* Major averages hold slight gains in afternoon trade
* Financials, consumer disc. lead S&P 500 sectors
* Real estate, healthcare sharply negative
April 16 - Welcome to the home for real-time coverage of U.S. equity markets brought to you by Reuters stocks reporters and anchored today by Lewis Krauskopf. Reach him on Messenger to share your thoughts on market moves: lewis.krauskopf.thomsonreuters.com@reuters.net
GOLD MINERS: HEAVY METAL HITS THE CHARTS (1400 EDT/1800 GMT)
With spot gold XAU= falling to its lowest level since late December, pressure is coming in on gold mining shares. The VanEck Vectors Gold Miners ETF (NYSE:GDX) GDX.P is down almost 2% on the day. This as the Philadelphia SE Gold/Silver Index .XAU is breaking support. one interpretation on the charts can be that gold is in the final leg down (wave e) of a large triangular pattern. If so, once weakness runs its course, both the yellow metal and the GDX may then be poised for a strong advance. (Click on chart below)
Although the rolling 50-day correlation between gold and the GDX has weakened from nearly 1.0 earlier in the year, to about 0.64 recently, it is now strengthening again. Thus, gold and the miners appear in-gear to the downside.
If gold is to see a 50-61.8% Fibonacci retracement of its August 2018/February 2019 rally, it can still threaten the $1,253/$1,231 area. Risk is toward $1204/$1175, including the lower boundary of the triangle.
However, gold should then turn higher, and ultimately resolve the triangle with a strong upward thrust through its $1,374.91 summer 2016 top. In that event, the GDX will have potential to then be swept significantly higher.
Gold breaking the support line from early 2017, can suggest a failed pattern.
(Terence Gabriel)
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HEALTHCARE IS STILL SICK (1315 EDT/1715 GMT)
The start of first-quarter earnings season was thought to be a potential catalyst for a resurgence for the healthcare sector .SPXHC , which has been the worst-performing major S&P 500 sector to start 2019.
Not so much on Tuesday. After opening the session sharply higher, healthcare was solidly negative by midday following earnings reports by Johnson & Johnson (NYSE:JNJ) JNJ.N and UnitedHealth Group (NYSE:UNH) UNH.N to kick off the reporting season for the sector.
UnitedHealth, the biggest health insurer and third-biggest overall healthcare company by market value, saw its shares fail to hold early gains despite the company's higher-than-expected profit. shares were down about 5%, while rival insurers Anthem (NYSE:ANTM) Inc ANTM.N and Humana (NYSE:HUM) HUM.N were off more than 6% each.
Policy uncertainty is clouding the outlook for healthcare stocks, particularly for health insurers. On the company's conference call, UnitedHealth executives addressed issues such as government-run "Medicare for all" proposals coming from the Democratic candidates for president.
"Management faced a bit of a catch-22 on engaging Democrats' Medicare-for-All proposals on the call," Evercore ISI analyst Michael Newshel said in a research note.
"They gave the right critique on system disruption and alternatives to universal coverage," Newshel said. "But the attention itself elevates the issue in a sensitive market."
(Lewis Krauskopf)
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TRY SHORT UTILITIES WITH A SIDE OF LONG FINANCIALS (1145 EDT/1545 GMT)
With utilities stocks trading at about a 60% premium to financials, Bank of America (NYSE:BAC) Merrill Lynch's equity & quant strategist Savita Subramanian wrote in a note published Monday that it's a good time to go long financials and short utilities.
When relative valuations have been this high historically, a long financial/short utilities trade has returned 20% over the following 12 months, according to the research note. As a result Bank of America has moved to underweight in utilities while remaining overweight financials.
While financials .SPSY tend to resemble utilities .SPLRCU in that they are heavily regulated and provide cash return moreso than growth, one key difference between the two is the price tag, according to Subramanian, who says utilities is two standard deviations above its average relative multiple.
Since 1986, this happened eight times and in seven out of those eight times, the following 12 months saw the long financials/short utilities trade outperform the S&P 500.
Investors may already be taking heed. On Tuesday, the S&P 500 Utilities index .SPLRCU , down 0.6%, was underperforming the S&P 500 Financial index .SPSY , up 0.4%. On a year-to-date basis, financials have risen 13.6% compared with a 9.4% gain for utilities.
(Sinéad Carew)
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GOOD ECONOMY, CAUTIOUS ECONOMY (1113 EDT/1513 GMT)
The Wells Fargo (NYSE:WFC) Investment Institute earlier this month trimmed its estimate for 2019 U.S. GDP growth to 2.1% from 2.5%, reflecting its expectation of broadly weaker global growth.
But the group sees a lot going right for the U.S. economy.
"There are more job openings today than unemployed people; household debt payments are at an historic low; and housing affordability largely remains above levels seen in the 1990s," Peter Donisanu, investment strategy analyst at the Wells Fargo Investment Institute, writes in a report out on Tuesday, adding that hiring is also still robust.
Donisanu says that the "constructive view" of the economy is reflected in the institute's preference for cyclical equity sectors.
Still, confidence is an issue and a factor in the bank's tempered view of growth. Policy uncertainties loom, including regarding trade, elections, Brexit and the debt ceiling.
"We expect business leaders and households to moderate spending and to simply wait out the uncertainties -- at least until they have more reasons to be optimistic about the future," Donisanu writes.
(Lewis Krauskopf)
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WEAKENING INFLATION MAY BE HARD FOR THE FED TO IGNORE (1031 EDT/1431 GMT)
Joseph LaVorgna, chief economist, Americas, at Natixis, believes inflation is going to weaken. To him, this situation should eventually push the Fed toward easing monetary policy by later this year.
LaVorgna says that with the most recent core CPI print of just 0.1%, that the 12-month change is the slowest rate in more than a year. He then notes that core PCE is up just 1.8% over the last year, which is below the Fed's target rate. Given the strong correlation between CPI and core PCE, LaVorgna expects the weakness in the CPI should be evident in the PCE data due to be released on April 29.
Here is his chart showing producer prices at the crude stage of processing vs. goods prices in CPI:
This suggests to LaVorgna that disinflation is in the pipeline. Therefore, LaVorgna expects consumer goods prices to weaken over a multi-quarter period. With weakness in the CPI to below 2%, he says the core PCE deflator could slide under 1.5%.
LaVorgna expects this dynamic to not go unnoticed at the Fed, adding that weakening inflation will be especially troubling if it occurs along with stalling GDP growth.
(Terence Gabriel)
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S&P 500: ALMOST THERE (0915 EDT/1315 GMT)
With CME E-Mini S&P 500 Futures EScv1 suggesting the S&P 500 index .SPX is poised to jump about 10 points at the open, the broad market average will find itself within 1% of its September 21 record intraday high at 2,940.91.
That said, momentum studies remain cautionary with divergence evident across short and longer-term time frames. For example, the weekly RSI is struggling to move into overbought, and remains shy of its 2018 peaks. (Click on chart below)
This as complacency appears pervasive amid low CBOE equity put/call ratio readings, concerning signs from a longer-term study on the SPDR S&P 500 ETF (NYSE:SPY) Trust SPY.P that incorporates volume as well as moribund volatility measures. On a shorter-term basis, the SPX Average True Range study has collapsed to its lowest level since October 3, the day the DJI .DJI topped.
The SPX has swing support at the broken weekly log-scale trend line from the 2009 low at about 2,860. This ahead of the early-April weekly gap (2,836.03). new a high, the SPX's next hurdle, in the form a resistance line across its 2018 peaks, would only then be about 2% away.
(Terence Gabriel)
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PREMARKET SNAPSHOT: BIG EARNINGS DAY COULD SEND S&P ON ITS WAY (0858 EDT/1258 GMT)
The S&P 500 ended Monday less than 1% from its September 20 all-time closing high of 2,930.75. Tuesday's batch of first-quarter earnings could bring the benchmark closer to a new record.
Johnson & Johnson JNJ.N and UnitedHealth Group UNH.N , both Dow components, were rising in premarket after the respective healthcare bellwethers reported results. of America BAC.N detracted from the positive tone, falling in premarket after the bank's report. futures for the major U.S. indexes were higher in premarket.
Here is the premarket snapshot:
(Lewis Krauskopf)
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<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ premarket snapshot April 16 2019
https://tmsnrt.rs/2Xan9Si SPX04162019
https://tmsnrt.rs/2XdS2W0 LaVorgna04162019
https://tmsnrt.rs/2XgkVAQ US jobs graphic
https://tmsnrt.rs/2XcodFa goldgdx04162019
https://tmsnrt.rs/2VL7uIJ
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