A Photo Finish!

A photo finish!  Major indexes rallied to all time highs yesterday on trade optimism.  The path of least resistance is up, up, up with decent earnings, trade progress, and a vigilant Fed.




  1. Where there’s a will. Maybe both sides have had enough pain and decided that it’s time to play nice.  There are certainly signs that that is the case as both sides have sent up some very positive, very public signals that a respectable deal could emerge from discussions soon.  Starting on Friday, the US and China had a phone call which both sides declared as being very productive.  The so-called Phase One deal was supposed to be signed at the APEC conference in Chile later this month but when the conference was cancelled due to unrest in Chile, worries over where, when, and if a deal would be signed drew a bit of worry.  Both sides have been working on finding a venue and President Trump suggested yesterday that the deal should be signed in… Iowa.  Why?  According to him the deal would come with the biggest order for farmers in history.  It also turns out that Iowa is a political hotbed with primaries right around the corner, a fact that has not likely escaped the President.  No matter, a big order for farmers is a great thing and very likely given that China is so reliant on agricultural imports.  Commerce Secretary Wilbur Ross announced yesterday that licenses to work with Huawei might be issued soon putting wind under semiconductor and tech stocks.  China’s President Xi, who does not usually comment on negotiations, gave the negotiations an indirect nod in a speech during which he referred to China’s commitment to further multilateral trade and intellectual property protections. Finally, WHILE YOU SLEPT the Financial Times reported that the US is considering removing the 15% tariff that took effect on September 1st.  China has been quite vocal about having existing tariffs removed as a pre-requisite to a deal.  Seems like things are falling into place and the market has been responding positively to the news which helped the S&P500, the Dow, and the NASDAQ Composite all reach new highs yesterday.


  1. Better than feared.  Wall Street is all about expectations beaten and missed.  If you beat, your’e good, if you miss your’e punished… for the most part.  A common theme in the past three earnings seasons has been a fear of a breakdown in corporate earnings.  The old news by now is that the fear never came to fruition.  The past few earnings seasons have all turned out slightly better than expected, keeping the indexes buoyant, with a little help from the Fed of course.  While companies were beating ever-lowered bars they were lowering future expectations amidst the applause, thus further lowering the bar.  By the time this current earnings season began investors were expecting the worst and guess what… companies are beating expectations yet again!  In fact, so far a greater percentage of S&P500 companies have beaten on earnings compared to last quarter’s results.  That is certainly good for stocks, at a high level.  But something that is not so good for stocks which gets far less coverage is the fact that reported revenue growth is slowing significantly.  Earnings are easily manipulated with legal accounting tricks but revenues are revenues making them an important metric to watch.  Year over year sales growth peaked around 10% mid-2018 and has been sliding since.  Now revenue growth sits around just 3%.  It is still growing, but at a slower pace and still better than back in 2015 in which sales actually declined.  The decline was a key factor in the stock market’s poor performance for that year.  As earnings season slowly winds down, many investors are breathing a sigh of relief that this quarter companies continue to perform… as expected.




Stocks propelled to new all time highs driven by positive trade news, good earnings, and more afterglow from last week’s Fed easing.  The S&P500 climbed by +0.37% to a new high, the Dow Jones Industrial Average traded up by +0.42% to its first new high since July, the Russell 2000 advanced by +0.51%, and the NASDAQ Composite Index jumped by +0.56% to a new high.  The bond market sold off and 10-year treasuries added +6 basis points for yield to maturity of 1.77%.




– Markit Services PMI is expected to be 51.0 same as last month.

– JOLTS, which tracks job openings is expected to come in at 7.063 million openings, up from last month’s 7.051 million.

– ISM Non-Manufacturing PMI is expected to come in at 53.5 up from last month’s 52.6.

– Richmond Fed President Thomas Barkin, Dallas Fed President Robert Kaplan, and Minneapolis Fed President Neel Kashkari will all speak today.

– This morning Becton Dickinson and Virtu Financial beat estimates while Zimmer Biomet and Mallinckrodt missed.  Before the bell we will also hear from Newmont Goldcorp, Regeneron, Peloton, Allergan, and Mylan.  After market reports include Devon Energy, Diamondback Energy, and DaVita.

daily chartbook 2019-11-05

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