Yesterday, calmness returned to the market, but it happened on a late August day on Wall Street, which means light volume and skewed outcomes.
Big news from the G-7 meeting came from a one-page communique that acknowledged the World Trade Organization (WTO) is antiquated and needs to be “modernized.” I take that as a de facto admission China has flouted the rules and the rest of the G-7 supports the United States.
This is better than trying to rally the troops: getting Europe to ignore the riches of China’s Belt and Road Initiative (BRI), which would be harder to come by if they took a more forceful stance.
So, the market rallied with all 30 stocks in the Dow closing higher, and all sectors other than Materials finished higher.
S&P 500 Index | +0.84% | |
Communication Services (XLC) | +1.17% | |
Consumer Discretionary (XLY) | +0.70% | |
Consumer Staples (XLP) | +1.01% | |
Energy (XLE) | +0.25% | |
Financials (XLF) | +0.80% | |
Health Care (XLV) | +0.83% | |
Industrials (XLI) | +0.41% | |
Materials (XLB) | -0.05% | |
Real Estate (XLRE) | +0.54% | |
Technology (XLK) | +1.14% | |
Utilities (XLU) | +0.78% |
The market breadth was fine - new lows dwarfed new highs, underscoring the lingering carnage.
Market Breadth
NYSE
- Advancers: 1,968
- Decliners: 972
- Up volume: 2.07 billion
- Down volume: 805.3 million
- New highs: 61
- New lows: 133
NASDAQ
- Advancers: 2,054
- Decliners: 1060
- Up volume: 1.22 billion
- Down volume: 490.2 million
- New highs: 36
- New lows: 138
More on Durable Goods
Karina Hernandez: Research Analyst, Wall Street Strategies
With talks of a recession along the way, I crunched the numbers of the latest second quarter (Q2) Gross Domestic Product (GDP) report, understanding their numbers to a broader scale. Personal consumption expenditures remain strong at 4.3%. Private investment tumbled 5.5% due to challenges in global growth and tariffs.
I saw a trend in private investment from 2015-2016, where private investment fell into a "recession," possibly due to oil prices. However, the overall economy did not contract due to strong consumers. My thesis is that what's yet to come will heavily depend on consumers.
See my in-depth segment, where I shared my letter to the Business Roundtable.
The United States of America-China Chamber of Commerce (USCCC) branch shows cracks in the notion American businesses can’t or won’t move supply chains. Moreover, only 30% say they are in China to make stuff to export to the United States. That’s great news and should be articulated, as the public demands more accountability.
If you have relocated or are considering relocating China-based manufacturing facilities to other
countries because of the tariffs, where have you located, or where are you relocating to (check all that apply)?
Options | Responses | Percentage |
No plans to relocate | 144 | 60.3% |
Southeast Asia | 59 | 24.7% |
Mexico | 25 | 10.5% |
Indian Subcontinent | 20 | 8.4% |
United States | 14 | 5.9% |
What specific outcome of any trade deal is the most important to your company?
Options | Responses | Percentage |
Return to status quo | 102 | 42.7% |
Equal enforcement of Chinese regulations for foreigners | 35 | 14.6% |
Increased market access | 29 | 12.1% |
Improve IPR protection | 24 | 10.0% |
End Chinese industrial policies | 17 | 7.1% |
Purchase more U.S. goods by China | 7 | 2.9% |
What is your primary strategy in China?
Options | Responses | Percentage |
Produce goods or services for China market | 103 | 43.1% |
Produce goods or services for U.S. market | 30 | 12.6% |
Produce goods or services for markets other than China and the U.S. | 22 | 9.2% |
Today’s Session
What the Heck?
During the last several weeks the market has seen brutal volatility that has left many investors shaken, although the market’s resolve seems to underscore most are hanging in there.
This morning equity futures have improbably been trending higher. The two biggest down sessions over the last four weeks were triggered by events that were supposed to spell doom.
Date | Event | Dow Jones |
August 5, 2019 | Yuan moves below 7 to one dollar | -768 points |
August 14, 2019 | Two and ten yields invert | -800 points |
This morning the market seems to be yawning instead of panicking which leads me to ask what the heck is going on.
The two- and ten-year yield have been inverted all morning.
- Two year 1.537%
- Ten Year 1.515%
The Yuan continues to get weaker against the US Dollar.
- Yuan 1 = $7.16
If the market can rally against the tide of events that just hit like atomic bombs, then you know there is a serious pent up demand to own US stocks.