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 …
July 22, 2019 – A big week lies ahead. 133 S&P 500 companies will report earnings. Congress goes down to the wire (once again) trying to cobble together a 2-year spending authorization bill and an increase to the debt ceiling before going on a six-week hiatus.
Stocks finished lower both on Friday and for all of last week. Early strength, tied to hopes that the Fed would cut the Fed Funds rate by 50 basis points next week, were squashed when the Fed officials who hinted at the possibility, said such a discussion was only theoretical, and didn’t apply to possible …
July 19, 2019 – Earnings season has gotten off to a good start. Early cycle stocks, unlikely winners this late in a bull market, will get a new life if the Fed begins to cut rates in two weeks.
Stocks managed to eke out a small gain after trading lower for much of the session. With the next FOMC meeting less than two weeks away, the yield curve has flattened a bit reflecting investor optimism that lower rates could spur economic growth and a slight increase in the rate of inflation. This week has …
July 17, 1019 – As we await the flood of earnings reports to come over the next few weeks, it may be a good time to stand back and reflect on some of the major trends that have come to dominate our world today. Populism is one. The way politicians react as they hear the cries of their electorate will shape tomorrow’s world.
Stocks gave ground yesterday amid some profit taking. A sharp drop in energy prices nicked the oil sector. Late in the day, President Trump once again spoke of the possible need for further tariffs against the Chinese should trade talks fail to make progress. The markets reacted much less harshly than they have in the …
July 15, 2019 – The 3-month to 10-year yield curve is very close to uninverting. Fears of recession are waning and stocks march to record highs. Valuation remains a concern. A lot will depend on the moods managements display during earnings season which starts today as Citigroup reports.
Stocks continued to rally on Friday and most leading indices again closed at record high levels. With long Treasury bond yields continuing to press higher, the 3-month to 10-year yield curve, which has been inverted for a few months, is very close to uninverting, perhaps even before the Federal Reserve lowers the Fed Funds rate …
July 12, 2019 – Inflation remains missing in action. The world suffers from oversupply, and millennial debt levels are starting to strain spending. The Fed will cut rates at the end of July. The only open question is how much.
Stocks finished mixed yesterday. The Dow Industrials set a new record high crossing the 27000 barrier for the first time led by UnitedHealth Group which jumped sharply after President Trump stepped back from his proposal to ban rebates within the distribution channel for pharmaceuticals within government drug plans. On the flip side, the pharmaceutical stocks …
July 10, 2019 – The big event this week will be Fed Chair Jerome Powell’s testimony to Congress beginning today. Those wanting multiple interest rate cuts this year may be disappointed by Mr. Powell’s approach of being data dependent meeting to meeting. But, based on market action this week, investors appear to have adapted to Mr. Powell’s approach to monetary policy.
Stocks finished mixed yesterday recovering from a weak open. The big economic event this week is Fed Chair Jerome Powell’s testimony before Congress today. While it continues tomorrow all the reaction will happen today. Here’s the conflict. Markets love higher earnings and lower interest rates. That may sound like an oversimplification but it really isn’t. …
July 8, 2019 – Interest rates have been the driver for rising stock prices this year. Fed Chair Jerome Powell’s comments to Congress this week could give clues to the path forward.
After Friday’s strong employment report stocks fell as the likelihood of significant rate cuts later this year were diminished. But the losses were cut by half or more at the end of a very slow trading day. This morning, however, the downward response continues if futures are any indicator. As we have noted numerous times, …
July 5, 2019 – A strong employment report is good for the economy. A July rate cut is still an almost 100% likelihood, but future rate cuts will depend on the course of inflation and markets overseas.
Stocks rose on Wednesday as rates remained weak. But the big story today is the June employment report just released. Let me start by restating one truism that we shouldn’t ignore. The higher the net employment gain, the better it is for our economy. Period. In June, 224,000 net new jobs were created. After a …
July 3, 2019 – Lower rates mean higher P/Es. That continues to propel stock prices higher. While lower rates and a partially inverted yield curve could portend a recession, more likely they reflect a reaction to easier monetary policy worldwide and an effort to stimulate growth.
Stocks staged a mild gain once again yesterday, and the S&P 500 set another all-time high. 10-year Treasury yields fell below 2.0%. This morning they are trading at about 1.96% as yields throughout Europe tumble further into negative territory. Economic data this week continues to show some slowing in the pace of economic growth in …
July 1, 2019 – The good news coming from the Trump/Xi meeting may be less substantive than appears on the surface. While the removal of tariff threats is a relief, starting talks is a lot easier than reaching an agreement. In the meantime, nothing emanating from the summit is likely to change the GDP or earnings outlook.
Stocks rose again on Friday amid optimism that the G-20 meeting wouldn’t produce any unwanted surprises. The bond market was quiet with the 10-year Treasury yield settling around 2.0%. While there were a lot of headlines over the weekend related to the G-20 meeting and President’s Trump brief foray into North Korea, the news was …
June 26, 2019 – Stocks fell and investors accepted the likelihood of no trade deal this weekend. However, this morning, Mnuchin’s comments that we are 90% of the way there was taken encouragingly. The consensus of the moment is that no deal is achieved this weekend but new tariffs are deferred. Any deviation will cause immediate market action next week.
Stocks suffered their biggest decline in months yesterday. While profit taking would have been a good enough explanation, heightened rhetoric between the U.S. and Iran, a statement from a White House spokesperson to the press toning down expectations for the Trump-Xi summit this weekend, poor economic data out of Europe and weak housing data here …
June 24, 2019 – With stocks back to recent highs, risks start to increase and reward potential starts to decrease. Overcapacity worldwide is keeping inflation low. For equity investors, the attendant rise in P/Es is a plus. But central banks are pumping money to try and boost inflation. Cheap available funds often lead to bad decisions and economic bubbles as evidenced by the current frothy IPO market.
Stocks continued to chug along and now the Dow is within shouting distance of setting a new all-time high just as the S&P 500 did last week. But all isn’t perfect. German ten-year bund yields fell below -30 basis points overnight, and 10-year Treasury yields in the U.S. are down to 2.0% after reaching over …
June 21, 2019 – Markets set new highs yesterday as the Fed indicated a rate cut was likely in July. The IPO market continues to boom. This is clearly a risk-on market that is starting to flirt with euphoria. While it is nice to celebrate new highs, creeping euphoria sets off danger signals.
Stocks moved to new record high ground after the Federal Reserve strongly hinted that a rate cut would come at its July FOMC meeting. Markets are pricing in at least one more rate cut before the end of 2019. Normally, the Fed cuts rates to stimulate the economy. That is a likely outcome of a …