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Equities Face Some Volatility – Weekly Update for August 19, 2019

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The Week on Wall Street

U.S. stock indices saw significant ups and downs last week, with traders looking for economic cues from Treasury yields and also developments in the tariff fight between the U.S. and China.

The S&P 500 lost 1.03% on the week; the Dow Jones Industrial Average and Nasdaq Composite respectively declined 1.53% and 0.79%. Overseas shares also retreated: the MSCI EAFE index lost 2.34%.

Attention on the Bond Market

Wednesday, the yield of the 2-year Treasury bond briefly exceeded that of the 10-year Treasury bond. When this circumstance occurs, it signals that institutional investors are less confident about the near-term economy. That view is not uniform. Asked whether the U.S. was on the verge of an economic slowdown, former Federal Reserve Chair Janet Yellen told Fox Business “the answer is most likely no,” noting that the economy “has enough strength” to avoid one.

The demand for bonds has definitely pushed prices for 10-year and 30-year Treasuries higher, and their yields are now lower (bond yields usually fall as bond prices rise). The 30-year Treasury yield hit a historic low last week.

Some China Tariffs Postponed

Last week, the Office of the U.S. Trade Representative announced that about half the Chinese imports slated to be taxed with 10% tariffs starting September 1 would be exempt from such taxes until December 15.

The White House said that the reprieve was made with the upcoming holiday shopping season in mind, so that tariffs might have less impact on both retailers and consumers.

Final Thought

Lower interest rates on bonds are now influencing mortgages. According to mortgage reseller Freddie Mac, the average interest rate on a conventional 30-year home loan was just 3.6% last week. That compares to 3.81% roughly a month ago (July 18).

30-year and 15-year fixed rate mortgages are conventional home loans generally featuring a limit of $484,350 ($726,525 in high-cost areas) that meet the lending requirements of Fannie Mae and Freddie Mac, but they are not mortgages guaranteed or insured by any government agency. Private mortgage insurance, or PMI, is required for any conventional loan with less than a 20% down payment.

THE WEEK AHEAD: KEY ECONOMIC DATA

Wednesday: The minutes of the July Federal Reserve meeting and the latest existing home sales data from the National Association of Realtors.

Friday: Federal Reserve Chairman Jerome Powell delivers a speech at the Fed’s annual Jackson Hole economic conference on monetary policy, and July new home sales numbers arrive from the Census Bureau.

Source: Econoday / MarketWatch Calendar, August 16, 2019

The Econoday and MarketWatch economic calendars list upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.

THE WEEK AHEAD: COMPANIES REPORTING EARNINGS

Monday: Baidu (BIDU), Estee Lauder (EL)

Tuesday: Home Depot (HD), Medtronic (MDT), TJX Companies (TJX)

Wednesday: Analog Devices (ADI), Lowe’s (LOW), Target (TGT)

Thursday: Salesforce (CRM), Intuit (INTU)

Source: Zacks, August 16, 2019

Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Any investment should be consistent with your objectives, time frame and risk tolerance. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.

Trade Tensions Affect Stocks – Weekly Update for August 12, 2019

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The Week on Wall Street

Stocks spent much of last week rebounding from a Monday drop that reflected nervousness about the U.S.-China trade fight. By Thursday’s closing bell, the S&P 500 had regained all its Monday losses – but it descended again on Friday.

The three big U.S. equity benchmarks finished the week lower: the S&P declined 0.46%; the Dow Jones Industrial Average, 0.75%; the Nasdaq Composite, 0.56%. A broad index of foreign shares, the MSCI EAFE, lost 0.95%.

China Devalues Its Currency

Last Monday, stocks fell 3% in reaction to the overnight weakening of the Chinese yuan. A weaker yuan makes Chinese exports cheaper for buyers who pay for them in dollars.

Critics quickly accused China of manipulating its currency to strike back at the U.S. The federal government plans to impose tariffs on nearly all Chinese products next month, likely making those goods more expensive to American consumers; a weaker yuan could counter the effect of those import taxes.

Earnings Season Update

Ninety percent of S&P 500 firms have now reported second-quarter results. Their collective sales and profits have surprised to the upside.

Stock market analytics firm FactSet says that overall earnings have beaten estimates by 5.7%. Seventy-five percent of firms have reported actual earnings per share surpassing estimates, which is better than the five-year average.

Final Thought

We are seeing a significant bond rally this summer, even with interest rates at very low levels. (When bond prices rise, bond yields tend to fall.) At the moment, about a quarter of the global bond market is invested in government notes with negative interest rates. The 10-year Treasury stands in contrast. Friday, it was yielding 1.74%.

THE WEEK AHEAD: KEY ECONOMIC DATA

Tuesday: The July Consumer Price Index appears, reporting the country’s monthly and annual rate of inflation.

Thursday: July retail sales numbers from the Census Bureau.

Friday: The initial August University of Michigan Consumer Sentiment Index presents the latest snapshot of household confidence in the economy.

Source: Econoday / MarketWatch Calendar, August 9, 2019

The Econoday and MarketWatch economic calendars list upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.

THE WEEK AHEAD: COMPANIES REPORTING EARNINGS

Monday: Sysco (SYY)

Wednesday: Cisco (CSCO)

Thursday: Alibaba (BABA), Applied Materials (AMAT), Nvidia (NVDA), Walmart (WMT)

Friday: Deere & Co. (DE)

Source: Zacks, August 9, 2019

Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Any investment should be consistent with your objectives, time frame and risk tolerance. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.

 

Fed Cuts Rates, Stocks Retreat – Weekly Update for August 5, 2019

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The Week on Wall Street

Last week, the Federal Reserve cut interest rates for the first time in more than a decade, in line with Wall Street’s expectations. Ironically, stocks had their worst week of 2019. 

The S&P 500 finished the week 3.10% lower. The Dow Jones Industrial Average and the Nasdaq Composite also posted weekly losses; the blue chips fell 2.60%, while the premier tech benchmark slumped 3.92%. International stocks tracked by MSCI’s EAFE index dipped 1.06%.

Fed Cuts Benchmark Interest Rate

On Wednesday, the central bank reduced the federal funds rate by 0.25%. The latest Fed policy statement noted that “global developments” and “muted inflation” influenced the decision.

Addressing the media, Fed Chairman Jerome Powell described the cut as a “mid-cycle adjustment.” After that comment, Wednesday’s trading session turned volatile on the interpretation that the cut was a “one and done” move, instead of what might be the first in a series.

More Tariffs Planned

Shares also fell Thursday, after a White House tweet indicated that the U.S. would put a 10% tariff on another $300 billion of goods coming from China, effective September 1.

Practically speaking, this would mean a tariff on nearly all Chinese products arriving in America. So far, the announcement has not affected plans for trade delegates from both nations to continue negotiations in September.

The Latest Hiring Data

Payrolls expanded with 164,000 net new jobs in July, according to the Department of Labor. The headline jobless rate stayed at 3.7%; it has now been under 4% for 17 months. The U-6 jobless rate, which counts both underemployed and unemployed Americans, dipped to 7.0%, a level unseen since December 2000.

Monthly job growth has averaged 140,000 over the past three months, compared to 187,000 in 2018.

THE WEEK AHEAD: KEY ECONOMIC DATA

Monday: The Institute for Supply Management releases its latest Non-Manufacturing Purchasing Managers Index, its monthly gauge of business activity in America’s service sector.

Source: Econoday / MarketWatch Calendar, August 2, 2019

The Econoday and MarketWatch economic calendars list upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.

THE WEEK AHEAD: COMPANIES REPORTING EARNINGS

Monday: Marriott International (MAR), Tyson Foods (TSN)

Tuesday: Walt Disney Co. (DIS)

Wednesday: American International Group (AIG), CVS Health (CVS)

Thursday: Booking Holdings (BKNG), Uber (UBER)

Source: Zacks, August 2, 2019

Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Any investment should be consistent with your objectives, time frame and risk tolerance. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.

Stocks Descend from Recent Peaks – Weekly Update for July 22, 2019

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The Week on Wall Street

Stock benchmarks retreated during the first week of the second-quarter earnings season. As some big names shared quarterly results, investors seemed more interested in what might happen at the Federal Reserve’s upcoming policy meeting.

For the week, the S&P 500 declined 1.23%. The Dow Jones Industrial Average lost 0.65%, and the Nasdaq Composite, 1.18%. International stocks, measured by the week-over-week performance of the MSCI EAFE index, were down 0.79%.

Households Bought More Last Month

Retail sales were up 0.4% in June, according to the Department of Commerce. Consumer purchases account for more than two-thirds of America’s gross domestic product, and data like this may rebut some assertions that the economy is losing steam.

Traders still expect the Federal Reserve to make a rate cut at the end of this month, even with low unemployment, solid consumer spending, and stocks near record peaks. Ordinarily, the Fed lowers interest rates to try to stimulate business growth and investment when the economy lags. After ten years without a recession, its new challenge is to make appropriate moves to ward off such a slowdown.

Will Wall Street’s Expectations Be Met?

Thursday, Federal Reserve Bank of New York President John Williams noted that Fed policymakers could proactively adjust interest rates and take “preventative measures” to ward off a potential slowdown. A New York Fed spokesperson later said that Williams’ comments were “academic” and did not concern “potential policy actions.” Still, Fed Vice President Richard Clarida made similar comments last week, expressing the view that Fed officials “don’t have to wait until things get bad to have a dramatic series of rate cuts.”

Two other Fed officials – Esther George and Eric Rosengren – have publicly stated that they are not in favor of a cut.

What’s Next

About 25% of S&P 500 companies report earnings this week. In addition, the federal government will present its first snapshot of the economy’s second-quarter performance.

THE WEEK AHEAD: KEY ECONOMIC DATA

Tuesday: June existing home sales figures appear from the National Association of Realtors.

Wednesday: The Census Bureau presents its June report on new home buying.

Friday: The Bureau of Economic Analysis releases its initial estimate of Q2 economic growth.

 

 

 

 

THE WEEK AHEAD: COMPANIES REPORTING EARNINGS

Monday: Celanese (CE), Halliburton (HAL), TD Ameritrade (AMTD)

Tuesday: Coca-Cola (KO), Texas Instruments (TXN), Visa (V)

Wednesday: AT&T (T), Boeing (BA), Facebook (FB), PayPal (PYPL)

Thursday: Alphabet (GOOGL), Amazon (AMZN), Anheuser-Busch (BUD), Intel (INTC), Starbucks (SBUX)

Friday: AbbVie (ABBV), Colgate-Palmolive (CL), McDonalds (MCD)

 

 

 

Special Update: Quarterly Report – Weekly Update for July 8, 2019

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The Week on Wall Street

U.S. stock benchmarks opened a new quarter positively. The S&P 500 gained 1.65% in the opening week of July; the Dow Jones Industrial Average, 1.21%; the Nasdaq Composite, 1.94%. Overseas, stocks in developed markets, tracked by MSCI’s EAFE index, rose 1.43%.

On July 3, the S&P posted its latest record close: 2,995.82. In other news, the Department of Labor said that the economy added 224,000 net new jobs in June, far more than the 160,000 projected by analysts in a Bloomberg poll. The headline jobless rate ticked up 0.1% to 3.7% in June; the U-6 rate, including the underemployed, also rose 0.1% to 7.2%. Finally, the Office of the U.S. Trade Representative said that the federal government plans to levy new tariffs on $4 billion of food and beverages coming from the European Union.

Monday, July 15 will mark the start of the next earnings season. Money-center banks report first, followed by companies from a variety of industries. As Wall Street gets ready for their results, we will take a moment to recap Q2 index performance and the quarter’s two biggest news developments.

Stocks Rose, Fell, and Rose Again

The S&P 500 gained 3.93% in April, dropped 6.58% in May, and climbed 6.89% in June. In the end, it advanced 3.79% for the quarter, outdoing the Q2 gains of the Nasdaq Composite (3.58%) and Dow Industrials (2.59%).

The Fed Hinted at a Shift in Monetary Policy

The central bank’s June statement took out a reference about being “patient” on borrowing costs and noted that Fed policymakers would “act as appropriate” to try and sustain economic growth. The latest dot-plot, showing the opinions of Fed officials about where interest rates might be in the near future, showed nothing like consensus.

U.S.-China Trade Talks Stalled, But May Resume Soon

In May, the U.S. and China announced they would hike tariffs on each other’s exports during the quarter. Formal trade negotiations broke down for six weeks. On June 29, President Trump announced at the Group of 20 summit in Japan that talks would soon resume and that the U.S. would hold off on tariffs slated for another $300 billion in Chinese goods.

What’s Next

As the quarter gets underway, traders are wondering if an interest rate adjustment and a U.S.-China trade deal are in store for the summer; there is also some ambiguity about the economy’s momentum. Investors will have plenty to consider in the coming weeks.

THE WEEK AHEAD: KEY ECONOMIC DATA

Tuesday: Federal Reserve Chairman Jerome Powell delivers opening remarks at a conference at the Federal Reserve Bank of Boston.

Wednesday: Fed Chair Powell testifies on monetary policy in Congress, and the Fed also releases the minutes from its June meeting.

Thursday: The June Consumer Price Index appears, showing monthly and yearly changes in inflation.

 

 

 

 

THE WEEK AHEAD: COMPANIES REPORTING EARNINGS

Tuesday: PepsiCo (PEP)

Wednesday: Bed Bath & Beyond (BBBY)

Thursday: Delta Air Lines (DAL), Fastenal (FAST)

 

 

 

 

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