 The Market Sum | Insight after the bell
By Caleb Silver, Editor in Chief Friday's Headlines 1. Markets fade off record highs Markets Closed
Year-to-Date
 Summertime... Happy Summer to those of you in the Northern Hemisphere.
Got any good books on your summer reading list? Here's what Bill Gates recommends.
There is a fresh batch of new warning signs for investors to navigate. One is sector based, involving semiconductor stocks, the others are macroeconomic. All are serious.
U.S. Markets Slide into the Weekend
U.S markets couldn't add on to Thursday's records, but ended the day relatively flat, capping an intense week for investors. The S&P500 is up 7% in June, erasing May's losses, as investors pin their hopes on future interest rate cuts from the Federal Reserve.
After months of aggregate outflows, investors have been putting money back to work in the stock market, helping push the major U.S. indexes to - or close to - record highs.
According to Bank of America Merrill Lynch, investors put $14.4 billion into equities in the past week, the most since March of 2018. They also put $8.2 billion into bonds, which has been a hot part of the market as prices continue to rise as yields collapse. Momentum investing in stocks is picking up, as evidenced by the S&P500's recent records and the broad breadth of the market rally.  Chip Stocks Sales Ban The U.S. Dept. of Commerce issued a new restriction of sales of semiconductors and telecom equipment to five Chinese companies it deems to pose national security threats. Those companies are:
I've never heard of these companies or their aliases, and you likely haven't either, unless you are well versed in the Chinese high performance computing industry. But U.S. based semiconductor manufacturers know these companies well, as they are some of their biggest Asian customers.
The new ban is similar to the U.S. Commerce Dept. ban on selling equipment to Chinese telecom giant Huawei issued last May. That ban was later amended, but it still fractured trade negotiations between the U.S. and China, who are battling over forced technology transfer, among other issues.
Read more: What is Forced Technology Transfer? Read more: Why is Huawei in the Middle of the U.S. China Trade War?
Semiconductor stocks sold off on the news, but recovered a bit of those losses by the close.
Semis are very sensitive to the trade war since they are critical components in smart phones, laptops, servers and PCs. If you look at a one year chart of the Philadelphia Semiconductor Index, it pretty much mirrors the up and down chaos of the trade war, albeit a bit more extreme. The SOXX Index is the top chart.
chart courtesy koyfin.com  Truckin' Trouble
Regular readers know I am a little obsessed with cargo and trucking data as an economic indicator. We got a new one today from BofA Merrill Lynch, and it's not positive. Bank of America's Truck Shipper Survey which surveys 40 trucking companies in the U.S. about freight demand and supply, showed a 29% year over year decline, the largest in the history of the survey. Trucking companies are telling the Bank that shipping rates are down, capacity and inventories are high, and demand is falling. That's a bad combination of metrics, and it tells a larger tale of where the U.S. economy may be headed.
About 70% of what truckers move are industrial and consumer goods, and retail products.
What's unusual is that they did not cite the U.S.-China trade war as the source of the declines. Most of them blamed bad weather in the Spring, which hurt produce production, as well as a slower than usual home building season. We've seen that manifest in falling timber and lumber prices, and now we are hearing it from the trucking companies that haul that material from the mills to the Home Depots and lumber yards across the country.
Here's BofA's chart of the outlook from shippers, taken just a couple days ago.  Manufacturing Miss
Not to overload you with pessimistic economic reports on a summer Friday, but this is what we are seeing.
The IHS Markit Flash Purchasing Managers Index, out this morning, showed the weakest expansion of business activity in the past three years. While it's not cratering, it's been trending lower all Spring. IHS Markit surveys private manufacturers on business conditions, employment, order flows and other metrics. While many of them were feeling the impacts of the trade war for the past several months, they are starting to see weakness in their own pricing power due to demand.
Apologies for the tiny chart, but you can zoom in for the details.  This is what economic weakness feels like. We start to see it in these weekly and monthly reports until it becomes a trend that spreads across most major industries It hasn't made its way to the consumer yet, but it is hard to imagine that it won't, eventually.
This is also why we are seeing so many investors and traders hoping and betting that the Federal Reserve will cut interest rates. Businesses feel tight. Their customers are spending less and capacity and inventories are building, but they have no pricing power. That's why the Fed is concerned about inflation, and why it might very well have to use the mighty sword of monetary policy to stimulate the economy before it continues to weaken.
The stock market may be near all-time highs, but don't confuse the stock market with the economy.
It's irrational right now, but remember the famous words of John Maynard Keynes:
"The Market can remain irrational longer than you can remain solvent." 
chart courtesy www.koyfin.com  Carmax rose more than 3% today on the company's fiscal first-quarter earnings.  Sealed Air Corp stocks deflated today (you see what I did) as Merrill Lynch downgraded the food packaging company following news that the company had fired their CFO.  Word of the Day Today was a Quadruple Witch day. Not sure what that is?
That's why we're here: "Quadruple witching refers to a date on which stock index futures, stock index options, stock options, and single stock futures expire simultaneously. While stock options contracts and index options expire on the third Friday of every month, all four asset classes expire simultaneously on the third Friday of March, June, September, and December."  credit: American-Rails.com
Today in History June 21st 1970: The Penn Central, one of the world's largest and oldest railroad operators, declares bankruptcy when the Federal government refuses to guarantee $200 million in emergency loans. Investors -- especially banks and holders of the railway's commercial paper -- were caught almost completely by surprise.
The New York Times, June 22, 1970, p. 1 Chart of the Day: Gold Breaks Out to Multi-Year Highs  We just wrote about the big breakout in gold prices a few days ago, but the precious metal's rally has hit even higher highs since then. The recent combination of lower interest rate expectations, a weaker U.S. dollar, and safe haven flows have boosted gold above the $1,400 price level. At its height on Friday, price reached all the way up to $1,415, a level not seen since September of 2013 – nearly six years ago.
As we explained earlier this week, when interest rates are expected to fall or remain low (as they are now), non-interest-bearing gold has less competition from interest-bearing instruments. As a result, demand for gold, and gold prices, tend to rise. This is what we're currently seeing with the precious metal as the Federal Reserve has become increasingly dovish of late.
Adding onto that, the U.S. dollar has begun to make some significant declines. Since gold is typically denominated in U.S. dollars, gold and the dollar are generally inversely correlated. As a result, when the dollar drops in value, gold prices tend to rise, and vice versa. Now, as the dollar has been on the downswing again, gold has been further boosted.
Finally, gold has also been buoyed in recent weeks and months by various market risk concerns, including fears of global trade wars and economic slowdowns, which have helped boost the precious metal in its capacity as a perceived safe-haven asset. Investors tend to buy gold when they are concerned or fearful about global political and economic conditions.
As shown on the chart above, the price of gold has shot up in the past two days to breakout above previous resistance around the $1,365 level. This is a major breakout that places the precious metal at a critical juncture above the long-term range of the past several years. If this breakout extends, the next major upside targets are around the $1,430 and then $1,530 resistance levels.
How can we improve the Market Sum? Tell us at marketsum@investopedia.com
Enjoy the Market Sum? Share it with a friend. Or share the link below to invite friends to sign up.
CONNECT WITH INVESTOPEDIA
Email sent to: mondemand.forex@blogger.com To update your newsletter preferences or unsubscribe, click here.
114 West 41st St, floor 8 New York NY 10036 © 2019, Investopedia, LLC. All Rights Reserved | Privacy Policy |
Friday, June 21, 2019
Summertime Blues
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment