A rebound this past week on relatively light pre holiday volume, as the U.S. both did its best to tamp down worries about the trade war. How much of this is real vs “talk” is debatable but the market was in a mood to listen.
Trump said negotiations would begin again in the wake of the U.S. receiving two “very good calls” from Beijing, even though the Chinese played down the significance of the calls.
That sounds great!!! Except for well this whole issue of there were no calls…
China’s foreign ministry has said though that it is “not aware of” any phone call between China and the U.S.
But no worries it got the market up over 1%.
More real… on Thursday:
A spokesman for China’s commerce ministry was quoted in news reports as saying the country wouldn’t immediately respond to the latest round of tariff increases announced by President Donald Trump on Friday. Those increases came after Beijing announced a round of retaliatory tariffs. The spokesman, Gao Feng, said “the question that should be discussed now is about removing the new tariffs to prevent escalation.” He also said both sides were discussing a planned meeting next month of trade negotiators.
The global economy continues to slow/shrink:
Data on Tuesday affirmed that Germany’s economy shrank in the second quarter as weaker exports dragged on growth.
Reportedly, Trump called the German economy (twice) and told it to grow…
We pointed out the emergence of the consumer staples (XLP) and utility (XLE) sector ETFs a few weeks ago. They continue to lead the market – not what you want to see in a “risk on” market.
This 9700 level on the transports is also an interesting spot as that was the low in late May – and we’ve seen a bounce there a few times. This looks a LOT like the Russell 2000 chart we post weekly.
This is not to say any imminent doom is happening – as we have posted markets can rally for 6-12-18 months post “danger signals” – heck there may be new highs in 2 weeks for all we know. All it takes is a few more ummm… “stories” about phone calls to certain countries to get this market up 1%. But every so often we see these shifts which require more caution, and with the bond market inversion thrown on top of it, you generally need to be thinking of something more serious than the typical pullback that happens every few years. If it’s the bottom of the 8th inning after a 10+ year run, the risk/reward starts tilting away for those who are concerned about getting a lot more runs in the final inning or so.
In economic news, personal income in July rose 0.1% from June, below the 0.3% rise expected by economists. Personal spending rose 0.6%, in line with the consensus.
For the week, the S&P 500 gained 2.8% and the NASDAQ 2.7%. For the month the S&P 500 fell 1.8% and the NASDAQ 2.6%.
Here is the 5 day weekly intraday chart of the S&P 500 …via Jill Mislinski.
The week ahead..
We have a 4 day week here with the Labor Day holiday in the U.S. Wall Street should be getting back from Martha’s Vineyard in the coming 5-10 days so volumes should pick up. We come back to ISM Manufacturing Tuesday (last month 51.2, anything below 50 = bad), and the employment data Friday (expectation +155K).
We are a few weeks away from the next Federal Reserve meeting so the drumbeat of “WE MUST GET RATE CUTS” should start to infiltrate all financial media.
This means absolutely nothing in the short term but it’s fun data:
Since World War II, the average move for the S&P for all months is a gain of 0.69%, but the average September move is negative 0.54%. The market has been down 55% of the time in September, making it the worst month of the year, but October, which is up 61% of the time, is a more volatile month with historically steeper losses.
Short term: the S&P 500 had broken out over a “double top” in July. That level has now served as a resistance area for the fourth week in a row! So bulls want to see the S&P 500 slash through it.
The Russell 2000 bounced again off the low of late May/early June. When “the correction” comes the “experts” will point to the Russell 2000 underperformance as a canary in the coal mine. It’s been like that for much of the past 18 months.
The NYSE McClellan Oscillator went back positive late in the week.
Long term: a pullback here on the weekly chart but big picture bulls can only be happy. That said… keep a watch on this long term.
Charts of interest / Big Movers:
J.M. Smucker (SJM) fell 9.2% Tuesday, after the food-products manufacturer reported second-quarter results that fell short of expectations, while lowering its outlook for fiscal 2020.
Autodesk (ADSK) reported second-quarter earnings; the design software company’s stock fell 10.4% Wednesday after its outlook for third-quarter profits and sales fell short of analyst expectations.
Thursday, Best Buy (BBY) tumbled 8% after the retailer reported second-quarter revenue that fell short of analyst expectations, though it beat earnings-per-share forecasts.
Dollar General Corp (DG) added 10.7% Thursday after the discount retailer handily beat analyst estimates for sales and profits in the second quarter, while raising its outlook for the full-year 2019. The long march to the solely Amazon, Walmart, Target, dollar store, and TJ Maxx/Marshalls retail environment continues afoot.
Speaking of… Ulta Beauty (ULTA) swooned 29.6%, after the cosmetics retailer reported disappointing second-quarter results Thursday evening. Who is going to be buying this beauty product stuff in stores when your favorite Instagram influencer is making $78K a post to sell it to you direct!
Friday, Dell (DELL) rose 10.2%. After Thursday’s closing bell, it reported second-quarter results that topped Wall Street estimates.
Silver was making some moves this week!
Have a great week (stay safe those of you down in the Atlantic coast) and we’ll see you back here Sunday!