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Mar 28, 2018

The Wall Street Journal | MoneyBeat: Investors Are Losing Faith in the Bull Market, March 28, 2018.

The Wall Street Journal
MoneyBeat

Investors Are Losing Faith in the Bull Market

By Chelsey Dulaney
Morning MoneyBeat is the Journal’s pre-market primer. To receive the newsletter via email, click here.
Market Snap at 03/28/2018 07:49:52 AM ET
S&P 500 Futures 0.31%
2623.75
DJIA Futures NaN%
U.S. 10 Year 2/32
2.77%
WSJ Dollar Index 0.19%
83.49
Crude Oil -0.58%
$64.87
Gold -0.45%
$1341.80
Europe
Asia
FTSE 100 -0.05%
Nikkei 225 -1.34%
DAX -0.64%
Hang Seng -2.5%
CAC 40 -0.75%
Shanghai -1.4%

Overnight Developments

  • The rout in technology shares continued to ripple through global markets. S&P 500 futures pointed to an opening gain of 0.1%.
  • The Stoxx Europe 600 was down 0.5%, with its technology sector down 1.9%.
  • Earlier, Asian bourses from Tokyo to Seoul were dragged lower by tech shares.
  • The Breakfast Briefing

    The resurgence in market volatility has shaken conviction in the aging stock bull market.
    A survey released Tuesday by the Conference Board showed 35% of consumers surveyed expect stocks to rise over the next year, down from 40% last month and marking the lowest level since the November 2016 U.S. presidential election.
    At the same time, the percentage of people expecting stocks to fall has risen to 29% after falling below 20% in recent months.
    The data is the latest indication that the economic and market optimism sparked by President Donald Trump’s election is faltering.
    The S&P 500 soared 19% last year even as geopolitical and economic tensions climbed and kicked off 2018 with one of its best starts to the year in decades. But recent market turbulence has put both the S&P 500 and Dow Jones Industrial Average in the red for the year. The S&P slid 1.7% on Tuesday, while the Dow slid 1.4% as a rout in technology shares deepened.
    Investors are also grappling with rising trade tensions and the impact of higher interest rates. Of course, rising pessimism about the outlook for U.S. stocks might not translate into actual market declines.
    Some have been predicting a market crash for years only to see U.S. indexes continue to climb to new records, earning the nine-year-old stock bull market its reputation as the “most-hated” in history.
    But dwindling conviction in the longer-term outlook for stocks is likely to add to market volatility and threaten the “buy-the-dip” mentality that has led investors to see market turbulence as an opportunity to buy more stocks.
    Market volatility has begun to spill over onto measures of confidence in the U.S. economy. The Conference Board’s broader consumer confidence index declined in March after hitting an 18-year-high a month earlier.
    Some investors say the pullback in sentiment was necessary given how much confidence metrics have risen in the last year.
    David Rosenberg, chief economist at Gluskin Sheff + Associates in Toronto, described the slip as a ”much needed shakeout in euphoric sentiment.”
    Despite March’s decline, consumer confidence remains high compared to where it was a few years ago. The March reading of 128 compares to a reading of 96 two years ago. A separate metric of sentiment released by the University of Michigan showed a preliminary increase in sentiment for March.
    How confident are you in stocks? Let the author know your thoughts at chelsey.dulaney@wsj.com.
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    Daily Factoid

    On this day in 1985, Ronald Reagan visited the floor of the New York Stock Exchange and rang the bell that opened trading. He was the first sitting U.S. president to do so.

    Key Events

    8:30 a.m.: GDP for the Fourth Quarter [Prior: 2.5%; Consensus: 2.7%]
    The third estimate for gross domestic product in the final three months of last year is expected to be revised higher. The second estimate was reduced because companies drew more from their inventories than previously estimated.
    8:30 a.m.: International Trade in Goods for February [Prior: -$74.4 billion; Consensus: -$74 billion]
    An advance reading on the U.S. trade deficit is expected to have narrowed slightly last month. In the previous reading, exports of goods fell 2.2% and goods imports slipped a narrower 0.5%. 
    10 a.m.: Pending Home Sales Index for February [Prior: -4.7%; Consensus: 3%]
    The number of U.S. existing homes going under contract is expected to have bounced back in February after falling to its lowest level in more than three years in January.
    10:30 a.m.: EIA Petroleum Status Report
    Estimates from 11 analysts and traders surveyed showed U.S. oil inventories are projected to have increased by 1.4 million barrels, on average, in the week ended March 23. Eight analysts expect a rise and two analyst expects stockpiles to fall. One expects no change.

    Stocks to Watch

    Alphabet—Up 0.6%: Alphabet shares fell 4.5% Tuesday, their worst day since Feb. 8, after a federal appeals court revived Oracle’s multibillion-dollar copyright infringement claims against Alphabet’s Google, in a ruling that could give fresh muscle to leading software makers but hamper upstarts developing new applications for computers and smartphones.
    Lululemon—Up 6.2%: The athletic apparel retailer said revenue rose 18% in the most recent quarter from a year earlier, a larger increase than expected. Lululemon also said it expects same-store sales to increase in the mid-to-high single digits for the 2018 fiscal year.
    Sonic—Down 4.7%: Sonic reported a surprise decline in same-store sales, with the drive-in restaurant chain attributing the drop to unfavorable weather and aggressive discounting by competitors.
    Walgreens Boots Alliance—Up 2.3%: The pharmacy firm reported an increase in earnings its fiscal second quarter and said it expects a cash tax benefit from the new U.S. tax law of over $350 million in fiscal 2018.

    Number of the Day

    2.302%
    The level of the three-month London interbank offered rate, or Libor, for the U.S. on Tuesday, the highest since November 2008. Libor is the latest threat to the U.S. economic expansion and already volatile markets.

    Must Reads

    Europe’s Booming, but Investors Aren’t Making a Cent: In the past 12 months, the Stoxx Europe 600 has delivered a 1% loss in local-currency terms, accounting for both share-price appreciation and dividends, compared with a 14% total return for the S&P 500.
    New York Fed’s New Chief Could Be a Lot Like the Old ChiefThe front-runner for president of the New York Fed has a regulatory record similar to its current leader, suggesting his appointment would bring continuity in the regulator’s relationship to Wall Street.
    Takeda Mulls Bid for Pharma Rival Shire: Japan’s Takeda Pharmaceutical said it is considering making an offer for Shire, a rival drug maker with a market value of around $40 billion.
    Apple Faces Multiple Lawsuits Over Throttled iPhones: Dozens of iPhone owners are taking Apple to court over the company’s disclosure that it slowed down old phones to preserve battery life.
    Casino Managers Enabled Steve Wynn’s Alleged Misconduct for Decades, Workers Say: Employees describe a corporate culture where supervisors looked the other way and complaining was futile; "don’t try to make this into anything."
    Oracle Wins Court Ruling Against Google in Multibillion-Dollar Copyright Case: Appeals court rules that Google infringed Java copyrights, orders trial to determine damages.
    Tesla’s Stock Slides Amid Crash Investigation: Tesla Inc.’s shares sank 8.2% on Tuesday, extending a rout in one of the hottest stocks in recent years, while the company’s bond prices also tumbled.