Currently the action for short term traders is choppy and tricky. Those with a long term view still are in cruise control as they have been for years. The holiday shortened week saw most of the action Monday as a “gap down” was met with buying, a nice rally Thursday, and then the employment data Friday gave the market something to think about other than TRADE WARS!!(tm) [which ironically began in earnest that day]. As a note, the NYSE McClellan Oscillator went positive late in the week.
Friday the Trump administration officially imposed tariffs on $34 billion of Chinese imports at midnight Eastern Time, and Beijing implemented tariffs on the same value in U.S. goods, as promised.
In other “fun” Axios reported early in the week that the Trump administration had crafted a draft bill that would declare America’s abandonment of World Trade Organization rules. This would essentially give Trump a license to raise tariffs at will, without congressional consent and largely outside of the international rules governed by the WTO.
Fed policy makers saw negative risks from U.S. trade policy, saying it “had intensified,” indicating that a tit-for-tat tariff clash could have negative effects on business sentiment and investment spending, according to the minutes of the June 12-13 Federal Open Market Committee released Thursday.
For the week the S&P 500 gained 1.5% and the NASDAQ 2.4%.
On Monday, it was reported the Institute for Supply Management’s manufacturing index rose to 60.2 in June from 58.7 – that’s a very strong reading (anything over 50 signals expansion and 60+ is rare). A read on construction spending rose 0.4% in May. Thursday, the ISM nonmanufacturing index forJune came in at 59.1 from the previous month’s reading of 58.6; again very strong.
“The increase in the ISM manufacturing index in June is a clear sign that, for now at least, the strength of the domestic economy is more than offsetting any increased uncertainty on trade policy. However, with the dollar appreciating by 6% since April, global growth slowing and retaliatory tariffs just beginning to bite, the [manufacturing] sector looks unlikely to fare so well for long,” Michael Pearce, senior U.S. economist at Capital Economics, said in a note.
The U.S. created 213,000 new jobs in June, above the 200,000 that had been expected, while the readings for May and April were also revised higher. Separately, the unemployment rate rose to 4% from 3.8% – which is be a good thing if it means more Americans are re-entering the work force.
The jobless rate rose largely because some 600,000 people entered the labor force.
Oil remained very strong – “bull flag” action.
Copper on the other hand looks like a disaster.
Here is the 5 day weekly “intraday” chart of the S&P 500 … not via Jill Mislinski.
Via the Visual Capitalist the world’s largest tech powers now reside solely in 2 countries! (I thought Samsung would have a say in this).
(click to enlarge)
The week ahead…
Earnings season begins anew. If the estimates are accurate this is going to be a very strong quarter and in the end, stock prices are a reflection of earnings prospects!
As an aside, longer term, this is an amazing statistic:
In the 17 midterm years since 1950, the average 12-month return after the election has been 15%—and not one of those periods has seen a negative return.
Short term: The S&P 500 had broken below it’s breakout level of 2740. Friday it jumped back over. Still a level to watch.
The Russell 2000 is already back where it was before the selling.
The NYSE McClellan Oscillator went back to black late in the week which if that holds will bode bullish.
Long term: Still very positive for the “buy and never sell” crowd.
Charts of interest / Big Movers:
This week’s winner in the biotech lottery was Adamis Pharma (ADMP) which Monday rose a cool 50% after it announced a distribution and commercialization agreement with Novartis.
Tesla (TSLA) dropped 7.2% Tuesday, adding to a 2.3% drop from Monday when The Wall Street Journal reported that the company’s top engineer Doug Field is leaving.
Thursday, Zebra Technologies agreed to buy Xplore Technologies (XPLR) – so the combined company looks like it will have a “lot of technologies”. 😉 Xplore rose 47%.
Friday, Biogen (BIIB) jumped nearly 20% after it announced positive results from a Phase 2 trial for an Alzheimer’s treatment. The surge represented its best daily gain since February of 2004.
Have a great week and we’ll see you back here Sunday!