 The Market Sum | Insight after the bell
By Caleb Silver, Editor in Chief Tuesday's Headlines 1. Markets Fall as Confidence Slips 2. Fed Chair Champions Independence Markets Closed
 U.S. Markets Tumble as Consumers Tense Up
Consumers Rattled After holding up pretty well all year despite the trade war and concerns about a global economic slowdown, U.S. consumers are showing signs of fragility.
The Conference Board's Consumer Confidence Index (CCI) for June hit its lowest levels since September 2017, after three months of steady increases. The CCI measures consumers' confidence about the present economic environment, their expectations for the future, and the labor market. They don't feel so confident about any one of those areas, and the majority of respondents cited rising tariffs as the main reason.
We are not at crisis levels yet - not even close - but given that U.S. consumers account for more than 70% of GDP, this one is worth watching.
chart courtesy tradingeconomics.com  No Pressure, Powell
In a speech to the Council on Foreign Relations in New York today, Fed Chair Jerome Powell defended the Federal Reserve's independence and said the Fed is, "insulated from short term political pressures." Powell did indicate that there are risks to what had been a favorable economic environment at the beginning of the year and that he and his colleagues will need to decide whether they warrant additional policy accommodation.
Translation: 'We might need to lower those interest rates sooner than we thought."
Traders are thinking that will happen at the FOMC's next meeting, which is at the end of July. According to the CME's Fed Watch Tool, options traders think there is a 100% chance the Fed will cut rates at that meeting in 35 days.  FedEx Sees Turbulence FedEx, the package delivery giant, reported its fiscal fourth quarter earnings this afternoon, and while the results were in line with expectations, the future looks pretty bumpy.
Here are the results as reported (GAAP)
FedEx is dealing with the impacts of deciding not to renew its FedEX Express delivery partnership with Amazon.com and a slowing global economy. The stock is down 35% over the past year, and never fully recovered from the December bear market.
This company has been through many ups and downs since its founding in 1971 and knows how to manage through the downturns.
It's feeling those downturns now, and bracing for more turbulent times ahead. Given its global reach and its finger on the pulse of businesses and consumers, we should all listen to what CFO Alan Graf said today:
"Our fiscal 2020 performance is being negatively affected by continued weakness in global trade and industrial production. While we are adjusting our costs to mitigate revenue weakness and market shifts, we will continue to invest in areas that expand our capabilities, improve our long-term efficiencies and reduce our cost to serve."
Here's FDX vs. the S&P500 over the past year.
chart via tradingview.com  Pharma Merger Boosts Botox Maker
The pharma aisle has already seen one big merger in 2019 as Bristol-Meyers Squibb paid $74 billion for rival Celgene (not that that deal has gone through yet). For big pharma companies, it's go big, or go home. Many of them, like Abbvie, rely on blockbuster drugs like Humira, the top selling drug in the world to drive their profits. Humira accounted for $19.1 billion worth of Abbvie's $32.8 billion in sales last year.
But when those blockbusters come off patent, as will be the case with Humira later this year, they need another one in their pipeline, or they need a strategic partner. Allergan found one in AbbVie, the maker of Botox and other skin products, which has also been looking for growth since being spun out of Abbott Labs. Together, both companies cover a wide range of women's health products and drugs to treat stomach illnesses, women's health and eye treatment.
As Big Pharma looks for its next growth phase, look for more of these mega-mergers that will consolidate the industry under just a few big names.
Allergan's shareholders thought they got a great deal today. Abbvie's...not so much. 
chart courtesy www.koyfin.com  We talked about it a little bit above, Allergan stocks shot up more than 25% today on news that AbbVie is going to buy the company for $63 billion.  AbbVie stocks plummeted more than 16% today on the same news. The chart above shows it nicely.  Word of the Day Consumer Confidence Index (CCI) "The Consumer Confidence Index (CCI) Survey is an index by The Conference Board that measures how optimistic or pessimistic consumers are with respect to the economy in the near future. The Consumer Confidence Index (CCI) is based on the concept that if consumers are optimistic, they tend to purchase more goods and services. This increase in spending inevitably stimulates the whole economy."
Today, the Consumer Confidence Index (CCI) dropped to its lowest level since September 2017.  Today in History June 25th, 1981 - Microsoft was formally incorporated in the state of Washington. Bill Gates and Paul Allen founded Microsoft in 1975 in New Mexico. Months earlier the company signed a deal to provide MS-DOS to IBM to power its PCs.
Above you can see the Microsoft logo through the ages, which begs the question, why did they ever get rid of the first one.
https://news.microsoft.com/facts-about-microsoft/#ImportantDates Chart of the Day: Small Caps Far Underperforming Large Caps  Tuesday was another down day for U.S. equity markets this week. Although all major stock indexes fell, small cap stocks are in a much weaker position overall than their large cap brethren, which may be worrisome. This divergence can readily be seen on the charts.
While the S&P 500 (SPX – large-cap benchmark index) is just coming down from its new all-time high that was hit late last week, the Russell 2000 (RUT – small-cap benchmark index), as shown above, is nowhere near its own August record high. Year to date, the Russell 2000 is up around 13% (as of Tuesday's market close), which is solid. But the S&P 500 is up nearly 18%. Put another way, the small-cap RUT is nearly 13% below its August all-time high, while the large-cap SPX is less than 2% below.
From a technical perspective, the Russell 2000 is now slightly under both its 50-day and 200-day moving averages, a significant bearish sign. In contrast, the S&P 500 is well above both of its own key averages. Though this may not necessarily be sustained going forward, it's a clear indication of large caps' substantial relative strength over small caps currently.
The relative weakness of the Russell 2000 is somewhat concerning, as this index is often seen as a leading indicator for the rest of the market. Where the small caps go, the large cap indexes are likely expected to follow, so this clearly does not bode well for the entire market. Does this mean that a bigger pullback or correction (or something even more foreboding) may be coming? Not necessarily, but at the very least, investors should be wary that market structure may possibly be in the midst of deteriorating, and that the strong bull market in large caps is not being confirmed by small caps.
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Tuesday, June 25, 2019
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