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President Donald Trump renewed his criticism of Federal Reserve Chairman Jerome Powell in a recent interview with ABC News’ George Stephanopoulos, saying the economy and stock market both could be doing much better “if we had somebody different” in charge of the central bank.
The president predicted that GDP would be 1.5 percentage points higher had Powell and his fellow central bankers not enacted rate increases and “quantitative tightening.” In addition, he said the stock market would be 10,000 points higher, presumably a reference to the Dow Jones Industrial Average, which was at 26,106 heading into Friday trading.
“If he did nothing, or perhaps even loosened, we would be in my opinion, just an opinion, 10,000 points higher than already a very high number,” Trump said. The number implies a potential 38% increase for a bluechip average, or about double the gain it already has seen since the November 2016 election.
Trump has repeatedly criticized Powell, whom he named to the post in early 2018, and has said openly that he believes the Fed should be cutting interest rates. Previous presidents have taken on Fed chairs before, but rarely in such a public fashion.
“He’s my pick and I disagree with him entirely,” Trump said. “As you know, it’s independent. ... But I’m not happy with what he’s done.”
Under Powell’s tenure, the Fed raised its benchmark overnight interest rate four times in 2018 and had intended to hike twice more in 2019 before making a policy pivot earlier this year.
In addition to the rate hikes, the Fed has reduced its balance sheet by about $600 billion by allowing proceeds to roll off from the bonds it acquired during three rounds of quantitative easing. Trump defined the process as “taking money out of the tills so that people can’t use it for doing what they’re doing.”
The Fed is currently unwinding the balance sheet runoff and will stop it entirely in September.
Trump said “it’s OK to raise interest rates a little bit” but said doing so now makes the nation’s $22 trillion debt more expensive. The debt has increased 10.3% during Trump’s 2½ years in office after soaring nearly 88% under former President Barack Obama.
Most active indices - VIX - 240k, SPY - 804k, SPX - 333K,
Most active equity options: DIS, AAPL, AMD, TSLA, FB, LULU, GE, NFLX, AMZN, BABA
SPY goes ex-div on June 21
Earnings:
Tuesday - Dave & Busters
Wednesday -Lululemon
Thursday - Broadcom
ODD BLOCK
Call love in Tellurian Inc (TELL)
Call love in EQT Corporation (EQT)
MAIL BLOCK
#Options #QuestionoftheWeek - #Bitcoin $BTC is hovering around $8500 right now. If you had to make a 1-month #options trade expiring 6/31 - would you rather...
- Buy $9000 Call
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- Sell $8000 Put
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The hilarious story of /u/1R0NYMAN and Robin Hood.
SirSoliloquy - What's hilarious is that, with the way robinhood is set up, /u/1R0NYMAN was somehow able to cash out $10,000 of robinhood's money before everything disappeared. So robinhood lost hundreds of thousands, but /u/1RONYMAN gained thousands
TheRealOneTwo - Basically Robin hood screwed up. They were giving people leverage without margin. Basically saying you are good for $200k in trades though you only had $1k in the account. No agreement for a loan (margin). Trader was shortboxing and lost. The actual risk to him was nothing since he did not agree to a loan (will be determined by the SEC). Robin hood is on the hook for his losses. RH has since blocked shortboxing.
A reading of the economy from Morgan Stanley is signaling “June gloom.”
Morgan Stanley’s Business Conditions Index, which captures turning points in the economy, fell by 32 points in June, to a level of 13 from a level of 45 in May. This drop is the largest one-month decline on record and the lowest level since December 2008 during the financial crisis, according to the firm.
“The decline shows a sharp deterioration in sentiment this month that was broad-based across sectors,′ economist Ellen Zentner said in a note to clients. “Fundamental indicators point to a broad softening of activity, but analysts did not widely attribute the weakening to trade policy.”
Fears of a possible economic slowdown were raised last week after a much worse than expected jobs report. The economy added just 75,000 jobs in May, according to the Labor Department last Friday. A report Thursday showed a spike in jobless claims last week. Manufacturing activity last month grew at the slowest pace in two years.
Worries about a trade deal getting passed between the U.S. and China weighed on stock markets in May. Perversely, that weak sentiment actually boosted equities this month because traders are hoping the Federal Reserve will cut interest rates. But some investors are starting to worry that the economy could fall into an outright recession.
June’s conditions index reading showed notable declines in hiring, hiring plans, capex plans and business conditions exceptions, Morgan Stanley said.
The manufacturing subindex business conditions fell sharply to zero, “a decline that was likely exaggerated by the recent turn lower in oil prices, while marking the lowest level for the subindex on record,” Zentner said.
The planned meeting between President Donald Trump and his Chinese counterpart, Xi Jinping, at the annual G20 summit remains a high-stakes "will they, won't they" game.
Trump said he wanted to meet with Xi later this month as trade tensions linger. Beijing has not confirmed any meeting, according to reports. And sources told Reuters this week that expectations were low that the leaders would progress toward ending the US-China trade war that has raged on for more than a year.
Whether or not the two leaders convene in Osaka, Japan, to discuss trade relations between the two largest economies will have implications for investors in US markets, according to equity strategists and economists.
With the Federal Reserve already assuming an accommodative posture in the face of slowing economic growth and volatile international trade tensions, any indication that relations are headed further south could sway the central bank's tightening path and influence the markets.
"We continue to see the Fed on hold through much of next year — a view that rests importantly on a market-positive outcome from the G20 meeting," Morgan Stanley strategists led by Ellen Zentner wrote Thursday in a note to clients.
Because the Federal Open Market Committee is set to meet next week, ahead of the Osaka summit, Zentner's team expects the market to move in response to the news flow surrounding the G20 meeting.
Investors appear pessimistic about the state of the trade war given the MSCI China Index's recent underperformance relative to the MSCI USA Index, along with moves in the renminbi against the US dollar, Oliver Jones, an economist at Capital Economics, said.
"There seems to be little expectation that another meeting at the next G20 summit this month will result in a fresh cease-fire," Jones wrote in a Thursday note to investors.
Capital Economics
"Indeed, it would probably come as little surprise to markets if the two sides imposed tariffs on virtually all bilateral goods trade, as we now think is likely," he said.
Jones also added that what's fueling his bearish view on equities is the belief that global growth will continue unabated, regardless of the trade war.
Some strategists say stock-market investors — within arm's reach of record highs in the US — are stuck in a "wait-and-see" mode with the G20 summit on the horizon.
Athanasios Vamvakidis, Bank of America Merrill Lynch's global head of G10 foreign-exchange strategy, told investors on Wednesday that the "rates market is too pessimistic, the equities market too optimistic," and the FX market is complacent.
Bank of America Merrill Lynch
In other words, he argues global stocks should probably be trading a bit lower, rates should be a bit lower, and the foreign-exchange market should be trading in a more volatile fashion. That is, if they were all properly pricing in risk surrounding the US-China talks.
"We remain optimistic, but one can also argue that things could get worse before/if they get better, both before and after the G20," Vamvakidis said.
Stocks in the US were broadly positive on Thursday, with the S&P 500 trading within 2% of its May 1 record.
U.S. markets rebounded on Thursday to snap 2-session slide despite a spike in crude oil prices, which was triggered after two tankers were damaged in a suspected attack in the Gulf of Oman. The major indexes shrugged off the news after holding positive territory throughout the session while finishing just off the session highs and pushing prior resistance levels.
Volatility stayed relaxed and is still giving a neutral reading as the index remains trapped between its 50-day and 200-day moving averages.
The Russell 2000 surged 1.1% following the 2nd-half push to 1,536. Lower and major resistance at 1,525-1,540 was cleared and held with more important hurdles at 1,545-1,560 and the 200/50-day moving averages.
The Nasdaq rallied 0.6% after reaching a morning peak of 7,848. Near-term resistance at 7,850-7,900 and the 50-day moving average was challenged but held with a close above the latter being a more bullish signal.
The S&P 500 gained 0.4% while trading to a high of 2,895. Lower resistance at 2,900-2,925 held for the 4th-straight session on the 5th-straight close above the 50-day moving average.
The Dow also added 0.4% following the intraday run to 26,156. Near-term and lower resistance at 26,250-26,500 held on the 4th-straight close above the 50-day moving average.
Energy and Communication Services paced sector leaders after advancing 1.2% and 1.1%, respectively. Consumer Discretionary was higher by 0.9%
Healthcare was the only sector laggard after slipping 0.1%.
Delphi Technologies (DLPH) upgraded to Buy from Neutral at Goldman Sachs HCP (HCP) upgraded to Outperform from Market Perform at Raymond James Williams-Sonoma (WSM) upgraded to Accumulate from Hold at Gordon Haskett
Cooper-Standard (CPS) downgraded to Sell from Neutral at Goldman Sachs Marathon Oil (MRO) downgraded to Neutral from Overweight at Atlantic Equities Union Pacific (UNP) downgraded to Equal Weight from Overweight at Barclays
FRIDAY'S EARNINGS ANNOUNCEMENTS Before the open: Cheetah Mobile (CMCM), China Online Education (COE)
METALS / OIL Goldclosed at $1,343.70 an ounce,up $6.90 Silversettled at $14.89 an ounce,up $0.14 Copperfinished at $2.65 a pound,unchanged Crude Oilwas at $52.19 a barrel, up $1.07 Bitcoin Investment Trust (GBTC)ended at $10.75, up $0.30
I hope this helps you prepare for the trading day. Make it a great one!
Todd Mitchell
Not sure the best way to get started? Follow these 3 simple steps ...
A Goldman Sachs stock portfolio that tracks industry-dominant “superstar” companies in the United States is beating the stock market over the last three years.
Among the stocks on the list: Procter & Gamble, which dominates consumer products, Altria Group, which dominates tobacco, along with Google parent Alphabet and PepsiCo. These companies often benefit from a high share of industry sales, strong pricing power and fat profit margins — all of which contribute to a compelling investment thesis, Goldman’s chief U.S. equity strategist, David Kostin, wrote Tuesday.
The stock strategist added that companies with the highest share of industry sales have returned 49% since 2015 compared with 16% for companies with the lowest share after controlling for industry group.
“The market positioning of superstar firms often allows for greater bargaining power over consumers and workers and higher profitability,” Kostin said in a note to clients. “Superstar firms have been one driver of the explosion in US corporate margins post-crisis.”
The decline in the number of listed U.S. companies from 8,000 in 1996 to about 4,000 today through fewer initial public offerings and M&A has led to a concentration in a number of key industries, Goldman added.
While dominance has led to hefty bottom lines at a number of well-known conglomerates able to maintain sizable market share, regulatory troubles could be brewing for a few.
U.S. lawmakers are looking to crack down on big tech companies like Facebook, Amazon and Alphabet through congressional probes into their impact on public life. Both the Federal Trade Commission as well as the Department of Justice are also launching investigations into whether some of the nation’s largest tech titans could be prosecuted under antitrust law or for violations of privacy.
That’s kept their stocks under pressure, with Facebook and Alphabet each down at least 5% over the last month. And while regulators are still months, if not years, away from a conclusion, Kostin added investors should monitor developments closely.
“From a strategic perspective, we believe that uncertainty is still too high to recommend investors avoid stocks in the regulatory spotlight,” he wrote. “But while the impact of regulation on today’s stocks will be case-dependent, similarities among historical outcomes suggest that investors should reduce exposure to any stock that becomes subject to an antitrust lawsuit. In the past, stock valuations and share prices declined between lawsuit filing and resolution.”
The S&P 500’s material’s sector is up more than 9% so far in June
Quick — what’s the best performing sector in the S&P 500 so far in June? No, it isn’t the highflying information technology sector — that’s second best.
The materials sector is by far having the best month of any of the 11 sectors in S&P 500 groups, up 9.5% in the June to date, according to FactSet data, as of Wednesday afternoon trade (see charted above).
In fact, the materials group, the sector that tends to be the most sensitive to global economic growth expectations, is on track for its best monthly gain since October of 2015, when it soared 13.45%, according to Dow Jones Market Data.
The sector represents shares of companies most closely tied to production of raw materials used in manufacturing, including steel, aluminum and chemicals.
By comparison, the information technology sector XLK, -0.56% is up 6.3% so far in June, while consumer discretionary shares XLY, -0.03% and consumer staples XLP, +0.15% are both set for monthly gains of at least 5%.
The exchange traded Materials Select Sector SPDR ETF XLB, +0.33% which offers investors the easiest way to bet on materials shares, is up 9.6% in June and about 14.4% this month.
So, why is the materials sector rallying, even as a tariff tit-for-tat between the U.S. and some of its largest trading partners is threatening to erode economic expansion?
The materials sector had been the most beaten down as stock prices fell in May, but has started to show an outsize rebound because there is growing hope that global central banks will ease monetary policy, some Wall Street analysts argue.
Expectations in the U.S., as reflected by bets made on federal-funds futures, shows that investors are pricing in at least two rates cuts in 2019. And while the Federal Reserve hasn’t committed to cutting interest rates, Chairman Jerome Powell did say that he would consider adjusting policy to help sustain the economic expansion if trade policy tensions continue to intensify.
“The market started to sense that the Fed was starting to transition from a pause to a more actively dovish stance,” Quincy Krosby, chief market strategist at Prudential Financial, told MarketWatch. She said anything that is seen as bolstering the economy-sensitive sector can deliver a jolt to shares of the materials sector.
Stocks of companies tied to aluminum and steel manufacturing were oversold last month and are now bouncing back, Karyn Cavanaugh, senior market strategist at Voya Investment Management, said.
Beyond trade tensions with China, in the past month the market also had to digest a threat by President Donald Trump to raise tariffs against Mexico if it didn’t help stem the flow of immigrants flowing into the U.S.
Krosby said that valuations after the earlier selloff may have made materials even more compelling.
Hope for an easy-money stance by the Fed and other central banks has partly helped the Dow Jones Industrial Average DJIA, -0.17% S&P 500 index SPX, -0.20% and Nasdaq Composite Index COMP, -0.38% return at least 4.5% so far in June.
U.S. markets showed weakness for a 2nd-straight session while closing slightly lower in anticipation of what the Fed may or may not do ahead of next week’s FOMC update. The pullback held near-term support levels with the possibility of a mini-trade range developing into the announcement on interest rates.
The Nasdaq was down 0.4% after testing a morning low of 7,773 and failing to clear its 50-day moving average for the 3rd-straight session. Near-term and upper support at 7,750-7,700 easily held with a close below the latter opening up risk towards 7,650-7,600.
The Dow was lower by 0.2%, after trading to an intraday low of 25,958. Near-term and upper support at 26,000-25,750 and the 50-day moving average was breached but held with a close below the latter being a bearish development.
The S&P 500 also slipped 0.2% following the intraday pullback to 2,874. Fresh and upper support at 2,875-2,850 was breached but held with the index holding its 50-day moving average for the 4th-straight session.
The Russell 2000 bucked the trend after edging up less than a point, or 0.05%, while testing a 2nd-half high of 1,522. Upper support at 1,515-1,500 was breached but held following the opening pullback to 1,512.
Utilities led sector strength after jumping 1.3%. Healthcare and Real Estate were higher by 0.5% and 0.4%.
Energy and Financials were the weakest sectors after dropping 1.4% and 1%, respectively.
Brinker (EAT) upgraded to Outperform from Market Perform at Telsey Advisory CommScope (COMM) upgraded to Buy from Neutral at Rosenblatt NXP Semiconductors (NXPI) upgraded to Overweight from Equal Weight at Morgan Stanley
Amcor (AMCR) reinstated with a Sell from Neutral at Goldman Sachs Beyond Meat (BYND) downgraded to Market Perform Dave & Buster's (PLAY) downgraded to Hold from Buy at Gordon Haskett
THURSDAY'S EARNINGS ANNOUNCEMENTS Before the open: Crown Crafts (CRWS), Duluth Holdings (DLTH), LiveXLive Media (LIVX), Secoo Holdings (SECO), Tufin (TUFN)
After the close: Broadcom (AVGO), Pure Bioscience (PURE), Urovant Sciences (UROV), Vince Holding (VNCE)
METALS / OIL Goldclosed at $1,336.80 an ounce,up $5.60 Silversettled at $14.75 an ounce,up $0.01 Copperfinished at $2.65 a pound,down $0.02 Crude Oilwas at $51.12 a barrel, down $1.95 Bitcoin Investment Trust (GBTC)ended at $10.45, up $0.65
I hope this helps you prepare for the trading day. Make it a great one!
Todd Mitchell
Not sure the best way to get started? Follow these 3 simple steps ...
Stocks closed marginally lower on Tuesday, taking a breather after posting strong gains to start off June.
The Dow Jones Industrial Average ended the day down 14.17 points at 26,048.51, erasing a gain of 185.99 points. The S&P 500 slipped less than 0.1% to 2,885.72 while the Nasdaq Composite finished just below breakeven at 7,822.57. The industrials sector was the biggest laggard in the S&P 500, dropping 0.9% as Raytheon shares declined by 5.1%.
The Dow also snapped a six-day winning streak. However, the S&P 500 remained around 2.4% below an intraday record.
“At this point, a failure to break out to new highs would be viewed as negative. The month is only a week and a half old, but we’ve got a head of steam now. We’re seeing evidence of more individual stocks in the S&P 500 making new highs. There’s a bit of an expectations the S&P 500 might be able to test those levels we saw in April,” said Willie Delwiche, investment strategist at Baird.
“The potential headwind to that is what happens with sentiment. Sentiment turned so negative in May and now, as stock rebound in June, we’re seeing pessimism being replaced with optimism. If it comes in too fast, that can shift from being a tailwind for stocks to a headwind,” Delwiche said.
Stocks jumped to start the day as a resolution between Mexico and the U.S. to avoid tariffs and hopes of lower interest rates from the Federal Reserve lifted investor sentiment.
President Donald Trump said Sunday that a 5% levy all Mexican imports into the U.S. would be suspended indefinitely. He added he had “full confidence” in Mexico’s ability to crack down on immigration from Central America.
Global stocks rose after Chinese state news agency Xinhua said the country would let local governments use bonds to finance infrastructure projects. The Shanghai Composite jumped 2.6% overnight, while the Stoxx 600 index in Europe gained 0.7%.
Market expectations for lower rates by July sat around 78%, according to the CME Group’s FedWatch tool. Investors are also pricing in a 97.1% chance of lower rates by December, according to FedWatch.
These forecasts have been rising amid weakening U.S. economic data. Monthly jobs growth slowed to 75,000 in May, missing an estimate of 180,000. Meanwhile, manufacturing activity in the U.S. grew at its slowest pace since 2016.
Stocks are on pace for sharp monthly gains after a strong decline in May. The major indexes are all up nearly 5%. In May, the Dow and S&P 500 dropped more than 6% each while the Nasdaq slid nearly 8%.
“The pendulum has swung significantly in the other direction,” said Art Hogan, chief market strategist at National Securities. “We spent six weeks grinding lower and now we’re spending seven days popping higher.”
“It feels like we went from despair to exuberance in too short of a period of time without much changing in terms of facts. I’d like to see some stabilization here,” he said.
President Donald Trump said Tuesday that he won’t proceed with new trade talks with China unless Beijing agrees to terms previously agreed upon.
Speaking to reporters outside the White House before leaving for a trip to Iowa, Trump made it clear that he won’t budge without “a great deal,” and accused Chinese officials of reneging on promises made at earlier negotiations.
“China wants to make a deal very badly,” Trump said. “It is me right now that is holding up the deal. And we’re going to either do a great deal with China or we’re not going to do a deal.”
“We had a deal with China and then they went back on the deal,” Trump said. “They said we don’t want to have four major points, five major points.” He did not specify what those points of contention were.
Trump’s comments came a day after he threatened to raise tariffs to 25% on $300 billion of Chinese imports if China’s President Xi Jinping doesn’t meet with him at the upcoming G-20 summit in Japan. “Tariffs are a beautiful thing,” Trump told CNBC on Monday, arguing that tariffs will eventually force China to make a trade deal.
