 The Market Sum | Insight after the bell
By Caleb Silver, Editor in Chief Thursday's Headlines 1. U.S. Markets Rally on Strong Retail and Tech Earnings 2. China Cuts its Holdings of U.S. Debt 3. Berkshire Hathaway's $900 million Stake in Amazon Markets Closed
 Markets Rally on Strong Earnings U.S. markets started strong, stayed strong, and finished strong today, as good old-fashioned fundamentals drove the sentiment.
Strong earnings reports out of blue-chip companies like Cisco Systems and Walmart set the tone, as both companies, in very different businesses, demonstrated strong results and upbeat outlooks for the year.
Trade issues continue to play on in the background, but without a clear resolution in sight, they did not sap investor enthusiasm.
There was one piece of news concerning U.S. and China relations that is worth noting, however.
China Reduces Holdings of U.S. Debt China, the biggest holder of U.S. debt, reduced its holdings of U.S. Treasuries in March by about $20.5 billion, bringing its overall ownership down to $1.12 trillion.
This brings China's holdings to their lowest level in two years and it's hard not to think that there is a connection between the trade tensions and this reduction in China's investments in US bonds.
Per CNBC citing UBS, China's share of total U.S. debt compared with other global government declined to 17.3%, the lowest since June 2006. Japan is still the second-largest holder, with $1.08 trillion, while the U.K. stepped backed into third place as it increased its level to $317.1 billion.
There has been a lot of hand-wringing about whether China will use its leverage as the Unites States' largest debt holder in trade negotiations as the tariffs intensify. U.S. Treasury Secretary Mnuchin was asked about that this Monday and said that he hoped China would continue to buy U.S. Treasuries since, as the Secretary said, 'It's a very good investment.'
This is worth keeping an eye on.
Here's a visual of the countries that own the largest chunks of U.S. debt, per debtconsolidation.com from late 2018.  Walmart Wins Walmart reported a very strong first quarter for 2019. It exceeded analysts estimates for earnings per share while revenue was in line with expectations. For the quarter, Walmart rung up $123.9 billion in sales, which is astounding. Walmart also posted a 3.4% increase in same store sales from the prior quarter. It was the biggest increase in that metric in nine years for the company. The world's largest retailer by nearly every measure, has also been investing heavily in its e-commerce platform to take on Amazon.com and match their next day delivery offerings. Online sales grew 37% in the U.S. on strength in groceries, fashion and home goods. Make no mistake about it, Walmart is going toe to toe with Amazon, although it has yet to launch a movie studio or a cloud computing business.
One key takeaway from Walmart's report is that company executives acknowledged that the tariff increases would eventually lead to higher prices for its customers. This has been a known effect of the trade war, but company executives in ever industry have been reticent to admit it openly. Not anymore.
It's worth noting that we are starting to see a slight uptick in consumer prices across the boards in the U.S. over the past couple of months. To be sure, inflation is still very tame. But, if retailers like Walmart start raising prices, the conversation may soon change.
Here's a chart of the latest Consumer Price Index, which was released by the Dept of Commerce on Friday.  Berkshire Hathaway Reveals $904 Million Amazon Stake In a regulatory filing on Wednesday, Warren Buffett's Berkshire Hathaway revealed that the size of its investment in Amazon.com Inc. was 483,300 shares as of March 31, 2019.
Read More: Berkshire Reveals $904 million Amazon Stake
Berkshire's stake in Amazon represents only 0.1% of Amazon's outstanding equity, a relatively small position given the company's sizable investments in Apple Inc. (AAPL), JPMorgan Chase & Co. (JPM) and American Express Co. (AXP).
photo composite courtesy of ccn.com 
Charts courtesy of www.koyfin.com   Communication chipmakers (Xilinx, Qorvo, Skyworks) fell today on news of the Commerce Department adding Huawei Technologies and its affiliates on an "Entity List", which restricts the company's ability to buy components from U.S. companies. The trade war appears to be having some unforeseen consequences.  Word of the Day In a spot of good news for Uber (and bad news for their drivers), the National Labor Relations Board has concluded that company drivers are contractors, and not employees. The ruling renders Uber drivers ineligible for protections given under federal law to employees - for unionizing, most notably.
"An independent contractor is a person or entity contracted to perform work for—or provide services to—another entity as a nonemployee. As a result, independent contractors must pay their own Social Security and Medicare taxes. The payer must correctly classify each payee as either an independent contractor or employee. Another term for an independent contractor is a freelancer."  photo courtesy Museum of American Finance
Today in History May 16, 1792, the Buttonwood Agreement is signed. A legal agreement between merchants and stockbrokers, the Buttonwood Agreement is thought to be the forerunner to the New York Stock Exchange.
"The Buttonwood Agreement was made in 1792 between 24 stockbrokers and merchants on Wall Street in New York City in an effort to create a stock exchange. Rumored to have occurred under a buttonwood tree, the agreement marked the beginnings of the investment community of Wall Street." Chart of the Day: Tumbling 10-Year Yield Hits a Double Bottom  The benchmark 10-year U.S. Treasury yield has virtually been in a state of free fall since the major double-top pattern around 3.250% completed forming in November of last year. Now, the tables have turned and the 10-year yield has just formed a double bottom right around the 2.350% level. As shown on the chart, the first bottom was in late March, which hit a level not seen since the end of 2017. And just on Thursday, the benchmark yield dropped down to test November's trough.
A double-bottom pattern is a twice-touched low that is considered a strong support level. When fully formed, a double bottom is a bullish reversal pattern that looks a bit like the letter "W." To be considered fully formed, price (or yield, in this case) should break out above the peak between the bottoms. Of course, this hasn't happened yet, so the pattern is still tentative.
Contributing to the sharp decline in bond yields in recent weeks and months have been fears of slowing global economic growth, dovish-turning central banks, and expectations of low interest rates for longer. Investors are increasingly expecting the Federal Reserve to cut interest rates this year for the first time in over a decade. And most recently, an escalating trade war between the U.S. and China has reignited fears that protectionist policies on both sides could further weigh on global economic growth.
Does the tentative bottom that just formed on the 10-year mean that yields have bottomed out? Not quite yet - as mentioned, a double bottom is not confirmed until there's a breakout above the intra-trough peak. Alternatively, watch for any legitimate breakdown below the lows of the double-bottom – technically, this would be a substantially bearish signal.
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Thursday, May 16, 2019
Signs of Strength
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