Despite worsening U.S.-China trade tensions on Friday (when President Trump unveiled another $100 billion worth of tariffs) and over-the-weekend headlines out of Syria (alleged chemical weapons attack and an airstrike by Israel), the bulls blasted stocks higher out of the gate. It was a classic “pump and park” dynamic that was seen so frequently last year.
Only, it didn’t make any sense with so many headwinds in play. And in the final two hours of trading, the sellers came in hard and fast and pushed prices below the opening tick — cutting the majority of the day’s gains. In the end, the Dow Jones Industrial Average gained 0.2%. Bond yield rose. And gold, crude oil, and the dollar all declined.
The catalyst for the selloff was word of a raid on Trump’s personal attorney on the order of Special Counsel Robert Mueller. Trump could well fire Mueller or members of the Justice Department in what looks like a political ploy to get Trump top testify under oath.
Still, U.S. stock futures are up with the S&P 500 expected to open 1.13% higher, the Nasdaq Composite up 1.36% and the Dow Jones Industrial Average up 1.17%. Part of this is related to Chinese President Xi Jinping’s effort to relinquish some of the pain in the current trade battle with the U.S.
Six groups advanced while five sectors declined, yesterday. Healthcare led the way thanks to a 6.2% gain in Merck & Co., Inc. (NYSE:MRK) after announcing lung cancer treatment Keytruda helped previously untreated patients live longer in a late-stage trial. That was enough to push shares up and out of a multi-month trading range with a move over its 50-day moving average.
Tesla Inc (NASDAQ:TSLA) was among the first of the big-cap tech stocks to roll over, dropping back to the lower end of its trading range from Friday for a loss of 3.2% amid ongoing concerns about Model 3 production woes.
And Monsanto Company (NYSE:MON) surged 6.2%, triggering its circuit breaker, on reports regulators could approve its pending acquisition by Bayer. Last week, the company reported weaker-than-expected earnings of $3.22-per-share, 9 cents worse than analyst estimates on a 1.1% drop in revenues.
Checking in with SentimenTrader, the situation is looking ugly. The current correction has crossed the 50-day mark with a 10% decline, something that was last seen along with a rising 200-day moving average in 2000 and 2007. Moreover, there is an ongoing pattern of opening strength (associated with “dumb money” buying) and final hour selling (“smart money” distribution).
Check out Serge Berger’s Trade of the Day for April 10.
Today’s Trading Landscape
To see a list of the companies reporting earnings today, click here.
For a list of this week’s economic reports due out, click here.
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Anthony Mirhaydari is the founder of the Edge (ETFs) and Edge Pro (Options) investment advisory newsletters. Free two- and four-week trial offers have been extended to InvestorPlace readers.
