As the S&P 500 hits turbulence, here’s a corner of the stock market to hide in


It easily could be a tough day for stocks, as traders are worrying about Spar-a-Lago and moping about yesterdays ugly finish.

Why exactly does the stock market keep wallowing below its March 1 peak?

Analysts have a list of potential culprits: the Donald Trump-Xi Jinping summit that starts today in Florida, fears that tax cuts wont come soon, and the Feds plans to pare back its stockpile of bonds. Jefferies strategists, however, sound tired of the finger-pointing.

Just as the rise in markets can be attributed to a whole host of reasons, so can declines, say chief global equity strategist Sean Darby and his colleagues.


Nonetheless, they offer the best excuse for the recent selling as well as where investors ought to hide out now, for our call of the day.

Last quarters rally was built on large-cap, expensive stocks advancing at the expense of small-cap, cheap stocks, say the Jefferies strategists. N ow investors are uneasy about the even higher share prices for those big and costly plays, they suggest.

That doesnt mean stock bulls need to cash out completely, they say, even as they warn that the technical condition of the S&P 500 looks precarious.

The bottom line is that monetary conditions remain easy, the global economy was expanding well before Trump got elected, and real interest rates are negative, Darby & Co. write. So all things considered, investors should be rotating into lower-priced stocks which are experiencing positive earnings revisions.


Jefferies


The Jefferies team doesnt name individual stocks in their note. But if you want to bet on those little and inexpensive stocks that the strategists have flagged as unloved, theres an ETF for that. A bunch actually, such as the Vanguard Small-Cap Value ETF VBR, +0.16% and the iShares Russell 2000 Value ETF IWN, +0.11% .


Other pundits have also been highlighting the rough going for the small fry IWM, +0.04% , saying its a possible red flag for the overall market or at least great factoid fodder:

Election through December 7:
IWM +14.3%
SPY +4.9%
QQQ+1%


December 8 through today:
QQQ +13%
SPY +6.5%
IWM +0.75%

— Irrelevant Investor (@michaelbatnick) April 5, 2017 Key market gauges

Futures for the Dow YMM7, +0.15% , S&P 500 ESM7, +0.23% and Nasdaq-100 NQM7, +0.08% are modestly higher, after the Dow DJIA, +0.23% , S&P SPX, +0.24% and Nasdaq Composite COMP, +0.17% all sold off into yesterdays close.


Its been mostly selling in Europe SXXP, +0.08% and Asia. Gold GCM7, +0.51% is gaining, and oil CLM7, +0.89% is also rising. The euro EURUSD, -0.0563% has bounced back from losses that came as ECB President Mario Draghi revealed a four-point checklist for when its time for a rate hike.


See the Market Snapshot column for the latest action.

The buzz

Will Trump and Xi share a bucket of KFC and cheer Yum Chinas YUMC, +11.00% latest earnings? They almost certainly wont play golf at Spar-a-Lago, aka the new presidents most important meeting yet. Xi, that Communist Party animal, has been known to go for a beer.


See: Why investors are fretting over the Trump-Xi meeting

Bed Bath & Beyond BBBY, +6.08% is on track for an up day following its quarterly results late yesterday.

Aussie regulators are chewing out Apple AAPL, +0.10% over Error 53 iPhone shutdowns.


CarMax KMX, -0.69% and Constellation Brands STZ, +7.63% are among the companies that posted earnings before the open.


Online lender Elevate Credit ELVT, +0.00% is back to test the public markets again.

The economy

Weekly jobless claims came in below expectations, helping to whet everyones appetite for tomorrows big report on nonfarm payrolls. Yesterdays ADP release was piping hot, ICYMI.


Do monetary policy frameworks need to be adjusted in a world of (potentially) low natural real interest rates? If so, how?

If you often ask yourself those questions, you might be in luck. The San Francisco Feds John Williams and a German sidekick are tackling them around when the stock market opens.

Check out: MarketWatchs Economic Calendar

The chart Venture Monitor for 1Q 2017


The pace of investments in the U.S. entrepreneurial ecosystem downshifted again in the first quarter of 2017 even as dollars invested bumped up due to several outsized deals, says the latest Venture Monitor report from the National Venture Capital Association and PitchBook.

But dont worry, the report adds: This is not representative of a fundamental decline of venture funding of innovative startups, but rather a return to a more disciplined approach.

The quote Reuters Bezos speaks in Colorado Springs yesterday.


My business model right now for Blue Origin is I sell about a billion a year of Amazon stock and I use it to fund Blue Origin. Amazon.com AMZN, -0.19% founder Jeff Bezos yesterday laid out his vision for his space-travel startup.


See: Jeff Bezos sells $1 billion a year in Amazon stock to fund space travel push

And read: This could push Bezos past Bill Gates as the worlds richest human

The stat

$16 billion That is the amount in outdated European banknotes and coins that still has not been handed in and exchanged for euros EURUSD, -0.0563% , Bloomberg notes. Have you got old deutschmarks, French francs, Italian lira, etc.?

Random reads

Principal resigns after student reporters highlighted her questionable credentials.

#DumpOReilly? Not Angies List ANGI, -0.34% , though thats angering some subscribers.

Pew: Babies born to Muslims will outnumber Christian births by 2035.

Smoking causes one in 10 deaths worldwide, study says.

A Kansan way to keep small businesses (and small towns) alive when biz owners retire.

In casting news, hes played Batman, Moses and now…

Christian Bale reportedly to play Dick Cheney in biopic https://t.co/aCxOyW7Z7x pic.twitter.com/UbOsVbNRK7

— NBC News (@NBCNews) April 6, 2017

Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. Be sure to check the Need to Know item. The emailed version will be sent out at about 7:30 a.m. Eastern.

Or Follow MarketWatch on Twitter or Facebook.

And sign up here to get the Friday email highlighting 10 of the best MarketWatch articles of the week.

Leave a Reply

Your email address will not be published. Required fields are marked *