Art Hogan’s Week in Review – June 7, 2019

Week in Review

The US markets had a strong run this week. Over the course of five trading days, the Dow Jones Industrials are up 1,115 points or 4.73%. The S&P 500 is higher by 130 points or 4.77%, while the Nasdaq is better by 400 points or 5.48%.

The two major shifts in the market narrative contributing to the recent rise are: a glimmer of hope on trade tensions with both China and Mexico, and a Fed that stands at the ready to cut rates if an elongated trade war cause economic damage. Those two catalysts are mutually exclusive at some juncture. If we are able to put the traded tensions behinds us, the Fed would be less likely to see the need for easier monetary policy.

Highlights for the week:

On the US-China trade front, there appears to be a glimmer of hope that a path back to the negotiation table is possible. The Chinese Commerce Ministry said in a post that the “differences and frictions between the two sides should be resolved through dialogue and consultation,” according to a Google translation. But the post also said talks “need to be based on mutual respect, equality and mutual benefit.”

Speaking at the “Conference on Monetary Strategy, Tools and Communications Practices,” in Chicago Tuesday morning, Federal Reserve Chairman Jerome Powell signaled the central bank was open to easing monetary policy. The Jay Powell comment that the market keyed on was “We do not know how or when these issues will be resolved,” he said in prepared remarks. “We are closely monitoring the implications of these developments for the U.S. economic outlook and, as always, we will act as appropriate to sustain the expansion, with a strong labor market and inflation near our symmetric 2 percent objective.”

Several Republicans were quick to go public with their opposition to new tariffs on Mexican imports, with some going so far as to suggest the possibility of blocking such levies. White House trade advisor Peter Navarro said earlier on Wednesday that U.S. levies on Mexican goods “may not have to go into effect” depending on how talks between the two countries go.

Job creation decelerated strongly in May, with nonfarm payrolls up by just 75,000 even as the unemployment rate remained at a 50-year low, the Labor Department reported Friday. The decline was the second in four months that payrolls increased by less than 100,000 as the labor market continues to show signs of weakening. Economists surveyed by Dow Jones had been looking for a gain of 180,000.

Catalysts for the week ahead:

Monday – China imports/exports for May (Sunday night / Monday morning), Japan’s final reading on Q1 GDP (Sunday night / Monday morning), US JOLTs for April (10 am ET), analyst meetings (TXMD),
and earnings (ASNA after the close).

Tuesday – US PPI for May (8:30 am ET), analyst meetings (CARG and PTC), earnings (CHS, HDS, and HRB before the open and PLAY after the
close), and conferences (Morgan Stanley financials).

Wednesday – Japan machine orders for April (Tuesday Night / Wednesday morning), China’s CPI/PPI for May (Tuesday night / Wednesday morning), comments from Draghi (4:15 am ET), the US CPI for May (8:30 am ET), analyst meetings (CTXS and LNC), earnings (LULU, OXM, RFIL, and TLRD after the close), and conferences (Morgan Stanley financials).

Thursday – SNB decision (3:30 am ET), Eurozone IP for April (5 am ET), US import/export prices for May (8:30 am ET), analyst meetings (CPB, ESPR, and WCC), and earnings (DLTH before the open and AVGO and VNCE after the close).

Friday – China economic data for May (FAI, IP, and retail sales Thursday night / Friday morning), Japan’s IP for April (Friday morning), US retail sales for May (8:30 am ET), US IP for May (9:15 am ET), Michigan Confidence for June (10 am ET), US business inventories for April (10 am ET), and analyst meetings (CNC and GLW).

The views and opinions expressed herein are those of the analyst Arthur Hogan and are current as of this report’s posting date. This commentary is general in nature and should not be construed as investment advice. Opinions are subject to change with market conditions. Neither Art Hogan nor National Securities Corporation is affiliated with the issuers mentioned herein, and no part of this analyst’s compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by the analyst in the report. The views & and strategies may not be suitable for all investors and is are not intended to be relied on for legal or tax advice. Please note that any investment involves risk including loss of principal.