Hope-a-dope

Hope-a-dope.  Stocks advanced yesterday on renewed hopes for a trade deal with China.  Across the pond, Brexit wrangling continues at Westminster and the potential for a deal hangs in the balance.

 

MY TWO CENTS

 

  1. Same old news.  Yesterday was a relatively quiet Monday in the markets.  Some confusing Parliamentary proceedings in the UK left investors wondering if there would ever be a Brexit, roughly 20% of the S&P500 companies have announced earnings thus far and the results have been decent (though the bar has been set low), tensions remain high on the Syrian border, protests rage on in the streets of Hong Kong and Chile, and the House resumed its impeachment inquiry.  Lots of global uncertainty with a hint of decent earnings.  Enter Vice Chairman Liu of China who, speaking at a virtual reality conference, said that trade talks between China and the US were making “substantial progress”.  That became the catalyst for equities to trade up.  In stock markets the only thing that is usually predictable is that they are well… unpredictable.  Sino-US trade wrangling however seems to buck the trend where good news almost always pushes the market up and bad news has the reverse effect.  Later in the session Economic Advisor Larry Kudlow was on the tapes saying that the tariff scheduled to hit in December might be removed if talks continued to be positive.  There you have it, same news – different day.

 

  1.  The charts have it.  My regular readers know that I am a big fan of charts.  I include a chartbook in my daily notes for readers to indulge in if they have the appetite.  Flipping through it you might notice a few interesting themes emerging.  In the past 60 days, two out of the only three sectors that have gone up are defensive (Utilities and Consumer Staples).  The major stock indices have traded sideways and slightly higher since the end of the first quarter.  The large cap S&P500 is the standout best performer and lurks just below all time highs and the small cap Russell 2000 gets the good sportsmanship award having lagged the other major indices, though it is now above its 200 day moving average, which is a positive sign.  Crude oil has had a rough three quarters despite OPEC cutting production, Middle East tension, and missile attacks.  The energy sector, as a result, has been the worst performing sector.  Gold has had a landmark year in response to the geopolitical uncertainty.  The yield curve has twisted and turned with every Fed move and economic report.  It inverted earlier this year and has since gone back to its normal upward slope as the Fed gets more aggressive, affecting shorter maturities.  An inverted yield curve has typically occurred prior to recessions and no one is sure if that will hold this time around.  Bonds have been the long shot winner as they rallied for most of the year in response to an increasing weak global economic climate.  Overall markets appear to be at an inflection point awaiting some news.  That news can come in the form of real progress in trade talks or an aggressive move by the Fed.  The Fed will meet next week and there is a 93.5% chance that they will lower interest rates by -25 basis points.  If all continues to go well between the US and China, the “Phase One” deal could be signed next month at the APEC conference in Chile.  Until then, we will keep watching the charts, and waiting.

 

THE MARKETS

 

Stocks traded up yesterday as positive quotes about trade talks swirled about the news.  The S&P500 traded up by +0.69%, the Dow Jones Industrial Average climbed by +0.21% weighted down by Boeing, the Russell 2000 advanced by +0.95%, and the NASDAQ Composite Index jumped by +0.91%.  Bonds slipped and the 10-year treasury yield inched up by +4 basis points to 1.79%.

 

WHAT’S NXT

 

– This morning the Richmond Fed will release its Manufacturing Index which is expected to come in at -7 compared to last month’s -9.

– The National Association of Realtors will release Existing Home Sales which are expected to have fallen by -0.7% month over month compared to last month’s growth of +1.3%.

– The Treasury will auction off $40 billion 2-year notes.

– McDonalds, Nucor, UPS, Biogen, JetBlue, Hasbro, Proctor & Gamble, Pulte Group, and United Technologies are just a few of the many companies announcing earnings before the bell.  After the close earnings include Snap, Texas Instruments, and Six Flags Entertainment.

 

Coffe or Tea?

 

I will be in our New York offices next week meeting with clients and would love to meet you.  Please reach out and set something up.

daily chartbook 2019-10-22

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Muriel Siebert & Co., LLC is an affiliated broker/dealer of the public holding company, Siebert Financial Corporation, which also owns Siebert AdvisorNXT, LLC. Siebert AdvisorNXT, LLC is a registered investments advisor (RIA) with the SEC and with state securities regulators. We may only transact business or render personal investment advice in states where we are registered, filed notice or otherwise excluded or exempted from registration requirements. Investment Advisor products are NOT insured by the FDIC, SIPC any federal government agency or Siebert’s parent company or affiliates.

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