 The Market Sum | Insight after the bell
By Caleb Silver, Editor in Chief Friday's Headlines 1. Markets Fall for Second Straight Week 2. White House Considers Investment Limits on China 3. Consumer Confidence is Cracking 4. What's Ahead for Next Week? Markets Closed
Year-to-Date
 Markets Today
U.S. markets marched towards their second straight week of declines as political chaos in Washington added another unnecessary dose of uncertainty into the mix.
Today, several reports surfaced that the U.S. is considering implementing investing caps in China—especially into Chinese companies. Bloomberg News was the first to report that Trump administration officials are considering ways to limit U.S. investors' portfolio flows into China, including delisting Chinese companies from American stock exchanges and preventing U.S. government pension funds from investing in the Chinese market.
It might be a negotiating tactic ahead of the Oct. 10 rendezvous between U.S. and Chinese trade officials, but it also comes just as China is removing limits on foreign investment in its financial markets.
According to a report by the U.S.-China Economic and Security Review Commission, the market capitalization of the 156 Chinese companies, including at least 11 state-owned firms, listed on the three-largest U.S. exchanges—the NASDAQ, New York Stock Exchange, and NYSE American—stood at a collective $1.2 trillion as of late February.
The biggest of those companies is Alibaba, with a market cap close to half a trillion dollars. You might know Alibaba by name, but its operating businesses may be less known to folks outside of China or Asia.  More than 1,600 U.S. institutional investors hold shares of BABA, the ADR for Alibaba that trades on the Nasdaq.
Confidence in Cracking U.S. consumer sentiment improved somewhat in September, according to the Univ. of Michigan's monthly sentiment survey, but still shows signs of erosion.
According to the survey results, one-third of respondents made a negative mention of trade policies when asked to explain their economic expectations, and fewer Americans saw wages rising or unemployment falling in the year ahead.
Consumer spending for August rose 0.1% from July, the smallest gain in six months, but consumer confidence for September, which was released on Sept. 24, fell to a three-month low.  Yet, Risk Assets Continue to Surge Despite the second straight week of sell-offs for U.S. markets, it is nothing short of remarkable how well risky assets have performed so far in 2019.
So many things could've tripped up the stock market by now, but have yet to do so. That may be due to the low interest rate environment that we live in today, which has driven investors to stocks and corporate bonds. Or it might be an undercurrent of confidence that the global economy will recover and the U.S. may avoid a recession.
In a research report out this morning, Bank of America called it "The Miracle on Wall Street." Here's a short list of just some of the many events that could've been a land mine for capital markets:
We could keep going, but you get the point. Yet, risk assets have posted very healthy returns so far in 2019:
I mentioned a contraction in global profits in our list. That's far from over. As we will see going into earnings season, companies in the S&P 500 are already forecasting another decline in profits. Will investors ignore those warnings? Or will this be the quarter that brings the storm clouds?  What to Expect Next Week: The third quarter of 2019 comes to a close on Monday (where did the year go?).
Earnings season will kick off in a couple of weeks, except for a few companies that report off-cycle, such as Pepsi, Constellation Brands, and Bed Bath and Beyond, which all report next week.
The theme of the second quarter earnings was the impact of the trade war and global uncertainty balanced by the strength of the U.S. consumer. We'll see if that narrative holds up, and more importantly, if companies are taking down forecasts going into the final quarter of the year.
On late Sunday, early Monday, we'll get reports on Chinese manufacturing. The trend in China's Purchasing Managers Index has been lower since the Fall of 2017 (U.S. Presidential elections), but there have been months of mini-recoveries when negotiations looked positive. Note that the U.S. and Chinese trade representatives are planning to meet on Oct. 10, so we could see a slight bounce back.
Here's China's PMI going back five years, courtesy of tradingeconomics.com:  We'll get U.S. manufacturing reports for September on Tuesday. That has also been trending lower until last month, when a rise in new orders and output growth boosted the U.S. Purchasing Managers Index off of 10-year lows. Export growth, however continued to weaken, which has been the pervasive theme since late 2017.
U.K. GDP We'll get the final second quarter GDP results for the United Kingdom on Monday and the forecast is for a 0.5% drop. That would be the first negative quarter of growth for the U.K. since 2009. But, let's be honest... all anyone cares about is if, how, and when Brexit will be resolved. Now that Parliament is back in session after a high court judge ruled that PM Boris Johnson's attempt to prorogue it was unlawful, the clock is ticking towards the Oct. 31 Brexit deadline.
The potential outcomes are:
U.S. Jobs Report (Friday) Friday brings the September nonfarm payrolls report. The U.S. jobs market is tight. Unemployment is low and we've seen some real wage increases that have helped boost consumer confidence. There are signs, however, that both are starting to show weakness.
As mentioned earlier, consumer confidence in the U.S. weakened in the past month—the second in a row. It's still relatively strong, but the trade war and other political uncertainties are starting to wear down the consumer.
Here's the trend in monthly job gains over the past year: 
chart courtesy www.koyfin.com  Shares of Wells Fargo rose by nearly 4% after former Bank of New York Mellon Chief Executive Charles Scharf was named the company's new CEO. Ulta Beauty's share price increased by over 3% today, following the official start of its "Fall Haul" sale.  Following the plunge that began yesterday, shares of Micron fell another 11% today due to the U.S.-China trade war diminishing its sales to Huawei. Corresponding with today's top gainer, Bank of New York Mellon's stock price fell over 4% after their Chairman and CEO departed for Wells Fargo.  Word of the Day Divestment is the process of selling subsidiary assets, investments, or divisions in order to maximize the value of the parent company. Also known as divestiture, it is the opposite of an investment and is usually done when that subsidiary asset or division is not performing up to expectations. Companies can choose to deploy this strategy to satisfy either financial, social, or political goals.  (image courtesy: Society for American Baseball Research)
Today in Gambling History Sept. 27, 1920: Eight Chicago White Sox players are charged with fixing the 1919 World Series. Over the decades, major-league baseball has produced a host of memorable teams, but only one infamous one—the 1919 Chicago White Sox. Almost a century after the fact, the exact details of the affair known in sports lore as the Black Sox Scandal remain murky and subject to debate. But one central and indisputable truth endures: Talented members of that White Sox club conspired with professional gamblers to rig the outcome of the 1919 World Series.
(source: https://sabr.org/research/black-sox-scandal-bill-lamb)
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Friday, September 27, 2019
Tripping
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