8/16/2019
When volatility was your friend..
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Equities:
U.S. equities rebounded on Thursday, making back some of the steep losses in previous session, as China stated it hopes the U.S side will meet halfway. Strong retail sales figures led investors to believe the U.S. consumer can still help the country avoid a recession. Consumers spent more at stores and restaurants last month, a sign that fears of a global slowdown that have roiled financial markets haven’t yet soured consumer optimism. Retail store giant Walmart (WMT) reported better-than-expected earnings and raised its outlook for the full year, sending its stock price 6.1% higher Thursday. The leader saw growth in its core domestic business as well as online operations, marking the 20th consecutive quarter of sales gains in the U.S. Shares of Cisco (CSCO) plunged 8.6% Thursday after it said future earnings would be lighter than expected because of a significant impact from the U.S. and China trade war. The tech giant also said China revenue fell 25% last quarter on an annualized basis. The Dow Jones Industrial Average ($DJI) ended the volatile session 0.39% higher to 25,579.39 after suffering its worst day of the year the session prior. The S&P 500 (SPX) was up 0.25% to 2,847.6 while the Nasdaq Composite (COMP) ended slightly lower at 7.766.62.
Credit Markets:
U.S. government-bond prices continued to rally Thursday, as the 30-year Treasury bond yield fell below 2% for the first time ever and the 10-year Treasury note yield closed at 1.475%, a three year low. The historic drop in long-term U.S. bond yields come shortly after interest rates between the 10-year and 2-year Treasury’s became inverted. The inversion of this key part of the yield curve has previously been a reliable indicator of economic recessions albeit on a delayed basis.
Commodities:
Oil prices (/CL) declined for a second consecutive day Thursday, closing 1.4% loser to $54.47 a barrel amid worries that slowing global growth will weigh on demand. Gold prices (/GC) closed up 0.2% at 1,533.90 an ounce as a slump on global bond yields continue to spark demand for gold as store of value after the 10-year German bund yield fell to new record low of -0.714% and the 10-year UK Gilt yield dropped to a new record low of 0.404%.
Pre-Market:
Stocks around the world are staging a modest rebound Friday, lifted by hopes of a robust package of stimulus measures from the European Central Bank along with strong retail sales data in the U.S. The Stoxx Europe 600 rose 1.2%, Hong Kong’s Hang Seng gained 0.9%, while Japan’s Nikkei edged up 0.1% to finish out the week. U.S. equity futures (/ES) are looking higher in premarket after Europe and China announced plans for additional stimulus to shore up their economies in the wake of a global trade war. U.S. housing starts dropped 4.0% to a seasonally adjusted 1.191 million units last month, its third straight month of declines. Shares of California-based chip maker (NVDA) are up 6.4% in premarket trading after posting strong sales-growth figures for Q2. Farm-equipment maker Deere & Co. (DE) shares are down near 3.5% in premarket trading after topping revenue expectations, but falling short on earnings. As of this writing, S&P 500 futures (/ES) are up 0.9% near 2875, oil futures (/CL) are slightly higher near $54.80 a barrel, while gold futures (/GC) are down 0.6% near 1,520 an ounce.
Major Economic Reports:
Friday:
7:30 am CT – Housing Starts
9:00 am CT – Quarterly Services Report (Advance)
9:00 am CT – Consumer Sentiment
12:00 pm CT – Baker-Hughes Rig Count
Notable Earnings:
Friday– 8/16:
A.M. – DE
P.M. – N/A
Monday– 8/19:
A.M. – EL
P.M. – BIDU
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8/15/2019
Calling Out the Fed
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Equities:
In a reversal of the prior day’s optimism, equity markets plunged as the U.S. Treasury yield curve inverted, a sign that many view as a signal that a recession is likely. This spooked investors and sent the Dow Jones Industrials down 800 points, its biggest loss of the year. We have seen large swings in the usually liquid S&P 500 futures (/ES) as traders react to the latest tweet. The up moves have been more in reaction to some perceived positive tweet, whereas the sell offs are more about bad economic data and earnings releases. On the day, the Nasdaq Composite (COMP) dropped 3% to 7773.93, the Dow Jones Industrials ($DJI) lost 3% to 25479, and the S&P 500 (SPX) reversed 2.9% to 2840.60.
Credit Markets:
As much as the equity market selloff was in the headlines, the bond market’s latest rally has been the real underlying story. The yield on the U.S. 10yr Treasury note fell below the 2yr., inverting the yield curve for the first time since 2007. In addition, the yield on the 30y. Treasury bond fell to a record low 2.018% yesterday. To put that in perspective, that yield was not even that low during the dark days of 2008-2009. As equities have been gyrating, bonds have kept powering higher.
Commodities:
Poor economic data out of Germany and China, along with a deep sell off in equities put pressure on oil and other risky assets. U.S. crude oil futures (/CL) fell 3.3% yesterday to settle at $55.23 a barrel. This was the third move of 3% or more lower in the month of August.
Pre-Market:
S&P 500 futures(/ES) have been on a roller coaster ride overnight. They were more than $30 lower just 3 hours ago after it was reported that the U.S was attempting to take control of a British oil tanker under Iranian control. Then they shot higher to $30 higher on the session after China came out with a statement that they hoped the U.S. could meet them half way. The futures have sold off their highs after some mixed economic data. As of this writing, U.S. crude oil futures (/CL) are 1.7% lower near $54 per barrel, and S&P 500 futures (/ES) are 0.2% higher near 2848.
Major Economic Reports:
3-Yr Note, 10-Yr Note & 3-Yr Bond Settlement
7:30 am CT – Jobless Claims
7:30 am CT – Philadelphia Fed Business Outlook Survey
7:30 am CT – Retail Sales
7:30 am CT – Empire State Mfg Survey
7:30 am CT – Productivity and Costs
8:15 am CT – Industrial Production
9:00 am CT – Business Inventories
9:00 am CT – Housing Market Index
9:30 am CT – EIA Natural Gas Report
3:00 pm CT – Treasury International Capital
3:30 pm CT – Money Supply
3:30 pm CT – Fed Balance Sheet
Notable Earnings:
Thursday– 8/15:
A.M. –BABA, TPR, WMT
P.M. – AMAT, DDS, NVDA
Friday – 8/16:
A.M. – DE
P.M. – N/A
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8/14/2019
Curve Ball!
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Equities:
Yesterday’s strong overall performance off sudden tariff relief from the administration became short-lived as futures (/ES) appear set to erase most of any progress made. Duties on goods worth over $150 billion were temporarily delayed into mid-December as the concession sparked hopes of a de-escalation towards the longwinded trade war. The Dow ($DJI) settled 372 points higher with only 2 components down on the day. The S&P 500 (SPX) looks suspect to breech the 2900 level this morning with banking stocks taking much of the brunt off a 3% implosion amid recessionary fears. Brick and mortar retailers also continue to struggle amid an Amazon-dominated world as popular Macy’s (M) shed 12% of its stock price overnight off a sizeable earnings miss.
Credit Markets:
The 10 year Treasury yield slipped to 1.61% ahead of the open as recessionary fears re-surface after the 2 year yield topped the longer 10 year rate for the first time in over a decade as a potential canary in the coalmine. The corresponding yield on the 30 year bond also plunged to a new record at 2.015% as safe haven assets will likely win the day.
Commodities:
Oil futures (/CL) are down a staggering 3.5% near the $55 a barrel mark after China signaled an alarming 17 year growth lull in industrial output dampening demand. Weekly inventory numbers will be coming just after the open with a 2.5 million draw expected. Gold Futures (/GC) are currently trading $9 higher as safety becomes paramount.
Pre-Market:
Europe also saw poor industrial production overnight with a 1.6% contraction on top of a weak reading on the German economy which sent German bond yields to fresh record lows. All of Europe is trading lower in tandem with the string of troubling data. Import prices in the U.S. were expected to flat line, but came in higher at 0.2% indicating some early signs of inflation. Equities are slipping by nearly 1.5% pre-market as the yield curve inversion sparks fresh fears of a likely recession. Cisco (CSCO) will be on display after the close with the stock currently hanging right on the 200 dma. Ninety percent of all S&P 500 companies have reported up to this point but several retailers will be eagerly watched in the days to come.
Major Economic Reports:
Wednesday:
6:00 am CT – MBA Mortgage Applications
7:30 am CT – Import and Export Prices
9:00 am CT – Atlanta Fed Business Inflation Expectations
9:30 am CT – EIA Petroleum Status Report
Notable Earnings:
Wednesday– 8/14:
A.M. – M
P.M. – CSCO, NTAP
Thursday– 8/15:
A.M. – BABA, TPR, WMT
P.M. – AMAT, DDS, NVDA
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**BOLD above indicates important and potential market-moving news and information
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8/13/2019
Don’t Cry for Me Argentina…
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Equities:
Continued trade worries, increasing tensions is Hong Kong, and a selloff in Argentina kept downward pressure on stocks in yesterday’s session. Violent demonstrations over the weekend in Hong Kong, forced officials to cancel over 130 flights yesterday after protests disrupted operations. The Argentinian Merval index closed down 38% yesterday after the country’s pro-business president was defeated by a leftist opponent in a primary election. Semiconductor stocks continued to feel trade pressures, with Nvidia (NVDA) losing 1.8% to $151.45 and Advanced Micro Devices (AMD) dropping 5.1% to $32.43. Retreating bond yields sent banks stocks lower, with Citigroup (C) and Bank of America (BAC) both losing more than 2%. On the day, the Dow Jones Industrials ($DJI) lost 1.5% to 25896.44, the S&P 500 (SPX) slipped 1.2% to 2882.44, and the Nasdaq Composite (COMP) fell 1.2% to 7863.41.
Credit Markets:
Global uncertainty and a political change in Argentina, sent U.S. Treasuries higher once again as investors looked for safe havens outside of equities. The yield on the 10yr. Treasury note (TNX) settled at 1.640%, its lowest level since October 2016, after Friday’s settlement of 1.731%.
Commodities:
Gold Futures (/GC) continued to move higher on escalating global tensions, with December futures closing almost 1% higher at $1522.30 per troy ounce in yesterday’ session. U.S. Oil prices rose yesterday despite a steep drop in equities. U.S. Crude oil futures (/CL) finished the day 0.8% higher near $55 per barrel.
Pre-Market:
After being lower earlier in the morning, equity futures rallied to almost unchanged after a benign CPI number. July CPI rose 0.3% versus an expected 0.2%. No real high profile earnings today, as earnings season begins to wind down. As of this writing, U.S. crude oil futures were 0.6% lower near $54.50 and S&P 500 futures (/ES) were near unchanged near 2881.
Major Economic Reports:
5:00 am CT – NFIB Small Business Optimism report
7:30 am CT – CPI
7:55 am CT – Redbook
Notable Earnings:
Tuesday – 8/13:
A.M.– JD
P.M. – HUYA, TLRY, YY
Wednesday – 8/14:
A.M. – GOOS, M
P.M. – AABA, CGC, CSCO, NTAP, VIPS
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**BOLD above indicates important and potential market-moving news and information
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August 12, 2019
The Week Ahead
U.S. equites ended modestly lower after a week of trade-driven volatility. The major indexes suffered their worst day of the year on Monday, while the CBOE Volatility Index (VIX) hit its highest level since late 2018. Feuds between the world’s largest economies drove much of the market volatility. China’s currency fell below the 7 yuan-to-1 U.S. dollar level for the first time since 2008, prompting U.S. officials to label China a currency manipulator. On Friday, President Trump expressed skepticism as to whether the two countries trade negotiators will meet as scheduled in Washington next month. The benchmarks recovered their losses in subsequent trading sessions but remained volatile through the end of the week. The Dow Jones ($DJI) ended the week down 0.75%, The S&P 500 (SPX) and the Nasdaq Composite finished the week down 0.5% and 0.6%, respectively. Energy shares were among the worst performers in the S&P 500 index, weighed down by a midweek plunge in domestic oil prices, following a surprise rise in U.S. inventories. Yields continued to tumble as the U.S. 10-year Note's yield dropped to a low of 1.60% last week. The central banks of India, New Zealand and Thailand lowered rates on Wednesday, on the heels of last month’s U.S. interest rate cut. The price of gold breached the $1,500-per-ounce level for the first time in six years, extending a strong run for the precious metal amid declining bond yields and increasing trade tensions.
After last week's whipsawing price action , U.S. equity futures are picking up where they left off , amid growing concerns over the global economy. U.S. stock index futures (/ES) are down more than 0.5% pressured by worries that an ongoing trade dispute between Washington and Beijing could tip the world's economies into recession. Losses accelerated in early trading this morning after Hong Kong International Airport cancelled all departures for the reminder of the day, citing serious disruptions due to intensifying protests. The market will continue to monitor the strength of the yuan versus the dollar, as the People’s Bank of China (PBOC) set its yuan fixing at 7.0211 per dollar Monday, marking the third consecutive session with an official midpoint past the psychological 7-per-dollar level. There are just a few earnings left for the second-quarter with Walmart (WMT), Cisco Systems (CSCO), Nvidia (NVDA) and Deere (DE) all reporting this week. As for economic numbers, CPI inflation data Tuesday morning, and a load of key reports will be released Thursday, including retail sales, PCE inflation data, industrial production and regional Fed surveys. As of this writing, Gold futures (/GC) are 0.3% higher near 1,512 an ounce, U.S crude oil futures (CL) are up 0.5% near $54.80 a barrel, while the S&P 500 futures (/ES) are 0.5% lower near 2904.
Major Earnings for the Upcoming Week (8/12-8/16):
Monday:
A.M. – SYY
P.M. – N/A
Tuesday:
A.M.– N/A
P.M. – N/A
Wednesday:
A.M. – M
P.M. – CSCO, NTAP
Thursday:
A.M. – TPR, WMT
P.M. – AMAT, DDS, NVDA
Friday:
A.M. – DE
P.M. – N/A
Economic Releases (8/12-8/16):
Monday:
1:00 pm CT – Treasury Budget
Tuesday:
5:00 am CT – NFIB Small Business Optimism report
7:30 am CT – CPI
7:55 am CT – Redbook
Wednesday:
6:00 am CT – MBA Mortgage Applications
7:30 am CT – Import and Export Prices
9:00 am CT – Atlanta Fed Business Inflation Expectations
9:30 am CT – EIA Petroleum Status Report
Thursday:
3-Yr Note, 10-Yr Note & 3-Yr Bond Settlement
7:30 am CT – Jobless Claims
7:30 am CT – Philadelphia Fed Business Outlook Survey
7:30 am CT – Retail Sales
7:30 am CT – Empire State Mfg Survey
7:30 am CT – Productivity and Costs
8:15 am CT – Industrial Production
9:00 am CT – Business Inventories
9:00 am CT – Housing Market Index
9:30 am CT – EIA Natural Gas Report
3:00 pm CT – Treasury International Capital
3:30 pm CT – Money Supply
3:30 pm CT – Fed Balance Sheet
Friday:
7:30 am CT – Housing Starts
9:00 am CT – Quarterly Services Report (Advance)
9:00 am CT – Consumer Sentiment
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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