This past week marked the beginning of a new month and a new quarter for investors. It began flat and quiet, and the buzz was that once we saw employment numbers from ADP and the government, we might get enough of a catalyst to move the stock market in a decisive direction. ADP’s private jobs report on Wednesday was a start, with 263,000 new jobs, but Friday’s government report of just 98,000 new non-farm jobs for March was a big disappointment. Economists were looking for 185,000 new jobs, but even that figure was down from February’s 219,000. Friday’s weakness was blamed on the bad weather in the east in March, while the jump in February was apparently caused by good weather in January and February.
Also keeping the stock market on hold this week was hesitancy among investors ahead of the big meeting between Donald Trump and Chinese President Xi Jinping, but the meeting was quickly overshadowed by the Thursday night U.S. missile strike on Syria. The news on the Chinese meeting and talks took a backseat to the Syrian incident on Friday, so we will just have to wait to hear a more in-depth analysis on what Trump and Jinping and their teams may have discussed. Stocks looked as though they might sink sharply on Friday before the bell, but we ended up pretty much flat for the day. This left the majors flat to lower for the week, with the Dow down less that 0.1%, the Nasdaq down 0.6% and the S&P 500 down 0.3% for the week.
President Trump’s decision to make the airstrike on Syria was very interesting in that it came with what looked like a lot of disagreements within his own Administration. There have been some changes already made in his team, and it looks as though more shuffling might continue in the days and weeks ahead. This sort of turmoil is normal in presidential administrations, but not that common in just the first 75 days. The stock market has replied with a shrug, though, and it is a plus for the bullish camp that an action-packed political week and some so-so employment news left the stock market flat for the first week of April and the start of the second quarter.
What was interesting about the employment numbers was the dark secret lurking underneath the so-so totals. The ADP number was good, but not great, and the government report was lukewarm, but we are seeing big job losses in the retail sector. One report said that more than 60,000 retail jobs disappeared in the past two months, and the reason for these disappearing jobs is Jeff Bezos and the monster that he created known as Amazon (AMZN). With its free shipping through Amazon Prime, Amazon is slowly and steadily devouring retail stores across the nation (and eventually the world?). The whole retail sector is reeling because of the success of the little start-up that less than 20 years ago was just selling books online at a loss.
Wall Street initially scoffed at Amazon, and in its early stages, Amazon was laughed off as a dot.com startup that had no profits and would quickly be out of business. Jeff Bezos stuck to his guns, though, and with its current market cap of $427 billion, Amazon is worth nearly twice as much as retail giant Wal-Mart (WMT). Amazon is working on drones, fresh food deliveries, and it even has bought its own airport, where it could go head-to-head against the likes of FedEx (FDX). Bezos even wants to promote space travel to Mars and the moon, so it is clear that we can never fault Jeff for not thinking BIG. Whether putting retailers out of business is a good thing remains to be seen, but it sure is nice to want a new shirt or a pair of flip flops and not have to drive to a mall to buy them.
As for the stock market, we are still in the holding pattern near all-time highs that we have been in for the past couple months, and we are still just waiting for a green light to head higher. The Federal Reserve is out of the picture for the time being, so that is one less thing to hold the stock market back. The next big possible catalyst for the stock market is earnings season, which is just about to kickoff with first-quarter numbers. That post-election run-up we saw created a lot of expectations, and while stocks are holding on to those gains, we need to see some strong earnings if we are going to see this tired bull market head toward new highs.
That said, the Gorilla wishes each and all a relaxing spring weekend. We have some great golf from Augusta this weekend, and it will be fun to see who slips on that green jacket on Sunday. Again, earnings season will be the key for investors as to which direction this market heads, so bulls will be keeping their fingers crossed. We will be back in action on Monday!
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