Stocks fell on Friday as bad company-specific news hit bellwethers Boeing# and Johnson & Johnson#. In addition, many of tech high flyers that show great promise, but little or no earnings, lost ground as investors increasingly show concern about the valuation of those stocks. Over the past many months you have read of my concerns …
October 18, 2019 – NABAF stands for not as bad as forecasted. That describes the stock behavior so far this earnings season. Results haven’t been great and have been in line with expectations. But fears of even worse results have helped to lift share prices of most of the companies that have already reported.
Stocks were essentially flat yesterday as there were few earnings reports of note. Economic data was also light and what there was confirmed a slow growing economy. Over the past several weeks, the yield curve has both steepened and risen, a sign the bond market predicts a slightly better economic environment moving forward. Recent market …
October 16, 2019 – Good earnings by a handful of banks and healthcare related companies sent stocks higher yesterday. Over the next two weeks, earnings are likely to dominate the headlines. As time marches on, however, the 2020 election will begin to impact investor behavior. The Republican and Democratic agendas taking shape are in stark contrast to each other. Depending on which way polls lean, market volatility could increase.
Earnings season got off with a bang as several major banks, along with Dow components United Healthcare and Johnson & Johnson# reported results that, for the most part, exceeded expectations. That lifted the market by almost 1%. As earnings season continues, day-to-day fluctuations are likely to be somewhat random, reflecting what the major companies reporting …
October 14, 2019 – A weak trade deal is probably better than no deal at all. But the economic impact of whatever deal comes together when all the i’s are dotted and t’s are crossed will not likely move the economic needle. Thus, attention now turns to an earnings season likely to produce rather flat results.
Stocks rallied once again on Friday as trade talks with China reached an endpoint. But they fell a bit at the close as the agreement appeared to be less encompassing than first thought. Actually, despite efforts by the Administration to label the agreement as important and pivotal, it wasn’t much of an agreement at all …
October 11, 2019 – A trade truce of some sort is likely to be announced today but a truce isn’t a treaty. China will buy some agricultural goods and we will suspend future tariffs but the tough issues that started the trade fight largely remain unresolved.
Stocks rallied yesterday, with momentum continuing in the overnight futures market, on reports that a trade truce with China is imminent. Vice-Premier Liu He is expected to meet with President Trump at the White House today. It is unlikely the meeting will end in anything but smiles. But, despite yesterday’s gains and this morning’s likely …
October 9, 2019 – Trade talks between China and the U.S. resume later this week. The stock market has been quite volatile in front of the next level of negotiations. While the media has focused on the near term economic impact on both countries if there is or isn’t a deal, the real issue may be what kind of deal can coexist with China’s long term economic goals.
Stocks turned sharply lower yesterday as noise from Washington suggested trade negotiators for both the U.S. and China were taking hard line stances that mitigated the possibility of an interim deal to calm the tariff wars. Intraday comments from Fed Chair Jerome Powell suggested ongoing monetary accommodation helped lift stocks momentarily, but trade worries ended …
October 7, 2019 – Stocks rallied on Friday after a tepid employment report reinforced the market’s consensus that the Fed would cut rates again in late October. But trade fears and earnings uncertainty should keep stocks within the same trading range they have been in for 18 months.
Stocks rallied again on Friday after a somewhat tepid employment report convinced investors that the Fed would lower rates again at the end of October. I have counseled many times that there is only one way to look at these monthly reports. A big gain in jobs is good. A small gain or a loss …
October 4, 2019 – Today’s solid employment report should put to rest the fears that we are tumbling into recession imminently. But the slowdown in wage growth and flat hourly workers suggest that all isn’t perfect, and investors will have to keep watching the data. The Fed remains likely to cut rates this month and perhaps once more this year.
Stocks staged a rather wobbly recovery yesterday despite another disappointing economic report, this time the ISM non-manufacturing survey of business activity in September. Getting less attention was the report of weekly jobless claims filed which continued to remain close to record lows. Clearly, the bulk of economic reports have suggested slower economic growth. As growth …
October 2, 2019 – A disturbingly weak manufacturing survey rocked markets yesterday and reminded traders of last year’s October-December swoon. But times are different and there remain few signs of a pending recession. However, valuations are full and a 10% correction wouldn’t be inappropriate. We haven’t witnessed one yet this year. Past corrections have reversed quickly, and I would expect the same this time around as long as recession is averted.
After a relatively quiet September, October opened with a thud when a stunningly weak manufacturing survey showed decided weakness last month. While noting that this was a survey and not actual data, and the survey was weaker than expected, in part due to inventory liquidation, when combined with moderating consumer confidence and overall economic slowness, …
September 30, 2019 – It has been a quiet week on the economic front. Impeachment headlines captivate many of us but have little impact on financial markets. The news flow will increase this week as we start to see August data.
Before I begin this morning, let me thank my colleagues who filled in last week and presented their perspective on the economy and stock market. I hope you found their thoughts informative. Stocks fell Friday after it was disclosed that the Trump administration was contemplating restrictions on investment in Chinese businesses. Also last week, President …
September 27, 2019 – The direction of the broad stock market is important for investors’ equity allocations. We look deeper and examine major segments of the stock market, namely value and growth/momentum, and how they have been behaving as the trade war continues to persist.
Today, politics again is center stage. The drumbeat for impeachment is getting louder with a whistleblower complaint detailing White House officials’ efforts to conceal evidence on the Presidents’ conversations with Ukrainian officials. Markets have changed little on this news and, as we have expressed earlier this week, what investors should be focused on is the …
September 25, 2019 – Impeachment inquiry causes near-term concerns. A bigger concern for investors is how the last ten years of low interest rates has created a record amount of debt and distorted asset pricing.
While Jim is away on vacation, other members of the TBA Investment Committee will write the market comment. Today’s comment is from Chris Gildea. Stocks declined and the benchmark 10-year Treasury yield fell amid news that Speaker Pelosi is opening a formal impeachment inquiry of President Trump. Investors are concerned that the already slowing economy …
September 23, 2019
While Jim is away on vacation, other members of the TBA Investment Committee will write the market comment. Today’s comment is from Maris Ogg. In recent weeks Jim’s letter has been focusing on near term events with potentially market moving consequences. Obviously, tariff talks, the Fed meeting and economic data have been front and center. …
September 20, 2019 – Stocks are likely to drift within a narrow range barring any spike in interest rates up or down. Earnings expectations are guarded as long as future tariff policy is opaque. Low level meetings this week in Washington are likely to end in smiles with promises of good faith negotiations to continue, but until there is a real agreement, those smiles won’t translate into new record highs for equities.
Stocks have generally drifted lower this week after two strong weeks of gains that challenged old highs. Bond yields have also traded within a narrow range. The Federal Reserve cut interest rates by 25 basis points, as expected, and suggested that future cuts would be dependent on economic data. While expressing concerns about global weakness, …
September 18, 2019 – The Fed will likely lower interest rates 25-basis points this afternoon. Investors will be watching post-meeting commentary for hints as to the future direction of rates. While investors favor lower rates going forward, too much easy money leads to misallocation of capital.
Stocks were mixed yesterday ahead of today’s FOMC meeting. Saudi Arabia suggested that it will recover from the weekend missile attack fully by the end of September. As a result, oil prices fell sharply, although they still remain above last week’s levels. While there is near unanimity that Iran supplied the missiles, there isn’t complete …
September 16, 2019 – An attack on a key Saudi oil field has cut over 2 million barrels per day of world production and sent oil prices 8%+ higher this morning. The attack by itself is a body shot to world markets but not a knockout blow. The key question is what is next. President Trump is governed by two natural but conflicting instincts; one to hit back harder, and the other to avoid war. Which dominates may dictate how markets react in the days ahead.
Stocks continued their winning streak on Friday, at least from the viewpoint of the Dow Industrials which rose for an eighth straight session. But the S&P 500 and NASDAQ Composite finished lower. Over the weekend, a drone missile attack against Saudi Arabia knocked out over 2 million barrels of oil production instantly. How long it …
September 13, 2019 – With last night’s tweet that an interim trade deal is possible (likely?), the trade/tariff news probably can’t get any better until an actual deal is achieved. That will turn the focus back to earnings. We will have to wait a month for earnings season to begin.
Stocks finish higher yesterday. The Dow Jones Industrials extended their winning streak to 7 straight sessions. But after pushing toward new all-time highs, stocks retreated in the afternoon and finished well off their best levels of the day. A 7-day rally showed signs of exhaustion although futures are higher again in the overnight hours. President …
September 11, 2019 – Stocks have been mixed this week but the major theme is a sudden change in leadership. The haves (led by high flying tech names) are the losers while the year’s losers, namely oil companies and banks, have surged ahead. There is a rational explanation.
Stocks were mixed once again. It has been an odd week, at least compared to prior trading patterns. The leaders this week have been the former bull market laggards, namely energy, banks and industrials. Meanwhile, the former tech darlings, including many prominent IPO names, saw significant profit taking. There must be a message in there …
September 9, 2019 – This looks to be a quiet week with very little on either the earnings or economic calendar of note. Elliott Management’s activist position in AT&T, a serial underperformer, will grab headlines today. Whether Elliott has the right formula for success or not, given AT&T’s track record, Elliott deserves to be listened to at a minimum.
Stocks moved sideways in listless trading on Friday. Volatility took a distinct move down after an employment report that was generally within the range of expectations. This week will be a quiet one for both corporate and economic news. Earnings season is still more than a month away. September is generally the most important month …
September 6, 2019 – It’s nice that China and the U.S. are planning talks to resolve the trade dispute but we have gone down this road before. Given the timing, in front of our elections and coinciding with tensions in Hong Kong, there are reasons for some optimism. But, at best, we will see an interim first step. At worst, distrust and tempers will abort any deal. The key dates are in mid-November when Trump and Xi are expected to meet at the APEC summit.
Stocks continued a sharp 3-day rally as prospects for renewed trade talks with China continue to improve. Bonds fell and interest rates rose, slowing the recent tailspin in rates. It is always nice to see a sharp rally given that most of us are long-only equity investors. But we have ridden this roller coaster too …
September 4, 2019 – Stocks fell yesterday as new tariffs rolled on, BREXIT problems rose, and tensions in Hong Kong increased. But overnight, British Parliament voted against a hard BREXIT and new actions by Hong Kong’s government eased tensions. Next up is the FOMC meeting. Interest rates will almost certainly be cut, but it is dubious what economic impact those cuts will make.
Stocks fell about 1% amid a confluence of negative news. The latest wave of tariffs on Chinese imports went into effect on Sunday. Britain’s new government is intent on forcing a Brexit showdown by October 31 and could force new elections that would elevate uncertainty. While a Parliamentary vote last night reduced the odds of …
August 30, 2019 – Stocks are rallying based on hopes of renewed trade talks. But the big event this weekend is the expected imposition of increased tariffs. If they go into effect as planned, look for the rally to end next week. But if they are deferred or reduced, the rally could continue and challenge recent record highs.
Stocks continued a strong rally as optimism grew that trade talks might soon begin to solve the U.S./China tariff war. Yet even with two very strong sessions and signs the rally will continue this morning, stocks remain locked in a rather narrow trading range. As noted previously, the decision to institute the next round of …
August 28, 2019 – Two events will dominate the stock market over the next three weeks. The first is the imposition of additional tariffs on Chinese goods this weekend. If it happens as planned, that would be bad for equities. The second is the FOMC meeting concluding 9/18. If rates are cut 50-basis points, that would ignite a rally. Anything less will probably not be received well.
Stocks fell once again following the path of interest rates downward as recession fears rose and policy confusion continued to increase. Energy, bank, industrials and consumer discretionary stocks were particularly weak. It was clearly a risk-off day for investors. This morning the trend continues as interest rates continue to fall, inversions widen, and stock futures …
August 26, 2019 – Trade and tariff threats continue to jerk markets in all directions. In the end, however, there are few signs of any substantive deal close at hand. While China may suffer more direct pain than we do in a tariff war, history shows that American acceptance for pain isn’t long lasting. With an election coming a little over a year from now, Mr. Trump will need to balance how much economic turmoil can be endured without jeopardizing his chances for reelection.
Stocks fell sharply on Friday as the trade war escalated. At the start of the trading session, all eyes were on Jackson Hole, Wyoming awaiting a speech from Federal Reserve Chairman Jerome Powell that might give guidance to the future path of interest rates. Market reaction to his speech, which continued to suggest that the …
August 23, 2019 – Jerome Powell’s speech this morning will be market moving. Unless he is unexpectedly dovish, it may unnerve investors. But rational behavior by the Fed will overcome the urge by traders for perpetually lower rates that are unlikely to foster greater growth.
Stocks finished mixed yesterday, a day when the yield curve briefly inverted once again. More about that in a moment. Traders were anxiously awaiting Fed Chair Jerome Powell’s speech this morning that may help to clarify the Fed’s near term and long term strategy. Yesterday’s yield curve inversion was very different than the one last …
August 21, 2019 – Wouldn’t it be nice if we got the same message from the White House two days in a row? Tax cuts may be good for elections but not what the economy needs. What the economy needs is patience to let rising demand chew up excess supply in an orderly way. In the meantime, a calmer bond market improves the backdrop for stocks.
Stocks gave back a bit of the gains achieved late last week as interest rates began to slip again. There was no significant economic news. Dow component Home Depot# reported solid results and the stock rose smartly. Without Home Depot, the market’s losses would have looked quite a bit worse. This morning, however, continued good …
August 19, 2019 – With yield spreads starting to widen once again, stocks are in rally mode. However, with earnings growth miniscule, and the decline in rates over, at least for the moment, there isn’t any overwhelmingly strong tailwind for stocks. All eyes this week will be on Friday’s speech by Jerome Powell hinting at the future direction of Fed policy.
Stocks posted solid gains on Friday for the second day in a row as the brief 2-10-year Treasury yield inversion that lasted only a couple of hours faded and yields posted tentative gains along the curve. Over the weekend, China preannounced a new lending structure that is a de facto cut in rates. That has …
August 16, 2019 – Bonds are in a bubble. There is no rational explanation for rates this far below the rate of inflation or for negative yields in Europe. But when the bubble bursts is an open question. Until then, as bond prices rise, stocks are likely to fall further.
Stocks staged a rather tentative rally yesterday after a 3% decline Wednesday when the 2-10-year Treasury yield curve briefly inverted raising fears of a recession within the next two years. The bond market has staged a huge rally this year with 10-year Treasury yields falling from 3.25% to just over 1.5%. Just this month, yields …
August 14, 2019 – The yield curve has inverted raising fears of a pending recession. Clearly, current momentum is to the downside. Inflation is also fading leading to fear of deflation. All this calls for strong monetary and fiscal policy actions around the world. One ray of sunshine is the spike in mortgage refinancing applications this week.
Volatility continues. The market fell about 1.5% on Monday amid heightened trade fears and concerns about the growing demonstrations in Hong Kong. Then yesterday morning, President Trump said he would defer some tariffs on consumer goods imported from China to December 1 to avoid price increases before Christmas. Stocks regained Monday’s losses. This morning the …
August 12, 2019 – Tensions in Hong Kong add risk to world economic growth should they lead to violent confrontation. They aren’t at that level yet, but today’s sit-in at Hong Kong’s airport leads to a situation that the government won’t tolerate forever. Heightened fears are causing stocks to open lower today. Hong Kong is likely to remain a market focus in the days ahead.
Stocks sold off in the last half hour on Friday bringing a very volatile week to a close. For the week, the major averages were all down, but gains mid-week muted the overall impact with losses generally totaling less than 1%. This morning, demonstrators in Hong Kong have massed inside the airport effectively shutting it …
August 9, 2019 – Growth continues but downside risks are heightened by trade rhetoric and by the events unfolding in Hong Kong.
For the second straight day, stocks advanced by more than 1% more than wiping out the losses from Monday’s sharp decline. With no new news regarding tariffs, trade, currency wars or the Fed, investors calmed down and resumed buying stocks. With bonds, even long term bonds, generally yielding 2% or less, even income investors were …
August 7, 2019 – Tariff and currency wars are causing investors to lower growth forecasts. But the fall in interest rates will raise P/E ratios. As markets adjust, volatility will remain elevated.
It has been a roller coaster week so far in the market with the Dow falling over 700 points on Monday before rallying 300 points yesterday. The catalysts for this week’s volatility have been strong moves in currency markets set off by President Trump’s threat to impose 10% tariffs on $300 billion of Chinese goods …
August 5, 2019 – The yuan has fallen overnight to its lowest level against the dollar in over a decade. While that will lessen the impact to U.S. consumers from promised tariffs, it’s consequences on other financial markets is hurtful. Currency markets, left alone, balance out the strengths and weaknesses of trading partners. Tariffs and currency interventions create havoc. Markets are reacting negatively this morning for the right reasons.
Stocks finished lower on Friday as traders continue to fret over President Trump’s threat to increase tariffs on an additional $300 billion of Chinese imports by 10%. Overnight, the value of the Chinese yuan fell to a ratio of over 7 to the dollar for the first time in over a decade. As a result, …
August 2, 2019 – The Fed lowered rates, chasing bad central bank policy in Europe and Japan. Lower rates may help the stock market over the near term, but it won’t solve the key economic issue of overcapacity. The consumer was robust before the rate cut and inflation is creeping up toward 2%. Trump’s tariff threat is simply throwing a fly into the ointment.
The Fed lowered interest rates 25-basis points on Wednesday as advertised. In the subsequent press conference, Jerome Powell confused everyone about the FOMC’s future course and stocks fell by over 1%. Then yesterday, as the yield on 10-year Treasuries fell to 1.95%, stocks started to take off once again until President Trump threatened more tariffs …
July 31, 2019 – The consumer is alive and well. Whatever might be ailing the economy, it isn’t a lack of consumer demand. In the stock market, look at the success of consumer staples and restaurant stocks for example. There are few signs that momentum is about to switch.
Stocks were mixed yesterday, in line with a mixed set of earnings reports. After the close, Apple# reported slightly better than expected results, and the stock moved about 4% higher. That alone will lift major averages this morning. Without the Apple impact, stocks look to trade fairly flat going into today’s conclusion of a two-day …
July 29, 2019 – About 150 S&P 500 companies will report earnings this week but the most important event will be the 2-day FOMC meeting concluding Wednesday afternoon. A 25-basis point cut is expected with post-meeting commentary likely to suggest a Fed receptive to the possible need for further cuts to raise inflation. Any deviation from market expectations could give markets a lift or a jolt.
Stocks rose slightly Friday in very light mid-summer trading. The bond market was quiet as well. Going into this week’s FOMC meeting, the yield curve is very flat with a slight inversion dip in the early years and a slight rising trend amid long-term maturities. This week, approximately 150 S&P 500 component companies will report …
July 26, 2019 – Earnings season is winding down and the focus will move to next week’s FOMC meeting. Will a 25-basis point cut in rates be enough? Stay tuned. The bond market will tell us rather quickly.
Stocks fell amid a few rather weak earnings reports and commentary from the ECB that was very dovish and suggested that steps taken by the central bank could push rates further into negative territory. One could assume the ECB move would push the Fed to be even more aggressive with monetary policy although there are …
July 24, 2019 – Justice is going to investigate possible antitrust violations by Facebook, Alphabet and Amazon. The investigation is just beginning but it is unlikely to end with a governmental smile. Elsewhere, economic doldrums are caused by ongoing world oversupply of everything but labor. The solution is time. Central bank easing will help but central banks don’t, by themselves, increase demand.
Stocks rose yesterday amid a few good earnings reports. However, after the close, the Justice Department announced that it would begin an investigation into antitrust activity at the big social media, search and Internet retailing companies. Put Facebook#, Alphabet# and Amazon at the top of that list. At the moment, this is an announcement of …