Alphabet, Starbucks drive Wall Street to record high (plus Succinct Summation of the Week’s Events for 7.26.19)

With the government announcing that Q2 GDP was higher than forecast plus Alphabet and Starbucks turning in great earnings reports, the Dow jumped up 51 points and the S&P and Nasdaq reached new record highs. The GDP report was exactly what the market wanted.  As today’s expert stated, “not so soft that the economy is slowing down precipitously and not so strong that the Fed is going to reverse course,” thereby solidying expectations that there will be a rate cut. This is a reversal of yesterday’s sentiment when the ECB decided the economy was strong enough to put off a rate cut.  Today 75% of 218 S&P companies have beaten estimates and the better news is that next week we’re heading into more trade negotiations in Shanghai which will be watched closely. Volume was a little below average at 6.1 billion. 

Wall Street gives up record high following weak results, Draghi

A flurry of downbeat Q2 reports plus the ECB painting a suddenly rosier picture of the economy and deciding on no rate cuts at this time sent chills through the market plunging all the indexes down, the Dow 128 points.  Ford, Xilinx, Facebook, and Align Tech all turned in disappointing Q2 bringing the percentage of 185 S&P companies beating estimates down to 75% from 77% yesterday and 80% Tuesday.  It is the expectations of a Fed rate cut to counter the protracted trade war that currently has all eyes and that has boosted all the indexes this month.  Volume was a little above average at 6.6 billion. 

Surging chip stocks propel S&P 500 and Nasdaq to records

The Nasdaq and S&P hit new records while the Dow dropped 79.  The tech stocks got a boost when TI said that the decline in global chip demand will not be as bad as thought. So chip index investors are hoping for a better second half of the year.  77% of 138 S&P companies have reported beating estimates. That’s a slide of just 3% from yesterday but shockingly now the Q2 forecast has gone in one day from a +1.0% to a -0.1%.  Could this be a misprint?  For the year, the S&P is up 20%, the Nasdaq 25% so a 1.1% drop in Q2 earnings doesn’t make sense in just one day.  Volume is in line with the 4-week average at 6.2 billion. 

Earnings and trade optimism push Wall St. toward record high

With 80% of 104 S&P companies topping Q2 expectations, both the S&P and Nasdaq neared record highs again lifting the Dow all day long to close 177 up.  The added good news was U.S. Trade Rep Robert Lighthizer traveling to China next week for more trade talks.  Even better was a deal reached with Congress for an extension on the debt limit and spending caps.  And with expectations that the Fed will cut rates next week, there was nothing but forward momentum today on volume of 6 billion shares. 

S&P 500 climbs toward record high, earnings in focus

It was another up and down day with the Dow at one point being up 70 and at another down more than 150 but closing at just about a wash.  Everyone is sitting on the fence in anticipation of the FAANG reports due later this week, all of which are expected to be positive.  This expectation was enough to put the S&P at another record high and the overall chip index up 2 percent.  In fact all the FAANG stocks rose before their reporting because of this optimism.  Other optimism went overseas with investors giving at least a 50/50 chance of the ECB doing a ½ point rate cut and hoping that will trigger the Fed to make the same decision.  30% of the S&P is reporting this week.  Microsoft and IBM have already turned in reports that beat forecasts.  As Q2 gets underway, volume remains low at 5.1 billion. 

Succinct Summation of Week’s Events 7.19.19 (plus Netflix Numbers)

Below is the usual weekly summation with the positives being jobless claims coming in 8k below predictions and the Empire Mfg Survey jumping big from a minus 8.6 to a plus 4.3, literally tripled. The negatives are same old, namely that job openings came in a tad under forecast and racial politics messing up the markets.  The bonus this week is today's post on The Big Picture, a very good analysis of the Netflix pricing strategies.  But don't let the title fool you.  This is really about all the FAANG stocks and that makes it a very worthwhile read.  Glad the really hot weather has passed and we all survived this torrid weekend. 

E-Commerce Stocks to Buy After the Trade War

From one of this week's editions of U.S. News Invested, here are their latest stock recommendations -- hot China stocks to buy after the trade war ends.  Worth a look, I thought it was very topical to discuss various investment opportunities from this trade war that is widely seen as hurting investment opportunities   ... 

Wall Street falls as Fed signals smaller rate cut

Yesterday, there was all kinds of confidence that there would be a 50-basis-point rate cut this month.  Today the Wall Street Journal reported that they had info that the Fed would be issuing just a ¼ point cut this time around and that sent the markets tumbling again after initially gaining over a hundred points.  Yesterday the odds-makers put a ½ point cut at 71%, today only 22%.  The good news is that, despite this, the Fed is still sending clear signals that there will probably be more rate cuts later.  The better news is that there were a lot of good Q2 reports today.  The best news is that the Q2 earnings forecast today leaped to a full 1 percent, quite a jump from yesterday at 0.6 and last week at a minus 0.4 percent.  Probably until the actual Fed meeting, volume remains below average at just under 6.3 billion. 

Wall Street rises as Fed's Williams cements rate-cut expectations

It was another wash though it started in the red with the Dow down 150 by noon.  But then John Williams of the NY Fed issued a statement supporting a rate cut and that cemented investor expectations recouping all the day’s losses by close.  It also helped that five major companies beat their Q2 profit forecasts.  It was enough to hike the Q2 S&P forecast 50% in one day to now 0.6%, not bad considering it was -0.4 a week ago.  Low expectations are leading to better than expected earnings.  6.7 billion shares traded which is now in line with the 4-week average, though that average has been depressed while the market has awaited more Q2.

Wall St. falls as CSX results signal damage from trade tensions

It took just one more bad Q2 report, this time from giant rail company CSX, and its confirmation that the trade war was indeed hurting profits, to send everyone to the exits and the Dow down triple digits.  CSX, Union Pacific, and Berkshire Hathaway (owns BNSF Railway) dragged the S&P industrials down 2.2 percent.  So trade concerns are creating uncertainty, which the market doesn’t want, but the flip side is that they’re also creating rate cut justifications, which the market does want.  The good news is that the Q2 forecast which just a week ago was a -0.4% was today reversed to a +0.4% from a year ago. Volume remains below average at 6.1 billion. 

Wall Street slips as bank earnings, Trump trade comments weigh

Pretty much a repeat of yesterday except ending nearly flat with a modest loss instead of a modest gain, the Dow sank 23 points as more banks reported in with a dampening of net interest income, same as Citi did yesterday.  Like Citi, JP Morgan erased its losses to end the session 1% higher but Wells Fargo lost 3 percent.  It is expected that net interest margins will continue to compress since the yield curve will remain flat, hurting profits.  It also dampened the index today when Trump stated that resolution with China was a long way off.  In better news, retail sales were strong pointing to more consumer spending.  Volume remains below average at just under 6.2 billion. 

S&P ends near flat as Citigroup results sink banks; Nasdaq hits new high

Citigroup today kicked off Q2 with a mixed report showing profits above forecast but a fall in net interest margin.  Though the giant bank recovered by the end of the session, the bad news about the net interest margin was enough to send the entire S&P bank index down 1 percent.  Tech and health care helped offset the losses from the financial sector so in the end the Dow was close to a wash, up 27 points.  Though some analysts expect the first quarterly drop in profits in three years, others think earnings will be generally positive.  If recent quarters are any indication, the latter should be the case.  But it’s a mute environment until more results come in.  Given the mute environment, volume was considerably below average at 5.4 billion. 

Succinct Summation of Week’s Events, July 12, 2019 (plus The Thrill of Uncertainty)

Below is the usual weekly summary, this time the positives being that, as of Friday's close, the markets are at new record highs with the Dow topping 27,000 and, after flirting with it for some time, the S&P finally closing above the all-important 3,000 threshold which has been considered a signal to investors that the future remains bullish.  And once again there is a mixed message on jobs as the issue fell into both the debit and credit columns with jobless claims falling at the same time that job openings also fell but, to be fair, both fell by very small amounts. 

The Common Traits of Billionaire Investors

For your weekend reading, I present a new offering in the world of investment newsletters -- and this one is free (except maybe you have to subscribe to U.S. News & World Report to get it; I don't know since I've been a lifelong subscriber to U.S. News.)  But it's worth a try and seems to offer some very good advice.  This sample from July 2nd is a look at "The Common Traits of Billionaire Investors."  If it looks good to you, go to the magazine's web site and see if you can get it.  (If not, I will add that U.S. News is one of the very best news weeklies out there and would be well worth subscribing to anyway.)  Enjoy the rest of this very pleasant weekend, and let's be thankful we're not in Louisiana!

Wall St. notches all-time highs on lingering rate-cut optimism

Today the market decided that Chairman Powell’s remarks before the Congress were “far more directive in terms of what the Fed is going to do” than before and between that and the S&P closing above 3,000 for the first time sent the Dow up a big 243 points.  Producer prices also showed that inflation was well under control so the focus is now shifting to Q2 reporting which begins with the big banks next week.  On Monday they had forecast a 0.1% dip in earnings, by yesterday 0.2 percent.  Today that has doubled again to 0.4% but if the last two quarters are any indication, the actual number will end up being positive rather than negative. Volume is still below average at just under 5.7 billion. 

S&P 500, Dow climb as health insurers, financials gain

All it took today was for Trump to scrap the plan to reduce drug prices and the market went soaring to new record highs, the Dow climbing 227 points and topping 27,000 for the first time.  The S&P also topped the all important benchmark of 3,000 for a while today but was not able to sustain it, something that is being taken as a big negative, a sign of investor cautiousness.  But was it really the scrapped plan that did it since, though some health insurers surged on the news, many of the drug makers dropped.  So who’s to say what triggered today’s 3-digit rally? Comments today from Chairman Powell continued to support a coming rate cut when he affirmed that the economy was still under threat by tamer factory output, tamer inflation and the trade war.  Volume continued below average at just over 6.1 billion. 

Wall Street touches new highs after comments by Fed's Powell

They were hoping that Fed Chairman Powell would NOT say that a rate cut was now off the table because of the strong June jobs report last week.  So when he used his standard phrase today to “act as appropriate,” there was a big sigh of relief on Wall Street that caused a big 200 point rally right out the gate.  It bolted the forecast for a half point rate cut from 8% on Monday to 26% today.  Of course the forecast for a ¼ point cut remains at near 100%.  The S&P reached another new record high shortly after open but all the indexes fell off some during the session for the S&P to close at 2993 and the Dow up 76 points.  Powell pointing to “broad” global weakness and the fallout from the trade war added more reassurance that cuts were on the way.  But as today’s expert so adroitly pointed out, “You’re running out of investors willing to put too much new money in without some indication that earnings will remain strong.”  Yes, earning still rule and the fun begins next week.  Pending all that, volume remains below average at just under 6.5 billion.  

S&P 500 ekes out gain though profit worries weigh

It was more or less a repeat of yesterday with the Dow dropping sharply right out the gate only to recover throughout and at least this time closing nearly even.  Besides bracing for the Fed news coming on Wednesday and hoping then for clarity on whether the rate cut will be 25-basis-points or the more desired 50, there is the repeated conviction just like Q1 that earnings will drop in Q2 when reporting starts next week.  In fact, in a single day the forecast has gone from a 0.1% drop to 0.2 percent. That’s not much but evidently enough to fray nerves and spark selling.  The German giant BASF is actually forecasting a 30% drop in profits, blamed entirely on the trade frictions with China.  As everyone awaits better news, volume remains below average at 5.7 billion. 

Wall St. drops as Apple falls, Fed eyed

It was a straight shot down right out the gate with the Dow losing almost 200 points after Apple was downgraded from “neutral” to “sell” by Rosenblatt Securities, but recovering throughout the day to close down 115.  With a strong jobs report on Friday now tempering hopes for a sharp rate cut, confusion reigns.  In one day the odds makers have reduced the chances for a ½% rate cut from 20% to 8%, though the chances for a ¼% rate cut have increased from 80% to 92%.  Investors will soon be focused on Q2 which begins next week with expectations of a 1/10% dip in profits from a year ago.  For the first day back from the long holiday week, volume was considerably below average at 5.7 billion. 

Succinct Summation of Week’s Events 7.5.19 (plus Looking For A Way To Identify The Next Big Bear?)

The weekly summation is below with new jobs for the June payroll report coming in at 224,000 -- way above the 165,000 that was forecast.  On the flip side, Wednesday's ADP employment report showed the opposite -- an increase of only 102,000 new jobs vs the expected 140K.  On Friday, the market decided to believe the payroll report.  But the best news is that the markets continue to show resilience, recovering from earlier sell offs and setting new record highs.  The bonus this Sunday is a good read from Heritage Capital Research on a topic that should be of interest to everyone who has something to lose -- the possibility of a coming bear market and how to recognize the signs when it happens.  Hope everyone enjoyed this delightful weekend. 

Learning From the Mistakes Made by Legendary Investors

I can't remember whether I ever ran this article in May or not.  If not, this holiday weekend seemed a good time to visit this topic of learning from the mistakes of the masters.  If so, the holiday weekend seemed a like good to revisit this very important topic ranked as #14 of the Top 40 AAII articles of all time.  We'll finally get a break from the heat tomorrow so enjoy the rest of Independence Day weekend! 

Wall Street dips as rate cut expectations relax

The entire day was in the red, at mid-morning more than 200 points down, all because the June payrolls report came in so much better than expected – 224,000 new jobs when only 160,000 were expected.  Why would this cause a big sell off?  It’s because anything that points to a solid economy weakens the case for a rate cut and a rate cut is what everyone’s banking on right now.  But it’s worse than that because it’s a foregone conclusion that a ¼ point cut is coming July 30^th.  But lately the hopes have been for a ½ point cut and today’s positive data more or less squashed that dream.  At any rate it’s a holiday-short week so trading is light meaning a little bit of selling creates a bigger than ordinary drop.  And trading was light, 5 billion shares when the 4-week average is 6.8 billion.  Wait until Monday when trading gets back to normal. 

What Does It Mean to Be a Patriot?

I searched high and low for some appropriate 4th of July reading and I think I came close with this two year old article posted today on The Big Picture web site from Behavioral Scientist magazine that examines in depth the meaning of patriotism with some rather surprising both liberal and conservative conclusions.  This has always been a country with a great deal of political and cultural division but the great thing we celebrate today is that, for 243 years, whenever there's been a genuinely dangerous crisis, we have always united to solve the problem.  This author questions whether we, as a people, are still capable of doing that. I hope he's wrong.  Enjoy your holiday weekend. And let's see what happens with the jobs report tomorrow.  Wednesday's employment report was not encouraging. Let's see if things follow suit on Friday. 

Major averages close at record highs on dovish Fed hopes

On very low holiday volume of just over 4 billion shares, the Dow was on a straight-up track today to close 179 points in the black as expectations intensify for a rate cut July 30^th.  The trigger today was a series of reports pointing to a slowing economy and, with the ECB taking a dovish course and bond yields hitting fresh lows, it is now considered a virtual certainty that ¼% rate cut is coming, and it might even be ½%.  Today’s ADP employment report coming in well below forecasts at just 102,000 new jobs added more fuel the rate cut frenzy.  But Friday’s jobs report will tell the true tale.  Happy 4^th of July!

Stocks edge higher as trade enthusiasm wanes

After spending most of the session in the red due to waning enthusiasm over trade, the Dow ended the session in the final minutes with a 69 point push up.  But the dominant sentiment of the day was wait-and-see:  over trade, the Fed, and earnings, and all of this will be waiting for at least two weeks.  So expect some sideways action.  Even though Cleveland Fed Prez stated that a rate cut may not be the right move right now, there is still the strong expectation that there will be a rate cut this month.  Next up is Friday’s jobs report with 160,000 new jobs expected after May’s sharp slowdown.  Volume was below average at just under 6.4 billion. 

Trade hopes lift S&P to record as tech leads

Today’s Dow was up almost 300 points at open but then there was bound to be some sort of rally after the events of this past weekend. These early gains were quickly lost when investors began  contemplating the Fed again due to the flip side that the lessening of trade uncertainty decreased the likelihood of a rate cut in July.  But the index did manage to finish 117 up with the S&P closing at yet another record high.  Also bolstering the market was news that manufacturing was cooling which is bad news taken as good since it supports a rate cut.  The smart money is still expecting a rate cut at the end of this month. Volume was a very healthy 7 billion shares.