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Stocks Close Modestly Lower, But Finish Near Their Highs

The markets nearly shrugged off all of their early losses yesterday to end modestly lower by the close. But it's worth noting that they finished near their intraday highs, which bodes well for today (ahead of the 3-day long Memorial Day weekend).

Concerns over trade (not a trade war) weighed on stocks a bit. But nothing major.

Then the news hit that President Trump cancelled the meeting with North Korea due to their recent belligerent language and being a no-show at the pre-summit meeting last week in Singapore.

Stocks fell on the news and the media couldn't get enough. But then stocks came to their senses and erased those losses.

Why do I say came to their senses? Because as I wrote the other day (after rumors swirled that the talks might not happen), selling off on that news makes no sense because that assumes there was a de-nuke premium built into the market – which there wasn't. And since there was no premium built into the market for the talks to happen, there's no premium to unwind now that the talks are off (at least for now).

So the rebound made perfect sense. And stocks should not see any negative effects because of it.

In other news, Weekly Jobless Claims ticked up to 234,000 from last week's 223K. But the 4-week average saw another decline, putting it at a 45-year low.

The FHFA House Price index was up 0.1% vs. last month's 0.8% print. The y/y change was up 6.7%.

Although existing home sales declined by -2.5% last month and -1.4% y/y. This was a bit disappointing. But most of the housing metrics are on the right track.

The Kansas City Manufacturing Index, however, put in another strong showing, coming in at 29 vs. last month's 26 and views for just 22.

All in all, it was another day of mostly positive economic reports. And that should continue to support the market.

Who knows what stocks will do today ahead of the 3-day Memorial Day weekend. But as I've said before, buy the dips and buy the rallies. Because I think stocks have a lot more upside to go and many more years of this bull market ahead of it.

Best,

Kevin Matras

Executive Vice President, Zacks Investment Research

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