A good amount of volatility this past week, but once again indexes are just sort of hanging around as we work through some news items, specifically facing trade issues. We ended last week with some hand wringing over Turkey – while nothing was really resolved, U.S. markets looked past that… however emerging markets continue their struggle. The U.S. indexes have simply been range bound for weeks on end.
The Turkish central bank pledged in a statement Monday to provide “all the liquidity the banks need.” It also said banks would be able to borrow foreign-exchange deposits from the central bank at one-month and one-week maturities. Analysts said Turkey’s reluctance to raise interest rates stood out. Wednesday, Qatar reportedly pledged to invest $15 billion in Turkey following a meeting between Turkish President Recep Tayyip Erodgan and Qatar’s Sheikh Temim bin Hamed Al Sani.
Brad McMillan, chief investment officer at Commonwealth Financial Network, said the main reason Turkey’s crisis is not likely to spread is because Turkey is an outlier. “It has borrowed more, as a percentage of its economy, in foreign currencies than any other country. There are only a handful of countries that are even close, including Hungary, Argentina, Poland and Chile. Recently, its central bank effectively lost its independence and is now politically unable to take measures that might mitigate the crisis. In other words, Turkey is both more exposed and less able to do something about it than any other country. Notably, while the other exposed countries are also taking hits, no country is as bad as Turkey,” he said in a note.
“The bottom line is that the volatility seen in overseas currency markets does not change the immediate picture for the stock market. The market continues to be driven by improving economic conditions. This is underscored by a report last week showing confidence among small businesses at an all-time record high, which bodes well for continued strength in the labor markets,” Bruce Bittles, chief investment strategist at Baird, said in a note. “The largest negative on the horizon is the reluctance of either the U.S. or China to back down from tariff threats, which could eventually lead to a slowing of global economic growth.”
After a few quarters of back and forth trade war rumblings have begun that a “summit” will happen in November between President Trump and Chinese leader Xi — and all will be well in the world again.
China broke to a new low Friday.
Apple (AAPL) rested for two weeks, and then took off again near the end of the week!
Not good action in those precious metals.
The only interesting economic news was retail sales rose 0.5% in July, above expectations. Excluding auto sales, they were up 0.6%, which was also ahead of expectations. The government also said sales in June rose a smaller 0.2% instead 0.5% as originally reported. Oops. Retail sales have increased 6.4% over the past 12 months, close to the long-run average since 1980.
For the week the S&P 500 gained 0.6% while the NASDAQ fell 0.3%.
Here is the 5 day weekly “intraday” chart of the S&P 500 … via Jill Mislinski.
The student debt bubble is a massive overhang among the younger folk in the nation. So it will be interesting to see how this plays out in the next decade – one note along that line: NYU’s medical school is offering free tuition go forward.
Amazon’s share of U.S. ecommerce has risen from 38% to 49% in the last 2 years!
The week ahead…
The minutes of the Fed’s last policy meeting are due on Wednesday, but are expected to deliver little new information. Central bankers are set to meet at Jackson Hole, Wyo – Fed Chairman Jerome Powell will give a Friday speech on “monetary policy in a changing economy.”
The longest bull market on record hits this week!
Short term: The S&P 500 is holding its breakout. Watch 7950 in the NASDAQ – maybe it is too cute to see yet another double top in a major index but …
This double top in the Russell 2000 has been in place quite a while now. On the other hand we are seeing “lower lows” on the index – so we are getting in a narrower and narrower range. Will be interesting to see which way the next move happens.
The NYSE McClellan Oscillator was in red for well over a month. Back to black Friday – let’s monitor this.
Long term: Still very positive for the “buy and never sell” crowd.
Charts of interest / Big Movers:
Monday, Dycom Industries (DY) plummeted 24% after it cut its second-quarter profit and sales outlook.
Wednesday, Macy’s (M) slumped 16% after the department store reported its revenue fell year-on-year even though its adjusted second-quarter earnings beat expectations.
Thursday, J.C. Penney (JCP) plummeted 27% after it reported an adjusted second-quarter loss that was much wider than expected. It also widened the loss it expects for the full year. The long slow death continues.
Also Thursday, Walmart (WMT) surged 9.3% after it reported adjusted second-quarter earnings that topped expectations, along with revenue that was above consensus expectations. The discount retailer also boosted its adjusted 2019 earnings forecast.
Tesla (TSLA) slumped 8.9% Friday after CEO Elon Musk told the New York Times the past year had been “excruciating” and “the most difficult and painful” of his career.
Friday, Nordstrom (JWN) soared 13% after the retailer posted better-than-expected earnings and raised its outlook.
Have a great week and we’ll see you back here Sunday!