Thursday, May 23, 2019

Today's Data Releases: The Good and The Bad

The good:

  • Jobless claims came in this week at 211k. That's really really good! Continues the longest streak in history below 300k!
  • New Home sales for April came in at 673k, which is good, but a bit below expectations. However, the two prior months numbers were revised by a total of 39k higher; that's really good!
The bad:
  • The PMI (Purchasing Managers Index) Composite (includes manufacturing and services) FLASH (preliminary read) for May came in at a barely expansionary 50.9 (50+ denotes expansion, 50- contraction); that's bad!

Brief Commentary on Today's Selloff (video)

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Wednesday, May 22, 2019

Latest Log Entries: Political Miscalculation

5/22/19 Wednesday

Monday saw the market lower on the U.S.’s blacklisting of Huawei, Tuesday saw the market bounce back, and some, on the U.S.’s temporary, and albeit very slight, about face on the blacklisting of Huawei. Wednesday saw the market lower on news that the U.S. is considering denying the sale of U.S. components to a number of Chinese tech companies. We’ll see what Thursday holds, futures are down notably as I type…

Tuesday, May 21, 2019

Brief Commentary on the Latest Action (video)

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Monday, May 20, 2019

Data Release of the Day: Waning

I mentioned in yesterday's video that we see general conditions waning. One of our proprietary macro index's waning components has been The Chicago Fed National Activity Index.

Sunday, May 19, 2019

What The Past Two Weeks Told

Two weeks ago yesterday I posted "A Telling Two Weeks to Come!". In it I stated that the following pending events would help us gauge stock price-action going forward.

Friday, May 17, 2019

Headline of the Day: Could Be a Game Changer (If a Harbinger of Things To Come)

The Dow just staged a 300-pt turn around on the following headline:

Yesterday's Log Entries and This Week's Message: We Should Be Skeptical

Yesterday's log entries pretty much cover my view of immediate-term conditions. Bottom line; we should be skeptical of the staying power of the three-day rally. Beyond the immediate-term, overall general conditions, while reflecting what I'll call trade-war strain, are not at this point rolling over and signaling imminent recession/bear market.

Thursday, May 16, 2019

Brief Commentary on The Latest Action (video)

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Wednesday, May 15, 2019

Chart of the Day: Loud and Clear on the Economics of Tariffs!

Take a look at the market (S&P 500) reaction immediately upon news that the President is delaying (for 6 months) his decision on whether to impose tariffs on European cars:

This Morning's Log Entry; A Most Timely Selloff!

Premarket:

In yesterday’s log entry I suggested that if this week’s data reflects what we’re seeing in our PWA index (a weakening [but not yet recessionary] economic backdrop), it’ll add incentive for the Administration to abandon protectionism as a strategy for combating protectionism.

Well, we’ll soon find out, as U.S. retail sales and industrial production both missed expectations this morning – following week overnight data out of China – and stocks are trading lower in the premarket as a result.

Tuesday, May 14, 2019

Education on International Trade (really should say "required reading", but it's entirely up to you)

I'm thinking that all of the present hullabaloo around trade makes -- for those interested -- for a wonderful (and extremely important) learning opportunity!

For my part, here are four quick and easy videos I produced before the present administration came to be (so you know, none of my recent carping is the least bit politically-inspired), and a blog post I penned last year.

Quote of the Day: Markets Scratching Their Heads

I agree with the following from Bloomberg macro strategist Cameron Crise's commentary this morning:

This Morning's Log Entry

Trump was clearly rattled by yesterday’s market action; during a speech last evening he suggested that we’ll know if we have a [China trade] deal in 3 to 4 weeks: he said “we’ll see, but I think we’ll get a very good deal”. On that, U.S. equity futures went from red to modestly green; trading notably higher in the cash session this morning. 

Monday, May 13, 2019

Brief Commentary on Today's Selloff (video)

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This Morning's Log Entry: This Week's European Tariff Deadline

5/13/19 Monday

Premarket:

Equity futures are selling off markedly this morning on Trump’s weekend China-trade tweets and China’s stated resolve.

Yesterday's Log Entry: Not Yet Buying This Decline, Or Jumping Ship

5/12/19 Sunday

While I certainly wouldn’t advocate panic at this juncture, I am nonetheless amazed at the sanguinity (if not complacency) I’m witnessing among much of the investment community, amid what is clearly an escalation of trade tensions. I read where one well-known technician deems last week’s late-week bullish action as a signal that we’re near the end of this brief, and modest, selloff, and that new all time highs will soon be at hand. Bespoke Investment Group, whose research I hold in high regard, sees the present as an attractive buying opportunity for equity ETFs, particularly many non-US offerings. I continue to see references to “a very strong and resilient U.S. economy” and how it’ll hold up against the trade war headwind well into the future.

Well, while I like the sound of all of that, I presently do not share the near-term optimism, for the following reasons:

Friday, May 10, 2019

This Week's Message: Surreal! (required reading)

Per many of my latest blog posts, I've been guarded in my assessment of the market's near-term probabilities. And while this week's 2+% declines in the S&P and the Dow, and 3+% decline in the Nasdaq, support my assessment, if you had told me that come Friday's close we'd be looking at a scenario that had tariffs ramped up on Chinese imports, and trade talks concluding with no followup on the calendar (although both sides dubbed this week "constructive" and vowed to continue negotiating), I'd have told you to look for a selloff easily doubling what actually occurred.

This Morning's Log Entry

5/10/19 Friday

Premarket

As I type the Dow future contract is pointing to a 90–pt decline at the open. Given the hike in tariffs overnight, Trump’s tweet this morning that essentially said there’s no rush and that tariffs are good, the potential for him to announce tariffs on European cars next week, the pending details on how China will retaliate, and the odds that the EU will respond aggressively to any hike in U.S. protectionism make the shallow depth of this morning’s futures selloff – not to mention the modest rally occurring in European equities (and the overnight rally in China [although I suspect state-backed buyers stepped in big time) – frankly, surreal!

Thursday, May 9, 2019

Complacency Update

I've been noting of late what I view to be a dangerous degree of complacency among market players in certain circles.

Now you'd think that with this week's wake-up call we'd be seeing those snoozers on the bullish (short-term sentiment) side of the boat begin to, well, wake up.

The Only Question Remaining

Given all of the news, commentary and rhetoric around the China trade deal over the past 48 hours, I am now more convinced that my following narrative captures the current state of affairs than I was when I penned it Monday evening. The only question remaining; how much of a hit will the market need to take to permanently pound home the economic reality of tariffs and, thus, inspire a complete change of tactic going forward?

Wednesday, May 8, 2019

Brief Commentary On The Latest Action (video)

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This Morning's Log Entry

Premarket:

U.S. equity futures are bouncing around a bit this morning; going from notably negative to flat, now moving lower once again.

Tuesday, May 7, 2019

Bonus Chart of the Day: Our Three Top Weightings Look Relatively Cheap

Yesterday afternoon the Fed released its latest "Financial Stability Report"; its findings suggest that the Fed has some concerns over asset valuations and debt levels (related to businesses) in the U.S. economy. On the plus side the report states that household borrowing remains modest relative to incomes, and sub-prime (credit score) borrowers' debt levels remain "flat". Banks remain in very good shape, as do insurance companies, and hedge fund leverage "appears to have declined over the past six months".

This Afternoon's Log Entry

After suffering a 600-pt decline the Dow rallied back to close down 470 points in today’s session. The late-day buying has carried through a bit into the after-hours session.

Chart of the Day

While it's good sport to profess that the U.S. jobs market suffers at the hands of outsourcing to technology and offshoring to cheaper foreign labor markets, by some apparent miracle the U.S. jobs market remains remarkably robust.

Last Evening's Log Entry (The Sooner the Selloff the Better!)

5/6/19 Monday

EVENING:

Today saw a stellar rebound from a 470-point Dow plunge at the open. The plunge was entirely warranted based on Trump’s Sunday Tweet, the rebound occurred on news that China’s negotiators are nonetheless coming to Washington this week for the next round (was originally billed as the last round) of talks; a scenario that was in question at the market open this morning.

After hours, however, Lighthizer stated that indeed tariffs will be raised this Friday, per the President’s tweet, despite the scheduled talks. Apparently this is in response to China’s reneging on previously agreed-upon provisions in the draft deal. U.S. equity futures immediately tanked on Lighthizer’s announcement; with the Dow dropping by 200+-points, SPX down 20+.

Monday, May 6, 2019

Back to Where We Started

In reviewing my market log entry from Saturday (logged after completing my weekly macro analysis), it occurred to me that after the President's Sunday surprise tweet, the market's strong initial response, and the subsequent rally nearly all the way back on news that China's negotiating team looks to be nevertheless descending upon Washington this week, we're virtually right back to where we left off last Friday.

This Morning's Underwhelming Response to Overwhelmingly Negative News

Overnight, Dow futures traded as much as 600 points lower; as I type the Dow's down merely 170. The depth of last night's lows came on news that China may all-out cancel the trade talks, in response to Trump's Sunday tweet threatening to severely exacerbate the "trade war" (in response to China reneging on previously agreed-to terms). 

High Stakes Poker

Clearly, a record-level stock market, a strong jobs number last Friday and a positive Q1 GDP read has the President feeling like he’s holding the chips, and the winning hand, in the current game of trade poker with China; as he just doubled-down in response to what he apparently views as his opponent's bluff.

Sunday, May 5, 2019

Currencies' Reaction to Today's News

I know, more than you need on a quiet Sunday afternoon, but I also know that a fair number of readers look to me to keep them abreast of what I'm seeing/thinking.

Quotes of the Day

Bloomberg's economists pretty much echo my earlier comment regarding what's behind the President's risky move this morning, and that it will "focus the market's attention" on trade; specifically on China's top negotiator's Washington visit this week. 

This I Did Not Expect!

While I've expressed serious concern over the extent to which tariffs will continue to play a roll in U.S./rest-of-the-world trade relations going forward, this I did not expect:

Saturday, May 4, 2019

Friday, May 3, 2019

This Week's Message: Concerned (Near-Term) About Complacency (video)

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This Morning's Log Entry

The April jobs number was just released and it was definitely good: 263k new jobs (vs 190k expected), 3.6% unemployment rate (down .2% from March) and 3.2% average hourly earnings growth (same as March). However, average hours worked and the labor force participation both legged just a bit lower.

Thursday, May 2, 2019

This Morning's Log Entry

The Fed, per yesterday’s post-meeting commentary, shares our view on the state of general conditions. Powell’s comments regarding the present lack of inflation (transient), despite doing a bit of a number on stock prices (as I hinted it might in yesterday’s entry), were, all things considered, right on the money. That said, this morning’s strong productivity report suggests that there’s possibly room for certain pressures to run (notably) before we see above-Fed target (2%) inflation.

Wednesday, May 1, 2019

Quick Comment on Today's Action

The Fed left rates unchanged and, in their official statement, along with Powell at the presser, gave an overall upbeat assessment of general conditions. Powell stated that, in the committee’s view, the lower than expected inflation of late is transient and will likely not persist for too long going forward. I entirely agree.

Data of the Day: ISM Survey Speaks To What Most Concerns Me At The Moment

In this morning's log entry I noted that data this week has been "net positive". Well, the exceedingly important ISM (Institute for Supply Management) Manufacturing Survey results were released this morning, and they lower that net (relative to expectations) number just a bit.

This Morning's Log Entry: The Fed Announcement Today Will Be Telling

The week so far has seen no letup in this earnings season’s high percentage of bottom-line beats (relative to lowered expectations). Even top-line numbers, which have been relatively disappointing in terms of % beats, have shown a notable pickup in that category over the past few days.