In recent months, I've noted many times in this space the importance of the U.S. consumer and that many of the recession calls were likely premature because the market has not absorbed material deterioration in consumer data to date. I'll stick by that thesis because the preliminary September sentiment reading seems to indicate the August result was a bump in the road, not the start of a negative trend.
The Dow Jones Industrial Average traded higher for a seventh straight day and U.S. benchmarks are again flirting with record highs.
Adding to today's ebullience was news out of China that the country will exempt certain U.S. goods from 25% tariffs that were deployed last year. This is the latest sign that the trade talks the two countries are expected to hold next month could actually happen and that the results could be positive.
Likely adding to weakness in stocks is ongoing momentum for value stocks, which will plague growth fare. Count me among those that need a little more convincing that value is “back,” but the factor has been topping growth since early August.
That report was certainly one of the reasons why stocks swooned in the first trading of the month because ISM readings below 50 are viewed as poor. Unfortunately, ominous economic data points have recently been accumulating, fueling the fires of recession speculation.
In fact, the results for Friday, the last trading day of August, weren't too shabby when considering there was a concerning consumer data point released earlier today. Regular readers know that I've been beating the consumer drum quite a bit recently and it is a story worth following for investors.
Fortunately, that confirmation emerged today that two sides are indeed discussing trade and that helped stocks focus on something other than the second-quarter GDP revision, was pared down to growth of 2.1%. There was some good news in that GDP report that indicates the oft-discussed recession isn't as imminent as previously thought.
Put simply, Powell's Wyoming remarks weren't dovish enough for the president or markets as evidenced by Friday's tumble. Trump pondered on Twiter “My only question is, who is our bigger enemy, Jay Powell or Chairman Xi?”
However, that thesis may have been a short-term blow today as President of the Philadelphia Fed Patrick Harker said he doesn't believe more monetary stimulus is needed while Kansas City Federal Reserve Bank President Esther George said she sees the U.S. economy as still on solid ground.
Despite the dollar firming again today, the plenty of export-sensitive sectors and individual names rallied, helping the Nasdaq Composite to a gain of 1.35% while the S&P 500 added 1.21%. The Dow Jones Industrial Average started the week higher by 0.96% with just two of its 30 components finishing lower on the day.
For example, one of today's catalysts was China saying it will not let the yuan depreciate further. That helped for today, but some market observers believe there are trust issues that need to be resolved when it comes to the U.S. and its dealings with China. Another reason equities surged today is the belief that the trade war cannot get much worse. That's a belief rooted in hope, not empirical evidence.
Thursday serves as a reminder that with a simple visit to Twitter, President Trump can move markets. It is also a reminder that until real progress is made on the trade front, investors may want to focus on sectors that generate big chunks of their revenue on a domestic basis. Those just happen to be some groups that also benefit from lower interest rates – real estate, telecom and utilities.
At the close, the Nasdaq Composite slipped 0.44% as the technology sector was one of Monday's laggard groups. That hampered the S&P 500, in which technology is also the largest sector allocation, sending the benchmark U.S. equity gauge lower by 0.16%. The Dow Jones Industrial Average started the week higher by 0.11%.
Buoyed by strong earnings reports from technology companies and a solid second-quarter GDP reading, many Dow Jones stocks rallied Friday.
It was a different ballgame for the Dow Jones Industrial Average, which slumped 0.29%.The Dow's Wednesday weakness was largely attributable to a 4.50% loss industrial machinery maker Caterpillar.
Broadly speaking, stocks were somewhat listless Monday as traders await an absolute avalanche of marquee earnings reports this week.
Even with some trouble spots, the Nasdaq Composite, of which Netflix is a member, gained 0.27% while the S&P 500 added 0.36%. The Dow Jones Industrial Average rose 0.01%.
In advance of some important earnings reports coming Thursday from some big-name members of the Dow Jones Industrial Average, the major U.S. equity indexes did a whole lot of nothing Wednesday.
Arguably adding to the disappointment that was Tuesday's broader market action was that there was some encouraging economic data out earlier in the day. Retail sales rose for a fourth consecutive month in June, indicating that one of the primary drivers of the U.S. economy, that being the consumer, remains sturdy.