Investors have been haunted by three big themes this week: trade talks, U.S. politics and, lately, the economy.
It has been a tall order trying to get the clouds to clear on any one of these issues. As for the first, stocks have been pinning gains on hopes of a trade deal. Talk of a broad agreement, and a “productive meeting” tweet from Treasury Sec. Steven Mnuchin may have calmed some nerves as trade wrapped Friday. (see Buzz below).
Productive meetings with China’s Vice Premier Liu He and @USTradeRep Amb. Lighthizer. pic.twitter.com/KxOZffFXAa
— Steven Mnuchin (@stevenmnuchin1) February 15, 2019
And while a partial government shutdown is likely off the table, talk of an “emergency declaration” by POTUS will likely keep tensions between he and Congress simmering.
Then there is the economy, and we’ll get a key Michigan consumer sentiment survey Friday, following that gloomy retail sales that momentarily knocked the market from its perch.
“U.S. December retail sales rather shocked financial markets yesterday by seeming to imply that Americans had abandoned their lifelong national past time of spending money they don’t have on things they don’t need,” Paul Donovan, chief economist of UBS Global Wealth Management, told clients in a webcast.
“The world can probably breathe easily however, as this can be filed away under the headline of dodgy data,” he said, going on to point out how it was the second-best January for retail employment in 30 years, which hardly jibes with gloomy December sales data.
Our call of the day, from Seema Shah, global investment strategist at Principal Global Investors, is less sanguine. She says get inured to data-driven volatility for stocks, thanks to the U.S. central bank.
“The market is currently lacking in direction because there is no guidance from the Fed. So while the market tries to decide what the economic and monetary policy trajectory is, ‘the Fed’s data dependency means volatility will be elevated and markets may be subject to wild swings,’” said Shah in emailed comments.
Shah worries that the market has swung from “excessively pessimistic to excessively optimistic,” and may be underestimating coming headwinds from a global slowdown. While Fed Chairman Jerome Powell’s U-turn is one reason that she likes U.S. and emerging-market equities, she hasn’t got hopes that the current rally will last too much longer.
“If the underlying economy really is that weak, weakening earnings growth will weigh on equities. Or, if the Fed was simply propping up markets, renewed fears of inflation and rising interest rates are likely. Whichever reason you prefer for the Fed’s U-turn, the conclusion is the same: enjoy the ride while it lasts.“
Check out: These charts say don’t freak out over an ‘earnings recession’
The market
Some green shoots for Dow YMH9, +0.16% , S&P 500 ESH9, +0.15% and Nasdaq NQH9, +0.17% futures. That is after a mostly lower finish Thursday — the Dow DJIA, -0.41% and S&P 500 SPX, -0.27% dropped, and the Nasdaq COMP, +0.09% squeaked by with a gain. Read more in Market Snapshot.
The dollar DXY, +0.09% is steady, and gold GCJ9, +0.49% and oil CLH9, +0.51% are up slightly.
Read: U.K. Parliament rejects Prime Minister May’s Brexit strategy
Europe stocks SXXP, +0.76% are tracking a bit higher. Asia finished the week mostly lower, with the Hang Seng HSI, -1.87% dropping 1.7%. Data showed China inflation slowing even more in January.
The economy
A big data dump awaits, on the heels of that dismal retail sales data. We’ll get import and export prices, the February Empire State manufacturing survey, industrial production, business inventories and the University of Michigan’s consumer-sentiment index for February, which slumped in January.
The buzz
Progress toward a broad deal and plans to keep talking next week in Washington, is the gist of the outcome of Beijing trade talks, with a memo of agreement one possibly outcome. That is after earlier reports the two sides are deadlocked over key issues. China was hoping that purchases of U.S. semiconductor and other goods would persuade Trump to extend a 90-day tariff truce that ends in March, according to reports.
Earnings have been rolling out from PepsiCo PEP, -1.34% Newell Brands NWL, +0.18% and Deere DE, -0.17% whose shares are down after profit fell short.
Late Thursday, Applied Materials AMAT, -0.34% beat lower expectations, but its forecast also disappointed. Nvidia NVDA, +1.08% is soaring on an upbeat outlook, but do investors trust that view?
Equity holdings for the final quarter of 2018, reveal Warren Buffett’s Berkshire Hathaway BRK.A, -1.44% BRK.B, -1.47% cut its position in Apple AAPL, +0.36% dumped Oracle ORCL, +0.12% and bought Red Hat RHT, +0.02% and JPMorgan JPM, -0.65%
JPM, -0.65% Meanwhile, Buffett’s right-hand man, Charlie Munger tells CNBC that California, Connecticut and New York have been “driving rich people away,” with tax policies, saying that’s a “stupid move.”
Facebook FB, -0.07% may pay a record-setting, multibillion-dollar fine in an FTC settlement over an investigation into its privacy practices.
The chart
Lumberjacks rejoice. Our chart of the day from U.S. Global Investors reveals that the week’s best-performing commodity has been the stuff of home builders dreams, which saw a gain of nearly 8%.
“The commodity rose to a four-month high after supplies heading into the spring building season are sparse, according to industry insiders,” said Global Investors on their blog.
The quote
AFP/Getty Images
Protesters in Long, Island pictured last November
“Amazon is paying $0 in taxes on $11+ billion in profit. $0 for schools. $0 for firefighters. $0 for infrastructure. $0 for research and health care. Why should corporations that contribute nothing to the pot be in a position to take billions from the public?” — That was New York (D) Congresswoman Alexandria Ocasio-Cortez weighing in via Twitter on Amazon’s AMZN, -1.06% decision to pull plans for a Queens headquarters. But there is plenty of grumbling about lost opportunities from local business owners, and others:
Usually a big fan of your boldness and leadership, @aoc, but respectfully, you’re looking at this one the wrong way. NYC lost a lot of future jobs, tax revenue, and consumer spending today. Amazon, meanwhile, will now just provide those benefits to another city. https://t.co/KC5xDmXO3F
— Henry Blodget (@hblodget) February 14, 2019
The stat
283% — That was the fiscal third-quarter earnings gain for Canopy Growth CGC, +0.15% the biggest pot company by market value, which reported late Thursday in results practically buried in a filing on Canada’s securities regulator database. Canopy said it sold 10,102 kilograms of pot, but its bottom line was eroded by sales and marketing costs.
The economy
A big data dump awaits, on the heels of that dismal retail sales data. We’ll get import and export prices, the February Empire State manufacturing survey, industrial production, business inventories and the University of Michigan’s consumer-sentiment index for February, which slumped in January.
Random reads
A suicide bomb left over 40 Indian military personnel dead on Thursday.
Reports are that police may be investigating whether Jussie Smollett staged his own attack
POTUS: Pretty healthy, but clinically obese, says his doctor
Jogger’s hair-raising, life and death battle with a mountain lion
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