The Companies Count

The companies count.  Stocks closed mixed yesterday, reminding investors that individual company risk is a thing.  All eyes are turned east as the G-20 begins in Japan and many are hoping for something big.

MY TWO CENTS

1.  Which way is the exit.  The entertainment event of the month began yesterday in Osaka Japan.  That event would be the G-20 in which Trump will finally meet Xi to discuss trade.  Both are due to meet on Saturday and hopefully forge a path out of this messy trade war that began with tariffs and trade imbalance but quickly escalated into discussions of intellectual property policy and national security.  Though it is not clear how the largest part of the dispute can be resolved, the markets are cautiously betting that something positive will come out of the summit.  Many traders are waking up to news the President shared WHILE YOU SLEPT in which he said we can expect “very big” trade deals with India and Japan.  That can be interpreted as his attempt to preempt a bad response to a no-deal with China.  Meanwhile President XI met with other world leaders WHILE YOU SLEPT and spoke out against “bullying practices” and protectionism.  Any idea who he may be referring to?

2.  More signs on the economy.  Yesterday’s GDP number reflected quarter over quarter economic growth at +3.1% annualized, which is in line with prior estimate but slightly lower than expectations.  Personal Consumption came in under expectations, growing just +0.9, which can be some cause for concern as it makes up the bulk of economic growth.  The Kansas City Fed released its Regional Manufacturing Sector Sentiment yesterday and it came in at 0, down 4 points from last month’s reading.  The index has not been this low since November of 2016, indicating that tariffs are having a negative impact on the region.  The indicator is part of a growing number of regional Fed reports that are registering a slowdown in business activity in recent months.

THE MARKETS

Stocks had a mixed close yesterday as positive sentiment on trade propped up some indexes, while trouble for Boeing held the Dow Jones back.  The Financial sector led the S&P 500 up by +0.38% as traders awaited the results of the Fed’s annual bank stress test, expecting good results.  Traders bets paid off as the Fed passed all but one bank, which prompted many of them to announce increases in dividends and stock buyback programs, WHILE YOU SLEPT.  News that Boeing has identified more software problems with its grounded 737 Max jets caused its shares to fall, pulling the Dow Jones Industrial Average down by -0.4%.  The small cap Russell 2000 rose by +1.9% and the NASDAQ 100 climbed by +0.39%.  Bonds climbed and 10-year treasury yields pulled back by -3 basis points to 2.01%.

WHAT’S NXT

- Personal Income is expected to have risen by +0.3% compared to last month’s +0.5% while Personal Spending is expected to have grown by +0.5% compared to last month’s +0.3% growth.

- The Personal Consumption Expenditures (PCE) Deflator, the Fed’s top gauge for inflation, is expected to be at 1.5% year over year, and the core PCE deflator is expected to be 1.6%, well below the Fed’s 2.0% target.

- The University of Michigan final read on sentiment is expected to come in at 97.1, down slightly from last month.

- San Francisco Fed President Mary Daly will speak.

- Constellation brands will release earnings today.

- In next week’s abridged session we will get manufacturing PMI’s, more reads on durable goods, and the monthly employment situation.

Have a great weekend!

daily chartbook 2019-06-28