After weeks of unrelenting rallies on Federal Reserve easing anticipation the market had some consolidation this week as earning season kicked off. A bevy of mega financial companies reported this week and they mostly beat low expectations.
“…the broad theme we’re seeing is slowing loan growth, somewhat muted trading revenues and shrinking margins,” said Stephen Biggar, director of financial institution research at Argus Research in an interview. “Lower manufacturing activity, lower housing activity and business-investment slowing are all manifesting themselves” in bank performance, he said.
Tuesday, president Trump said an agreement with China on trade tariffs had “a long way to go,” in a briefing with reporters.
Interesting to note:
China’s gross domestic product in the second quarter slowed to 6.2%, marking its slowest pace since 1992 — though mostly matching expectations — from a reading of 6.4% in the first quarter.
The only major economic report of the week was retail sales which jumped 0.4%, ahead of expectations of 0.1%. Internet retailers led the way again with a 1.7% increase in sales. Sales fell a sharp 1.1% at department stores, which been losing out to internet rivals for years.
For the week, the S&P 500 fell 1.1%
One company we have not talked about enough this year but has quietly had a massive run is Microsoft (MSFT). While most of us think of it as a seller of Excel and Word, it apparently has transformed itself into a massive “cloud” company and this week passed the trillion dollar valuation mark. It also owns LinkedIn. The chart this year is quite amazing!
Here is the 5 day weekly intraday chart of the S&P 500 … via Jill Mislinski.
The week ahead..
The market has demanded a quarter rate hike and the Federal Reserve will deliver in a week and a half. Now it’s all about the language go forward as the market wants more than one. The European Central Bank is on tap this week so let’s see if they come out with something new and exciting to please the easy money addicts.
Aside from that it’s going to be a heavy earnings tsunami the next few weeks with 144 S&P 500 companies reporting this week alone. While everyone will be watching the “new economy” i.e. Facebook, companies like Caterpillar will be interesting coming off the back of the CSX miss as these are global industrial stocks and often are canaries in the coal mine.
Short term: some rest after a near vertical move since early June.
The Russell 2000 which reflects smaller companies vs the international focus of the larger two indexes remains stalled.
The NYSE McClellan Oscillator turned red late in the week so let’s keep an eye there – if that continues it calls for some caution.
Long term: can’t complain.
Charts of interest / Big Movers:
Symantec (SYMC) sunk 10.7% Monday after CNBC reported that it has ceased negotiations to be acquired by Broadcom (BRCM).
Domino’s Pizza (DPZ) fell 8.7% Tuesday, after the fast-food retailer reported second-quarter revenue and same-store sales growth that fell short of analyst estimates.
Also Tuesday, Blue Apron (APRN) surged 35.6% after the meal-kit company announced seasonal recipes that will include plant-based proteins from Beyond Meat! Much of that was given back in the next few days though.
Railroad company CSX (CSX) posted weaker-than-forecast quarterly results, after the close Tuesday, sending its stock down more than 10.3% Wednesday.
Thursday, Netflix (NFLX) fell as the streaming video giant said it lost 126,000 subscribers in the U.S. in the second quarter, the first such loss since 2011. Shares declined 10.3% representing its worst daily percentage loss since July of 2016.
Have a great week and we’ll see you back here Sunday!