Wall St. rallies on hopes of U.S. rate cut, trade progress

It was another big 3-digit day with the Dow zooming up all day long to close 263 up with once again bad news (a way under forecast payrolls report) taken as good news (the Fed cutting rates in July.)  There is a downside to this as today’s expert points out, “We’re addicted to low rates” which is and always has compromised our ability to achieve real growth. Investors don’t really seem to care right now, just hoping for the lower rate and a resolution to the Mexican stand-off on tariffs and trade, which is now considered to have “a good chance” of happening. Both tech stocks and the chip index benefited. Volume was a little below average at about 6.5 billion. 

Wall Street rises with hopes of Mexican tariffs delay

For the third straight day there was a triple-digit gain in the Dow due to unconfirmed reports that Trump may delay the Mexican tariffs, providing more hope for a quick resolution. There was also a confirmed report that Mexico would deploy 6,000 troops to the southern border with Guatemala as part of a possible immigration deal.  But long-term clarity about trade remains wanting and there was some fence-sitting today awaiting Friday’s U.S. jobs report accounting for the below average volume of 6.7 billion.  Consensus remains that “trade agreements need to be reached in order to push economic growth higher.” 

Wall St. climbs as weak private jobs data boost rate cut hopes

It was another big 3-digit rally today with the Dow bolting up another 207 points whereas, as has happened before, bad news gets taken as good news.  Today’s bad news was a poor employment report bolstering the case for a weakening job market and overall economy.  But, after all, a weakening economy also bolsters the case for the Fed to cut rates, which is something investors very much want right now. So the low new jobs number caused a big rally which was further bolstered by more hopes that a deal will be reached with Mexico.  But a rate cut is the big thing right now and the market is betting on one for July.  Volume was close to the 4-week average at just a hair over 7 billion. 

Wall Street soars on U.S. rate cut hopes

Well, the techies proved to be right today.  They’ve said for the last couple of sessions that the Nasdaq had reached a critical resistance level and was due for a comeback despite having flirted 0.2% below correction level yesterday.  Today everything came back big guns with the Dow soaring over 500 and the Nasdaq nearly 200 all on the “little bit of a spark” from St. Louis Fed chief James Bullard that a rate cut may be coming. Not that such an event will make all things right again as “we’re going to continue seeing tariffs take us back and forth” but it’s exactly what the market’s been looking for. There was also a boost of hope with Republicans potentially challenging the new Mexican tariffs and the Mexican president expressing hope that a deal could be reached.  T-bill rates also rose boosting the S&P bank index over 3.6 percent but there was no statement as to whether the yield curve remains inverted. Volume was not as vigorous as yesterday’s tumult but, at over 7.5 billion shares traded, it was far from anemic. 

Nasdaq confirms correction as Facebook, Alphabet, Amazon drag

The Nasdaq entered correction territory today by 0.2% and the Dow almost had as bad a day falling 135 points before recovering in the final minutes to break even. Besides the China-sensitive internet heavies Facebook and Alphabet having very bad days, another trigger was Trump’s decision to revoke India’s status as a developing country and thus ending preferential trade treatment for them.  And the inverted yield curve went into its fourth consecutive day and wider than ever.  Given that the Nasdaq has now broken an important resistance level, the expectation is that it should now start to climb.  So that’s where all eyes will be tomorrow for, if it breaks even lower, the index is expected to fall.  There was a scurry of activity today to rush into the safety of T-bills which is why the yield curve continues to invert and was reflected in the very high volume of over 8.3 billion. 

Succinct Summations of Week’s Events 5.31.19 (plus The Path Of Lease Resistance Looks To Be...)

It's time for the weekly summation, the positive being that despite all the tumult in May, the economy overall remains resilient which is reflected in the higher consumer confidence numbers.  But the negatives were quite daunting from the new tariffs on Mexico which even the gurus on Wall Street think is a bad idea, to the retaliation China is planning against the U.S. in the trade war to the effects all of the above had on the market this past week. 

“We could have a heck of a nice second half of the year.”

The following email was sent to me yesterday from the AAII promoting the big investor conference in Orlando in late October.  But after the drubbing the market has taken in the month of May, I thought everyone might appreciate hearing a voice of optimism coming from the guru who will be the keynote speaker.  It might also be worth checking out his long running missive "Economic and Market Perspective" which Money Magazine has placed in their "101 Things Every Investor Should Know."  Enjoy the rest of your weekend.