Art Hogan’s Week in Review – June 14, 2019

Week in Review

After seven weeks of higher than normal volatility, the market settled into a relatively normal steady-as-she-goes pattern. Over the last seven weeks we had seen an 8% drawdown, followed by a 6% retracement higher. This past week had plenty of headlines, but none so shocking as to rock-the boat. The S&P 500 ended the week at 2887, about 14 points higher, or 0.49%. It was not surprising to see less volatility in a week where two of the larger market moving catalyst on the short term horizon. The first possible pivot will be next week’s FOMC meeting, as investors have started to build expectations of rate cuts in the coming months. The second is the G20 meetings on June 28-29, where there is a building belief that both Presidents Trump and Xi will have a face to face meeting. The hope is that this will be the start of a round of US-China trade negations that have been dormant since May 3rd.

Highlights for the week:

Merger Monday strikes again. Raytheon and United Technologies agreed to a $166 billion merger that would make the combined company, which will be called Raytheon Technologies, the second biggest defense contractor on the planet, behind Boeing. United Technologies would own 57% of the combined entities to Raytheon’s 43%. A merger would bring together Raytheon’s Tomahawk missile systems with United Technologies capabilities in jet engine manufacturing. United Technologies split its company into three units last November which include Otis Elevators, Carrier HVAC Systems and its Aerospace division, which is the one merging with Raytheon.

Salesforce said it would acquire Tableau Software for $15.7 billion. This would be the biggest acquisition in the company’s history. Tableau helps companies analyze and visualize large data sets. Salesforce became the biggest CRM-(Customer Relationship Management) company in the world over the past decade, and helps companies generate and manage enormous amounts of data on their customers.

The headline retail sales number rose 0.5% in May, somewhat less than expected. But the “control” group that tracks the consumption input to GDP more closely (it excludes auto sales, gasoline, food/restaurants, and building materials) was also up a healthy 0.5%. Moreover, April’s same number was revised up from zero to a 0.4% gain! And March looks even better now, up 1.3%.

The U.S. blamed Iran for suspected attacks on two oil tankers Thursday near the strategic Strait of Hormuz, denouncing what it called a campaign of “escalating tensions” in a region crucial to global energy supplies.

U.S.-based equity funds attracted $4.4 billion of inflows in the week ended Wednesday, following two consecutive weeks of cash outflows totaling $34 billion, according to Lipper date Here. The United States and Mexico struck a deal to avert tariffs. U.S.-based high-yield junk bond funds – which move in sympathy with equity flows – attracted more than $1.7 billion of inflows in the week ended Wednesday, also following two straight weeks of cash withdrawals

Economic Data from last week:

MBA Mortgage Apps Up 26.8%
CPI & PPI +0.1% in line with estimates
IP / CU +0.4% / 78.1% Better than estimates
Michigan Sentiment 97.1 In line with estimates

Catalysts for the week ahead:

FOMC, BOJ and BOE Meetings
Global Flash PMIs
G-20 energy ministers meeting in Karuizawa, Japan
India set to levy higher tariffs on some U.S. goods Sunday
US Hearing on further China Tariffs Anticipated Tuesday
Friday sees a Quad Witch, along with a S&P Rebalance
ECB Forum on Central Banking
Paris Air Show

Monday – Eurozone labor costs for Q1 (5 am ET), the US Empire Manufacturing Index for June (8:30 am ET), the USTR China tariff hearing (on the remaining $300B worth of Chinese imports), and the US NAHB index for June (10 am ET).

Tuesday- China new home prices for May (Monday night/Tuesday morning), Eurozone auto registrations for May (2 am ET), Eurozone trade balance for April (5 am ET), Eurozone/German ZEW survey results for June (5 am ET), US housing starts/building permits for May (8:30 am ET), the kickoff to Trump’s reelection campaign (he will be holding an event in Orlando), analyst meetings (GE, HPE, Tesco, and Volvo), earnings (ADBE, JBL, and LZB after the close), and conferences (JPMorgan Energy).

Wednesday – Japan imports/exports for May (Tuesday night/Wednesday morning), Eurozone construction output for April (5 am ET), the FOMC decision (2 pm ET press release and 2:30 pm ET press conf.), analyst meetings (Airbus, CYBG PLC, HQY, and SHOP), earnings (BKS and WGO before the open and ORCL and SCS after the close), and conferences (JPMorgan Energy).

Thursday – BOJ policy decision (Wednesday night/Thursday morning), Japan machine orders for May (Thursday morning), Taiwan export orders for May
(4 am ET), the ECB economic bulletin (4 am ET), the BOE policy decision ( 7am ET), the EU Leader’s Summit (6/20-21 in Brussels), Trump’s meeting w/Trudeau in Washington, the Philadelphia Fed Index for June (8:30 am ET), the US Leading Index for May (10 am ET), the Eurozone consumer confidence reading for June (10 am ET), analyst meetings (MRK and QGEN), and earnings (CMC, DRI, and KR before the open and KFY and RHT after the close).

Friday – Australia flash PMIs for June (Thursday night/Friday morning), Japan’s flash manufacturing PMI for June (Thurs night/Fri morning), the Japan CPI for May (Thursday night/Friday morning), the Eurozone flash PMIs for June (4 am ET), EU Leader’s Summit (6/20-21 in Brussels), the US flash PMIs for June (9:45 am ET), US existing home sales for May (10 am ET), earnings (KMX before the open), and the US bank stress tests (results from the latest stress tests will be released Fri 6/21 at 4:30 pm ET).

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.