The Market's Wild Ride Just Starting?

CNBC reports stocks staged a massive reversal on Friday after President Donald Trump said conversations with China over trade will continue and his relationship with President Xi Jinping remains strong:
The Dow Jones Industrial Average finished the day 114.01 points higher at 25,942.37, roaring back from a 358-point loss earlier in the session that came in the wake of a tariff increase by the U.S. effective just after midnight. The S&P 500 snapped a four-day losing streak, eking out a 0.37% gain at 2,881.40. The Nasdaq Composite ended the day slightly higher at 7,916.94 after stocks rallied from their lows.

Stocks hit session highs after Trump’s late Friday tweet and closed near those levels. The president also noted that the trade talks with China were “candid and constructive.” Trump said the new tariffs on $200 billion worth of Chinese goods “may or may not be removed” in the future.




Major averages began paring some of their losses midday after Treasury Secretary Steven Mnuchin said China trade talks had ended for the day and were "constructive." Chinese Vice Premier Liu He also said the talks went "fairly well," according to reports.
Remember what I told you earlier this week when I discussed why Harvard is doubling down on hedge funds, follow the Commander-in-Tweets very closely because his tweets end up becoming true when it comes to markets and economic related events.

It was another crazy week in markets, none of which surprised me since I warned my readers to expect the unexpected in stocks a couple of weeks ago.

I thought things were getting a bit overdone, especially in tech stocks (XLK), so I wasn't surprised to see this week's pullback.

Below, you will find the performance breakdown for the S&P 500's major sectors for this week and year-to-date, courtesy of barchart (click on images):



As you can see, all the major sectors were down this week, but the sell-off was particularly steep in tech, industrials and materials.

No surprise there as tech shares have rallied the most and are still up 23% year-to-date (second chart above).

But I think there is a defensive rebalancing going on regardless of whether China and the US strike a trade deal, so expect high beta sectors to get hit more as we end Q2 and move into the summer season.

Next week, 13-F filings become available and we will find out where the world's top money managers invested in Q1, but all that is irrelevant in this algo-driven market hanging on every tweet Trump puts out.

What I find interesting is even though tech stocks got slammed this week, some of them like Roku (ROKU) were up huge and are among the top performers this year (click on images):




But Roku's good fortunes weren't the norm this week as a lot of large cap tech stocks and Chinese shares (FXI) got slammed hard as trade war fears escalated (click on image):


Not surprisingly, Uber's (UBER) much anticipated IPO was a total bust (click on image):


Uber's rival, Lyft (LYFT) was also slammed hard today and is down 44% from its highs when it IPOed in late March (click on image):


Where is the risk-taking in markets? These are the biggest IPOs of the year and they've both been shunned as investors aren't buying the hype.

In a way, it's fitting to see these beloved tech unicorns getting clobbered as they move from the private realm into the public one because it goes to show you how out of whack valuations are in private markets, which is something Warren Buffett alluded to last week when he slammed private equity's inflated returns.

Is Uber the next Amazon? Hell no! Not even close but if you heard CNBC this morning, they were all drinking the Kool-Aid, ranting about its future prospects.

Anyway, the overall market looks fragile here. The bulls are trying to defend the S&P 500's (SPY) 50-day moving average but the weekly chart tells me there could be more short-term pain ahead (click on images):



Buckle up folks, the market's wild ride-sharing ride isn't over, it might be just beginning but you wouldn't know it by looking at the fear index imploding today (click on image):


I suspect we will see more trade deal optimism and pessimism over the coming weeks and months and the market will swing with every Trump tweet, hanging onto his every word.

Below, stocks stage a comeback on more trade deal hopes. CNBC's Kayla Tausche and Scott Wapner, and the Fast Money traders, Tim Seymour, Karen Finerman, Steve Grasso and Dan Nathan discuss trade tensions and the stock market.

Also, CNBC Markets Now provides a look at the day's market moves with commentary and analysis from Michael Santoli, CNBC Senior Markets Commentator.

Third, Paul Meeks from the Wireless Fund and Jay Ritter, University of Florida finance professor, join "Power Lunch" to discuss Uber's IPO, which began trading lower than its IPO price, and whether companies like Uber and Lyft can be successful long-term.

Lastly, The Big Short's Steve Eisman of the Neuberger Berman Group was on Bloomberg earlier this week discussing hedge fund fees and why he thinks the US corporate market will suffer "massive losses" if the US falls into a recession.




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