5/24/2019
Oil Spill!
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Equities:
Stocks dropped Thursday as further signs of a protracted trade war between the U.S. and China weighed on risk assets. Chinese officials have amplified their criticism of the U.S. and its trade tactics, stating the U.S. should ‘adjust its wrong actions’ if it would like to continue negotiations. The losses pulled the Dow Industrials ($DJI) into the red for the week, continuing a dismal stretch as it hurtled toward its fifth straight weekly loss. This marked its longest such losing streak since 2011. Trade war fears, hit Apple (AAPL) particularly hard this month, sending the shares down another 1.6% yesterday after an analyst price cut. Energy companies posted some of the biggest loses on the day. The SPDR Energy Select Sector ETF (XLE) slid 3.6% toward a 4 ½ month low, due to the pullback in oil prices. Tesla (TSLA) managed to gain some ground Thursday. The electric-car maker’s shares added 1.4%, after reports that it had more than 50,000 new net orders for the current quarter. The Dow Industrials ($DJI) fell 1.1% to 25490.47. The S&P 500 (SPX) shed 1.2% to 2822.24, while the NASDAQ Composite (COMP) gave up 1.6% to 7628.28.
Credit Markets:
The yield on the 10-year Treasury note fell to its lowest level since 2017, dragged down by growing investor concerns that trade tensions between the U.S. and China could last longer and strain growth more than previously thought. The 10-year yield dropped to 2.299%, down from 2.393% on Wednesday. The ten-year’s yield is now below the yield on the three-month Treasury bill for the first time since May 15.
Commodities:
Oil prices (CL) closed out their worst trading day of the year Thursday, as tensions dampened the demand outlook and concerns grew amid increasing global supply. On Wednesday, the U.S. Energy Information Administration reported that U.S. oil inventories surged by 4.7 million barrels last week, reaching their highest total since July 2017. Oil Prices (/CL) fell 5.7% to $57.91 a barrel, their largest percentage loss since December 24and their lowest value since March 12.
Pre-Market:
World stocks edged higher this morning and oil prices bounced after President Trump encouraged hopes of progress on the U.S.-China trade front, while British Prime Minster Theresa May announced she is going to resign, and will stepping down as Conservative Party leader on June 7. The Stoxx Europe 600 rose 0.7%, and Germany’s DAX up 0.8%. U.S. stocks are looking strong in pre-market trading with reports that President Trump may ease up restrictions against Huawei Technologies Inc. as part of a bigger deal with China. Orders for durable goods fell 2.1% from the prior month to a seasonally adjusted $248 billion in April. Economists were expecting a 2% drop. Shares of Foot Locker (FL) are 8% lower in pre-market after the company reported Q1 financial results that trailed analysts’ projections. As of this writing, U.S. crude oil futures (/CL) are 1.7% higher near $58.90 a barrel and S&P 500 futures (/ES) are 0.5% higher near 2835.
Major Economic Reports:
7:30 am CT – Durable Goods Orders
12:00 pm CT – Baker-Hughes Rig Count
Notable Earnings:
Friday– 5/24:
A.M. – BKE, FL, KNOP
P.M. – N/A
Tuesday– 5/28:
A.M. – BAH, BNS, MOMO, PLAN,
P.M. – HEI, RAMP, WDAY, YY
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5/23/2019
Chip Dip
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Equities:
After recent up and down movement, U.S. stocks have slid lower in three out of the last four sessions. This time, the pullback was spurred on from a drop in the semiconductor chip sector, after a U.S. federal judge ruled that Qualcomm (QCOM) illegally suppressed competition for chips used in cellphones. The semiconductor sector has been one of the most volatile, as companies have been buffeted by trade negotiations and Chinese demand. After being up 35% in the first four months of the year, the PHLX Semiconductor Index (SOX), is down 14% in May. In yesterday’s session, Qualcomm (QCOM) lost 11% to $69.31. Among retail stocks, Target (TGT) climbed 7.8% on better than expected same store sales, and Lowe’s (LOW) dropped 12% when the company lowered estimates for their full year earnings targets. On the day, the Nasdaq Composite (COMP) lost 0.4% to 7750.84, the Dow Jones Industrials ($DJI) fell 0.4% to 25776.61, and the S&P 500 (SPX) slipped 0.3% to 2856.27.
Credit Markets:
Trade worries have kept 10yr. Treasury yields near the 2.4% level in recent weeks. U.S. government prices held their gains yesterday following the release of the minutes from the most recent Fed meeting. The yield on the benchmark 10yr. Treasury note fell to 2.393% from 2.428% on Tuesday.
Commodities:
Oil prices fell yesterday, after U.S. crude oil inventories rose to their highest level since July 2017. U.S. crude oil futures (/CL) dropped 2.7% to settle at $61.42 per barrel, its lowest closing level since May 13th.
Pre-Market:
Initial weekly jobless claims were released at 7:30 CT. The report showed weekly claims of 211,000 versus a consensus estimate of 215,000. The trade conflict between the U.S. and China continues to intensify as more companies suspend business with the Chinese telecom giant Huawei, to comply with the recent U.S. action against the company. As of this writing, U.S. crude oil futures (/CL) are 3% lower near $59.50 per barrel, and S&P 500 futures (/ES) are 0.9% lower near 2831.
Major Economic Reports:
7:30 am CT – Jobless Claims
8:45 am CT – PMI Composite FLASH
9:00 am CT – New Home Sales
9:30 am CT – EIA Natural Gas Report
12:00 pm CT – FOMC member Kaplan Speaks
12:00 pm CT – FOMC member Barkin Speaks
12:00 pm CT – FOMC member Bostic Speaks
12:00 pm CT – FOMC member Daly Speaks
10:00 am CT – Kansas City Fed Manufacturing Index
3:30 pm CT – Fed Balance Sheet
3:30 pm CT – Money Supply
Notable Earnings:
Thursday– 5/23:
A.M. – BBY, HRL, MDT, WB
P.M. – ADSK, HPE, HPQ, INTU, SPLK
Friday – 5/24:
A.M. – FL
P.M. – N/A
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5/22/2019
Retail Hell?
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Equities:
Stocks advanced on Tuesday as a temporary reprieve was found for Huawei Technologies in an attempt to appease ongoing trade friction with China. The Nasdaq (COMP) captured an 1% improvement over the course of the session as tech responded favorably. The S&P 500 (SPX) still jumped by a lesser 0.85% clip with the Dow Jones ($DJI) trailing at only a 0.77% advantage with only 5 components down on the day. Equity futures (/ES) are picking up steam to the downside this morning after a court-ruling just sent Qualcomm (QCOM) off by $10 after the FTC proved the chipmaker violated anti-trust laws. Double-digit losses are now showing up in the S&P 500 (/ES) as no real trend has been able to develop over the past several sessions off conflicting developments. Asia stocks closed mixed overnight with no real developments on the trade front further muddying sentiment. European counterparts are also seeing similar conditions as inconclusive Brexit negotiations fell on its face yet again which will likely force Prime Minister May to resign in short order.
Credit Markets:
Treasury yields on the 10 year are edging lower near 2.412% with asset classes shifting more towards safety as equities slip ahead of the open. Rates will likely be sensitive throughout today’s session as traders assess the state of interest rates through the 2nd half of the year based on the latest Fed activity.
Commodities:
Oil prices (CL) are seeing a rare retreat today with a 1.3% reversal near $62 a barrel marked after API figures validated a surprise 2.4 million barrel surplus over the previous week. Official data will be forthcoming just after the open with a 1.2 Million draw projected by the EIA over the same period. Anything closer to the API number may help to ease pricing into our popular Memorial Day weekend where 43 million drivers are expected to hit the roads.
Pre-Market:
Today’s session will be stacked with a barrage of Federal Reserve members that will center around their scheduledFOMC minutes release for 1:00 to better ascertain the trajectory of interest rates. Retail stocks are gripping around the latest round of earnings with Lowe’s (LOW) and Nordstrom Inc. (JWN) both diving by nearly 10% in a familiar story as of late. Target (TGT) appears to be a rare bright spot in the space as the sector continues to separate itself with the competition getting even more fierce with the bigger players dominating. Earnings will continue through the end of the week at somewhat of a slower pace although Limited Brands (LB) and Best Buy (BBY) will both have their turn to prove themselves among the recent carnage.
Major Economic Reports:
12:00 am CT – FOMC member Bullard Speaks
6:00 am CT – MBA Mortgage Applications
9:00 am CT – FOMC member Williams Speaks
9:15 am CT – FOMC member Kaplan Speaks
9:10 am CT – FOMC member Bostic Speaks
9:30 am CT – EIA Petroleum Status Report
1:00 pm CT – FOMC Minutes
3:00 pm CT – FOMC member Bostic Speaks
Notable Earnings:
Wednesday – 5/22:
A.M. – ADI, LOW, TGT, VFC
P.M. – CTRP, LB, NTAP
Thursday– 5/23:
A.M. – BBY, HRL, MDT, WB
P.M. – ADSK, HPE, HPQ, INTU, SPLK
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5/20/2019
Where do we go next?
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Equities:
U.S. equities sank Monday as the fallout from White House’s move against Chinese telecom Huawei battered technology shares and stoked more trade jitters. The U.S. Commerce Department last week blacklisted Huawei and effectively halted its ability to buy American-made parts and components. In the wake of the restrictions, Google (GOOG) has suspended business activity with the Chinese giant. Other Huawei suppliers, including Qualcomm (QCOM), Broadcom (AVGO), Intel (INTC) and Xilinx (XLNX) also told employees they will not sell to the Chinese frim until further notice. The news pushed eight of the Standard & Poor’s 500’s 11 market segments lower, with tech shares losing nearly 1.8%. Shares of Xilinx (XLNX) tumbled 3.5%, while Qualcomm (QCOM) dropped nearly 6% on the day. The VanEck Vectors Semiconductor ETF (SMH) was down almost 4%, nearly 15% below its intraday all-time high. On the day, the Dow Jones Industrials ($DJI) closed down 0.3%, while the S&P 500 (SPX) fell 0.7% during the same period.The tech-heavy Nasdaq Composite (COMP) dropped by 1.5% as doubts increased.
Credit Markets:
U.S. government bond prices held a tight range yesterday as global political and economic risks supported demand for the safest assets. The yield on the 10 yr. note settled at 2.416%, compared with 2.396% on Friday.
Commodities:
Oil prices rallied yesterday to their highest level in nearly three weeks on continued U.S.-Iran tensions and as major crude producers, including Saudi Arabia, signaled they may maintain production cuts until the end of this year. U.S. crude oil futures (/CL) rose 0.5% to $63.10 per barrel, the highest closing price since May 1st. As of this writing, U.S. crude oil futures (/CL) are leaning up 0.5% at $63.50 per barrel. Gold Futures (/GC) are currently seeing two week lulls near $1271 an ounce as risk appetites have shifted somewhat overnight.
Pre-Market:
U.S stock futures are looking up Tuesday following a mixed session in Asia as the trade-war driven turbulence that has dominated markets this month show some signs of abating. S&P 500 futures (/ES) are 0.6% higher near 2858 at the moment. On Monday night, the U.S. government temporarily eased trade restrictions imposed on China’s telecom giant Huawei, allowing it to purchase goods to maintain existing networks and handsets. In Europe, technology shares powered the Stoxx 600 Index higher. Chinese equities had the strongest gains over the Asian session, while their Japanese peers ended lower. Home Depot (HD) just beat on both top and bottom line estimates although shares are somewhat muted in reaction considering the $6.00 expected move. Shares of Tesla (TSLA) are down more than 3% in pre-market trading as a notable analyst slashed their worse-case scenario for the share price to just $10. In a surprise twist, shares of Boeing (BA) are up big pre-market after a report hints that the pivotal 737 Max crash may have been caused by birds vs. a major malfunction which will help the Dow Industrials.
Major Economic Reports:
7:55 am CT – Redbook
9:00 am CT – Existing Home Sales
11:00 am CT – FOMC member Rosengren Speaks
Notable Earnings:
Tuesday – 5/21:
A.M.– AZO, HD, KSS
P.M. – JWN, TOL, URBN
Wednesday– 5/22:
A.M. – ADI, LOW, TGT, VFC
P.M. – CTRP, LB, NTAP
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**BOLD above indicates important and potential market-moving news and information
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The Week Ahead
The Nasdaq Composite (COMP), Dow Jones Industrials ($DJI), and S&P 500 all posted weekly declines last week as the trade dispute between the U.S. and China continues to drag on . The Dow notched its fourth consecutive weekly loss, as industrials are particularly sensitive to trade. After the SPX and Dow saw their sharpest pullback since early January on Monday, stocks bounced back midweek, but ultimately reversed course on Friday. On the plus side, U.S. consumer sentiment helped boost investor confidence, with May’s levels reaching their highest mark since 2004. Even with all the recent trade turmoil, all three of the major indices are within 4.3% of their record closing highs. On Friday, Dow Jones Industrials ($DJI) slipped 0.4% to 25764.00, the Nasdaq Composite (COMP) dropped 1% to 7816.28, and the S&P 500 (SPX) fell 0.6% to 2859.53.
A surging U.S. dollar sent Gold (/GC) lower for a second consecutive session on Friday. Gold (/GC) for May delivery fell 0.8% to settle at $1274.50 a troy ounce. Copper futures (/HG) fell 0.3% to $2.7385 a pound, while U.S. crude oil futures (/CL) slipped 0.4% to settle at $62.76 per barrel. The 10yr.Treasury note was unchanged on Friday, and the yield was slightly lower at 2.396% from 2.407% on Thursday.
The upcoming week will be sprinkled with numerous speeches from FOMC members. Thursday will see the latest data on Jobless Claims and New Home Sales. It will be a retail heavy earnings week, with Home Depot (HD), Nordstrom (JWN), Loews (LOW), and Target (TGT) all reporting. This morning, various tech companies are putting downward pressure on equity futures after President Trump made moves on Chinese technology company Huawei Technologies. Chip companies Intel (INTC) and Qualcomm (QCOM) have both announce they will not supply the company until further notice. As of this writing, U.S. crude oil futures (/CL) are 0.1% higher near $63 per barrel and S&P 500 futures (/ES) are 0.7% lower near 2840.
Major Earnings for the Upcoming Week (5/20-5/24):
Monday:
A.M. – KHC, TTM
P.M. – N/A
Tuesday:
A.M.– AZO, HD, KSS
P.M. – JWN, TOL, URBN
Wednesday:
A.M. – ADI, LOW, TGT, VFC
P.M. – CTRP, LB, NTAP
Thursday:
A.M. – BBY, HRL, MDT, WB
P.M. – ADSK, HPE, HPQ, INTU, SPLK
Friday:
A.M. – FL
P.M. – N/A
Economic Releases (5/20-5/24):
Monday:
7:30 am CT – Chicago Fed National Activity Index
8:30 am CT – FOMC member Harker Speaks
12:00 pm CT – FOMC member Williams Speaks
12:00 pm CT – FOMC member Clarida Speaks
Tuesday:
7:55 am CT – Redbook
9:00 am CT – Existing Home Sales
11:00 am CT – FOMC member Rosengren Speaks
Wednesday:
12:00 am CT – FOMC member Bullard Speaks
6:00 am CT – MBA Mortgage Applications
9:10 am CT – FOMC member Bostic Speaks
9:30 am CT – EIA Petroleum Status Report
1:00 pm CT – FOMC Minutes
Thursday:
7:30 am CT – Jobless Claims
8:45 am CT – PMI Composite FLASH
9:00 am CT – New Home Sales
9:30 am CT – EIA Natural Gas Report
12:00 pm CT – FOMC member Kaplan Speaks
12:00 pm CT – FOMC member Barkin Speaks
12:00 pm CT – FOMC member Bostic Speaks
12:00 pm CT – FOMC member Daly Speaks
10:00 am CT – Kansas City Fed Manufacturing Index
3:30 pm CT – Fed Balance Sheet
3:30 pm CT – Money Supply
Friday:
7:30 am CT – Durable Goods Orders
12:00 pm CT – Baker-Hughes Rig Count
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*BOLD above indicates important and potential market-moving news and information
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