Where there’s a will… Stocks charged ahead in Friday’s session, trading up on positive sounding messages from both President Trump and President Xi. Strong earnings from Nordstrom caused a retail sector bounce.
MY TWO CENTS
1. … there’s a way. In the next chapter of the epic saga between economic behemoth United States and manufacturing juggernaut China… or wait… this sounds a lot like the previous chapter… or is it all just one long, repetitive recitation. On Friday morning, I reported that President Xi, who rarely comments on the negotiations, said in a speech that any deal would have to be based on “mutual respect and equality”. Ok, he also said that it was the US that started the trade war but implied that China wanted to work with the US. It was hard to get a read on the comments, but markets seemed to be on the side of: positive. Later in the session, President Trump weighed in on the matter saying that a deal could not be “equal”, contrary to Xi’s use of the word “equality”. Still, Trump also said that a deal is “potentially close”. Seems like no new information but markets took the comments as positive, boosting stocks in the session. The fact is, and despite all of the noise, both sides really do appear to want to strike some sort of a deal, making phase one more likely than not. However, the sides still appear to be far apart on some key issues. Some good news came in over the weekend, WHILE YOU WATCHED YOUR FAVORITE SPORTS TEAM HOPEFULLY WIN, when China announced that it would impose stiffer penalties on intellectual property theft. The move indicates China’s willingness to address one of the key drivers of the trade war’s origin. Speaking of intellectual property, to very little fanfare on Friday, the Federal Communications Commission (FCC) labeled Chinese telecom giants Huawei and ZTE a security risk, putting in place plans to remove their equipment from US networks. This, after the Department of Commerce relaxed some of its restrictions on sales to Huawei, earlier in the week. An inch of progress is surely better than none at all.
2. A view from the bottom. On Friday there were some positive signs from the economy that largely took second seat to the positive comments on trade. US Manufacturing and Services PMI’s both came in above expectations and higher than last month’s readings. Manufacturing increased from 51.3 to 52.2 and services rose from 50.6 to 51.6. The readings are hopeful signs that the non-consumer side of the economy may be making a positive turn. In the Eurozone, similar readings showed manufacturing tick up from 45.9 to 46.6, which is positive but still nothing to write home about, as readings below 50 still represent contraction rather than growth. On the other side of the equation the consumer appears to remain in relatively good shape after a week of mixed earnings from retailers. On Thursday night, Nordstrom’s earnings beat and spurred rallying in the retail sector as investors are hoping for a turn-around and sought to buy the dip. This will be a big week for retailers. In fact it will be the biggest week of the year as Black Friday will give way to cyber Monday. Some snap results that will follow could give us a clue about the true health of the all-important consumer. Also this week, we will get a read on Personal Consumption Expenditures from the Bureau of Economic Analysis as well as the Conference Board’s Consumer Confidence index. The week ahead will offer some more important clues on the effectiveness on the Fed’s monetary policy.
THE MARKETS
Stocks traded up on Friday in response to somewhat positive comments related to trade. The S&P500 advanced by +0.22%, the Dow Jones Industrial Average climbed by +0.39%, the Russell 2000 traded up by +0.31%, and the NASDAQ Composite Index ticked up by +0.16%. Bonds traded up slightly and 10-year treasury yields were unchanged at 1.77%.
WHAT’S NXT
– Chicago National National Activity Index is expected to be -0.20 compared to last month’s -0.45. Negative numbers indicate that the national economy is expanding below its historical trend.
– Dallas Fed Manufacturing Activity is expected to have contracted -3.7% compared to last month’s decrease of -5.1%.
– Fed Chairman Jerome Powell will speak today.
– The treasury will auction off 2-year notes.
– Palo Alto Networks, Agilent, PVH, and Hewlett Packard Enterprise will announce after the bell today.
– The week ahead will be jam-packed with economic numbers compressed into the three days leading up to the Thanksgiving Holiday. On deck are several housing numbers, some regional Fed reports, Consumer Confidence, GDP, Durable Goods Orders, Personal Consumption, and the PCE Deflator. Markets will be closed for the Thanksgiving Holiday on Thursday and will close early on Friday. Please refer to the attached economic and earnings calendars for details.
IMPORTANT DISCLOSURES.
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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