 The Market Sum | Insight after the bell
By Caleb Silver, Editor in Chief Friday's Headlines 1. U.S. Markets Rally to End Volatile Week 2. U.S. Treasury Yields Bounce off Lows 3. Deere Warns About Future Demand 4. CEO Pay Keeps on Rising 5. What to Expect Next Week Markets Closed
Year-to-Date
 Markets Today
U.S. markets rallied in light trading on this summer Friday, helping claw back some of the losses from Tuesday's brutal rout.
Here's where investors put their money in the past week, according to Bank of America:
The S&P 500 actually ended the week flat, but it sure didn't feel that way. Concerns about a possible recession, the inverted yield curve, the trade war with China, slowing corporate profits, and a host of other issues are still pervasive.  Deere to Cut Production by 20% as Farmers Stop Spending Tractor-maker Deere reported earnings this morning and badly missed analysts' forecasts. The company is seeing slack demand from farmers and agricultural exports, and is responding by cutting 20% of its production in plants across the Midwest. Shares of Deere rallied more than 3% today, but Deere's warning should be taken seriously.
CEO Samuel Allen said, "Concerns about export-market access, near-term demand for commodities such as soybeans, and overall crop conditions have caused many farmers to postpone major equipment purchases."
This is what tightening feels like. Even though borrowing costs are cheap due to lower interest rates, farmers are holding back on purchases. Some of that is due to a very wet growing season in the U.S. that caused widespread flooding, but a lot of it can be pinned on the trade war with China.
According to the American Farm Bureau, China imported $9.1 billion of U.S. farm produce in 2018, down from $19.5 billion in 2017. Imports fell again in the first half of 2019 for everything from soybeans to poultry. Soybeans are the most valuable U.S. export crop, and U.S. shipments to China of soybeans fell to a 16-year low last year as China turned to Brazil for supply.  GE Bounces Back Shares of General Electric staged a bit of a comeback Friday, the day after Madoff whistleblower Harry Markopolos accused the former Dow component of accounting fraud, claiming that the company has been hiding losses for years. In a 170 page report commissioned by a hedge funds, Markopolos claimed that GE had as much as $38 billion in losses over several years and the company would eventually be forced to file for bankruptcy.
GE CEO Larry Culp responded by denying those claims, calling them "market manipulation," on the part of the hedge fund that hired Markopolos to conduct the report. He also put his money where his mouth was by purchasing $2 million worth of GE shares yesterday.
Today, analysts who cover GE defended the company, helping send shares up 8%. As I said yesterday, this is far from over.
Here's GE shares this week:  CEO Pay Keeps on Climbing
Nobody should be surprised by this, but the statistics do get one's attention. According to the Economic Policy Institute, a progressive think tank, CEO compensation rose more than 1000% in the last 40 years, compared to a meager 11.9% rise for average workers. This, the Institute says, is exacerbating income inequality.
The EPI study revealed that corporate boards running America's largest public firms are giving top executives outsize compensation packages. The average pay of CEOs at the top 350 firms in 2018 was $17.2 million (including stock options), or $14.0 million using a more conservative measure. CEO compensation is very high relative to typical worker compensation (by a ratio of 278-to-1 or 221-to-1).  The EPI points out that CEO pay has also been rising about four times faster than the returns in the S&P 500, which is ironic given that a healthy portion of executive compensation is tied to stock performance. If you are looking for inflation, I think we found it.
Here are a few of the highest paid executives in the U.S, per S&P Capital IQ. It's good to be the boss, sometimes.
What to Expect Next Week August has been a dicey month for investors, and it doesn't get any easier until after Labor Day. While second quarter earnings season is just about in the rear-view mirror, there are several big events coming up next week and the following that are worthy of our attention.
The Huawei deadline: On Aug. 19, the 90 day exemption for U.S. companies to sell products to the China telecom giant expires. The Trump Administration may decide to extend it, which would be an olive branch to China, or reinstate the ban. U.S. semiconductor manufacturers and other telecom providers make a lot of money from Huawei, so reinstating the ban would hurt their sales and send a very direct sign to China's trade negotiators.
Italian government confidence vote: On Aug. 20, Italian Prime Minister Giuseppe Conte will be summoned to Parliament to face a confidence vote after he lost a key member of his coalition. A no-confidence vote could prompt Conte to resign, throwing the Italian government into chaos at a particularly sensitive time for the European Union. Germany, Brexit...you know what I mean.
Fed retreat in Jackson Hole: Aug. 24–25: The Federal Reserve and leading economists gather at their annual retreat in Jackson Hole, Wyoming, and there will be much more than fly fishing and mountain bike rides on the agenda. The Fed has been under intense pressure from the Trump Administration and some members of the business community to cut rates more aggressively to thwart a recession.
New tariffs to go into effect: It's not technically next week, but the Sept 1st deadline for another round of tariffs is scheduled to go into effect right before Labor Day here in the U.S.
Trump pulled the reins on tariffs on consumer goods and electronics this week, and the markets responded well. Will he show more signs of conciliation next week ahead of the Sept 1 deadline?
Programming note: I'll be out until Aug. 28 for a little summer fun with my family. James Early has the wheel and you are in good hands.
- Caleb
chart courtesy www.koyfin.com  General Electric's stock price has made a significant recovery by almost 10% from yesterday's loss, following GE's CEO purchasing a bulk of the company's shares and analysts asserting that the fraud allegations were baseless. Shares of Nvidia rose by over 7% today, due to its fiscal 2020 Q2 earnings beating estimates.  Shares of Alliance Data Systems fell by just over 9% after Deutsche Bank analysts downgraded the stock from "buy" to "hold." TripAdvisor's stock price decreased by more than 1% today amid its "hold" rating being reaffirmed by Stifel Nicolaus equities researchers.  Once again there were many winners today, with Hong Kong and Mexico having climbed the highest. Not every country was so lucky though, as evident by Turkey's performance. Word of the Day: One of the most popular ways to evaluate executive compensation is by comparing pay and performance. Unfortunately, many executives are given raises and bonuses even when their companies are faltering. Comparing pay to stock performance can help you determine whether executives are overpaid. The specific metric used most often is comparing the change year-over-year in executive pay increases to the change in stock price. If the change in the stock price outpaces the change in pay, the executive is not overpaid.  photo courtesy Time.com Today in Rock History Aug. 16, 1977: Elvis Presley died on this day in 1977. There is no investing story here, but Elvis was the King of his day to millions of people. My dad is a super fan.
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Friday, August 16, 2019
Stepping Up
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