Flash Point!

Flash Point!   Stocks slumped yesterday as tensions about trade ran high and energy continued to slip.  Stocks could not muster the positive spirits for a second day in a row as traders cross their fingers for a trade deal and a Fed move.

MY TWO CENTS

1.  Another data point on inflation.  Yesterday’s CPI release supports the claim that inflation is under control.  The headline year over year CPI came in at +1.8% compared to last month’s +2.0%.  First, the number is below the +2% target and second, prices are still going up, just at a slow pace.  Investors are smart to wonder if the soft patch is enough to cause the Fed to cut rates.  Still, the slightly weaker than expected number certainly makes it easier for the Fed to consider a cut.  The fact that the stock markets did not rally on yesterday’s release suggests that a rate cut is already factored into the markets.

2.  Are we making any progress with China? It certainly doesn’t appear that way if you track the proceedings via public statements by both sides.  Yesterday, President Trump said that “we had a deal with China and unless they go back to that deal, I have no interest.”  The statement weighed heavy on the markets and semiconductor stocks slipped by -2.25% as old fears of a drawn out trade dispute crept back into the industry group.  WHILE YOU SLEPT, a Chinese Commerce minister said that “China will fight to the end” if the US insists on continued escalation in the dispute.

MARKETS

Stocks slipped yesterday as investors retrained their focus on the impacts of a trade war.  Crude oil slipped by -4.0% in yesterday’s session on news that US crude inventories grew by +2.2 million barrels when traders were expecting a draw down of -.73 million.  Additionally investors are factoring in reduced demand by China resulting from the trade war.  Energy was the worst performing sector yesterday but crude jumped in overnight trade, WHILE YOU SLEPT, with reports that two oil tankers burning in the Persian Gulf surfaced.  Stocks traded off yesterday with the S&P 500 falling by -0.2%, the Dow Jones Industrial Average slipping by -0.17%, the Russell 2000 climbing by +0.05%, and the NASDAQ 100 sinking by -0.55%.  Bonds climbed with the 10-year treasury yield slipping by 2 basis points to 2.12%.

WHAT’S NXT

- Weekly initial jobless claims are expected to be 215k, down slightly from last week’s 218k.

- The Treasury will sell $16 billion 30-year notes.

- Broadcom will deliver earnings after the bell and investors await final pricing for the Chewy IPO which is expected to start trading tomorrow.

- Larry Kudlow, Director of US National Economic Council will speak today.

daily chartbook 2019-06-13