reserve-ratio requirement for banks well after Shanghai closed. That’s helped U.S. stock futures pare losses. The mood seems nowhere near as ugly in the U.S. as it was in China, where the Shanghai Composite, the worst- performing of 93 equity indexes around the world this year, got hammered.
“It was a red carpet across all major indices over in Asia and a similar market action is expected over in Europe,” said AvaTrade’s Naeem Aslam. “If the U.S. economic data does start to print more stout readings, just like the last week, then the odds of a further rate hike will not be that far out of sight and this will only inflate the market volatility further.”
Gold bugs like what they’re seeing so far. And they’ll really like it if the economic clouds darken a bit as the numbers roll in over the next few days. The precious metal, of course, has been crushing it this year and our call of the day expects more of the same (see his very rosy outlook below).
Key market gauges
Futures on the Dow YMH6, +0.56% and the S&P ESH6, +0.54% are having a bumpy start, even with that China move. Gold GCH6, +0.61% the best-performing major asset so far this year, is understandably catching a lift. Crude oil CLZ6, +0.20% is barely moving.
Asia ADOW, +1.03% was mostly in the red, and the Shanghai Composite SHCOMP, +1.68% SHCOMP, +1.68% closed off 2.9%, as investors expressed disappointment that there wasn’t much in the way of growth-boosting measures coming out of the G-20 meeting. Europe SXXP, +0.43% is down, and the dollar DXY, +0.19% is getting mauled by the yen.
The call
Speaking of gold’s banner year. Gavekal Capital is confident the rally is just getting started. “Buying gold today may be comparable to buying stocks in April 2009,” the blogger wrote. And we all know how that went.
He gives six reasons for why he believes gold needs to be in your portfolio right now. Here they are:
- . Technical trading patterns suggest gold may finally be breaking out into a bull market.
- . Gold remains out of favor despite the recent rally.
- . The Federal Reserve’s ability to raise interest rates is constrained.
- . The overpriced U.S. dollar has limited room to run.
- . Real interest rates are heading lower around the world as central banks get creative.
- . Physical gold may be difficult to acquire in the coming years.
The buzz
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Warren Buffett’s annual letter to Berkshire Hathaway BRK.A, +2.20% shareholders surfaced over the weekend, and there’s plenty left to be digested in its 31 pages. He defended some of his business moves, but he also waxed political. He didn’t name names but he did say that candidates “can’t stop speaking about our country’s problems.” And that they are dead wrong. “The babies being born in America today are the luckiest crop in history,” Buffett wrote.
Also read: Warren Buffett’s best opportunity might be his company’s own stock
Federal-Mogul shares FDML, +45.78% surged 37% in premarket trade after Icahn Enterprises Inc. IEP, +3.68% said it is offering to buy the shares it does not already own for $7 each in cash.
Starbucks SBUX, -0.22% is opening its first store in Italy. Good luck with that. “Now we’re going to try, with great humility and respect, to share what we’ve been doing and what we’ve learned through our first retail presence in Italy,” CEO Howard Schultz said.
The chart
Michael Lebowitz of 720 Global used this chart to show that when the S&P 500’s SPX, -0.81% 10-month moving average historically has cut below the 20-month moving average, it has signaled a prolonged decline. The circles on the map show that. The squares show when the opposite happens, which has signaled some big rallies over the years. Right now, we’re looking at a circle. “If history proves prophetic, buckle up,” Lebowitz said. “Stock prices may be in for a precipitous decline.”
The economy
Busy stretch. All eyes will be on the jobs report at the end of the week, but before that we’ll pore some notable numbers like February car sales and the January trade deficit. As for today, the Chicago Purchasing Managers Index comes out at 9:45 a.m. Eastern. Pending home sales hit 15 minutes later. The Dallas Fed Manufacturing Survey is due at 10:30 a.m.
The quote
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“It is better to live one day as a lion than 100 years as a sheep” — Donald Trump. Well, Donald Trump quoting a Benito Mussolini parody Twitter TWTR, +1.00% account. Read: How we fooled Donald Trump into retweeting Benito Mussolini.
Trump, of course, handled it like you might expect. “It’s a very good quote,” he told NBC’s “Meet the Press” on Sunday. “I didn’t know who said it, but what difference does it make if it was Mussolini or somebody else — it’s a very good quote.”
The stat
Energy was the worst-performing sector of 2015 in the S&P 500, and it was also the most-bought sector by hedge funds in the fourth quarter, according to S&P Capital IQ. Pioneer Natural Resources PXD, -2.30% and Williams Company WMB, +2.24% were the most-bought single stocks.
Random reads
Here are the most distressed cities in America.
When in doubt, just say “Thank you!”
Steph Curry, in case you haven’t heard, is ridiculous.
Denver and 13 other places to live after the apocalypse.
The top 10 quips from Chris Rock’s epic Oscars monologue.
Oh and Oscar Twitter fail: Oprah and Whoopi mixup
After more than two monotonous years of “no” tweets, this Twitter account finally had its moment. And the Internet cheered with some 21K RTs:
yes
— has Leo won an oscar (@LeoAndHisOscar) February 29, 2016
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