Quote of The Week "Many people think they want things, but they don't really have the strength, the discipline. They are weak. I believe that you get what you want if you want it badly enough."
-- Sophia Loren
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| | | Traders:
I hope your weekends have been good. Personally I think the ratio needs to be inverted... 2 work days and 5 weekend days. We should work on that.
Below you'll find a recap and some thoughts about next week. |
| Last Week In Sum U.S. equity markets rose this week (with the S&P and Nasdaq closing at new all-time highs) on the back of strong earnings reports (see below), a growing domestic economy supported by consumer spending and expectations of lower interest rates next week. S&P 500 +1.7%; Nasdaq +2.3% DJIA +0.1%.
The first reading of the U.S. Q2 GDP report came in at 2.1% topping consensus estimates of 1.9% (albeit slower than the 3.1% gain recorded in Q1). The underlying details were mixed, with consumer spending, the biggest driver of growth accelerating by 4.3%. But business investment declined for the first time since early 2016 as spending on factories, mining shafts and transportation equipment fell. Consumer spending is the biggest... but make no mistake... business investment falling is not good. Inventories fell as the trade gap widened and federal government spending rose - accounting for just over 1/2% of Q2 growth, the most since the end of 2009 (most likely a recovery from the first-quarter shutdown).
DIA |
| | Macro News:
- A bipartisan agreement will suspend the U.S. debt ceiling until the middle of 2021, eliminating the risk that the government could miss payments as early as September, a move that would have severe economic ramifications. It will also likely push the annual budget deficit for the U.S. above $1T next year, while Congress agrees on the details of the annual budget in separate appropriations bills to avert the possibility of a U.S. government shutdown. While markets are celebrating it seems to me that 45's administration is doing this to avoid talking about the ballooning deficit in the run up to the 2020 election.
- The Trump Administration is preparing a $16 billion relief package for U.S. farmers hurt by the trade war.
- The U.S. homeownership rate fell for a second straight quarter, as high prices and limited starter-home inventory are steering more households toward renting. The second quarter marked the first time the homeownership rate fell on an annual basis since 2016. There were 585,000 new homeowners in the quarter, compared with the nearly 600,000 new rental households.
- The European Central Bank signaled it is preparing to cut short-term interest rates for the first time since 2016 and restart a giant bond-buying program. The policy shift aims to insulate the wobbling eurozone economy from global headwinds ranging from trade tensions to Brexit...
- Meat lobbyists and vegan meat-makers are engaged in a battle: for what gets to actually be called meat. In 24 states, beef and farming industry groups have worked to prevent "meat" from being used to describe products that are made of non-animal products, while the alternative-meat makers are firing back, with one warning there's no need for "linguistic gymnastics" when faced with words like "burger." (A similar battle, as it happens, is occurring with rice.)
Micro News: - Tesla's shares dropped more than 10% in after-hour trading late Wednesday after the company announced its second quarter earnings—even though automative revenue rose by 60% year on year. That's because the biggest growth is coming from the Model 3—the newest, most affordable model Tesla offers, with thinner margins than its higher priced Model S and Model X.
- Google parent Alphabet reported a $9.2B profit for the second quarter, on revenue of $38.9 billion, up 19% from a year earlier—highlighting Google’s resilience in internet search.
- Amazon’s streak of record quarterly earnings ended at four, the victim of higher shipping costs, slower cloud-computing growth and a steeper loss in overseas retail. Profit for the second quarter was up 3.6% from a year earlier, at $2.63 billion, after more than doubling in the first quarter.
- Facebook posted a 28% rise in revenue for the second quarter, to $16.9 billion. And while critics may pummel the company for privacy missteps and misinformation on its platforms, it’s a darling of investors—the stock is up 56% this year, including 1.1% Wednesday.
- China’s new tech stock exchange, the Nasdaq-style STAR board in Shanghai, had a tumultuous debut this week when 25 companies launched on the bourse Monday. And launch they did – the average share price shot up 140% on the first day.
- Fortune Global 500: the number of Chinese firms rose to a record 129, including 10 from Taiwan, overtaking the 121 firms from the United States. This is the first time since its creation (1990) that a nation other than the US has topped the ranks of global big business.
- Alibaba has become the exclusive provider of Salesforce cloud services in greater China through a partnership with the U.S. company that secures Salesforce as Alibaba’s exclusive customer relationship management (CRM) suite offering.
- Ford, Honda, BMW and VW said they have voluntarily agreed to meet California emissions standards and reached a deal with the state on fuel economy, both stricter than what the Trump administration has proposed.
- Arianna Huffington and Benchmark’s Matt Cohler are stepping down from the Uber board. Both of the directors were vocal about the need for cultural and structural changes at the company under former CEO Travis Kalanick. Huffington and Cohler’s departures didn’t involve disagreements with Uber, and Huffington specifies she's leaving to focus on her company.
Facebook |
| | The Week Ahead
Next week is another action packed one...
- Heavy earnings calendar (including Beyond Meat, U.S. Steel, MasterCard, etc.).
- We also have the much anticipated FOMC meeting on July 30-31 as debate continues on whether we will see a 25 or 50 basis point rate cut. Federal Funds futures show traders are pricing in a roughly 89% chance of at least one more rate cut this year after next week and nearly 55% odds of at least two more.
- Also, next week, a U.S. trade delegation that includes U.S. Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer are flying to Shanghai to restart talks with their Chinese counterparts.
- On the economic front, the calendar includes reports on consumer confidence, construction spending, manufacturing activity and the July jobs report on Friday.
Bitcoin |
| | | As always, make up your own mind and, more important, minimize your risk no matter what you do.
KIS,
The Trader
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