Art Hogan’s Week in Review – June 21, 2019

Week in review

The S&P 500 closed at its first all-time high since April this week as markets focused on three big macro drivers: ECB’s Mario Draghi’s Dovish Speech; Presidents Trump and Xi’s phone call; and The FOMC’s dovish lean. In short the market has moved higher on the belief that Central banks will be cutting and a China deal is coming.

After 14 trading sessions, the S&P 500 is up 7.3% in June. This is the best start to a month since October 2011 and would be the best overall June since 1955. The month of June has seen the Dow, the S&P 500, and the Nasdaq up an impressive 7.81%, 7.47%, and 7.84% respectively. The May draw down has been virtually erased on the promise of easier monetary policy and the hope of getting the US-China trade negotiations back on track. The June move was made more powerful by the ultra-low investor sentiment in the 5 week sell-off that was the month of May.

Highlights for the Week:

Pfizer announcing that they will buy Array Biopharma for $48 a share in cash or $10.4 Billion. Shares of Array closed up 57%. Both boards of directors have approved the merger. 

In a tweet on Tuesday, Trump said that he and Xi “had a very good telephone conversation,” will be having “an extended meeting next week at the G-20 in Japan.” and that “our respective teams will begin talks prior to our meeting.”

Chinese state media reported shortly following the announcement that Xi had agreed to meet with Trump at the summit, scheduled for June 28-29 in Osaka

ECB President Mario Draghi reassured his constituents in the EU today that the European Central Bank would use fiscal stimulus to prop up the European economy if it falls into, or gets close to a recession. Investors took it as a sign that Draghi and the ECB would cut interest rates sooner than forecast and continue its accommodative policy to prop up European banks if necessary.

Facebook unveiled plans for its highly anticipated Libra cryptocurrency today, and this one feels different. The social media giant has been developing Libra for several years in the hopes that it will one day be used on a global scale among its 2 billion users like the U.S. dollar. The thing is, it’s not like the U.S. dollar, although it’s closer to the dollar, which is a fiat currency, than it is to Bitcoin.

The Federal Reserve did an admirable job meeting the market’s expectations on Wednesday, holding interest rates steady, while signaling possible rate cuts of as much as half a percentage point over the remainder of this year, as it responded to increased economic uncertainty and a drop in expected inflation. The Fed dropped the word “patient” in adjusting rates and said it “will act as appropriate to sustain” a nearly 10-year economic expansion. The Fed in essence delivered “insurance guidance” versus an insurance cut.

Federal authorities are investigating whether Deutsche Bank complied with laws meant to stop money laundering and other crimes, the latest government examination of potential misconduct at one of the world’s largest and most troubled banks, according to seven people familiar with the inquiry.

Slack opened at $38.50 on the New York Stock Exchange Thursday, well above the reference price of $26 that was set for the shares. The stock climbed as high as $42 apiece, giving the company a market value of more than $21 billion.

U.S. officials said a drone was shot down over Iranian airspace. President Donald Trump downplayed Iran’s attack on a U.S. Navy drone in the Persian Gulf that escalated regional tensions and fueled a surge in oil prices, suggesting a “loose and stupid” individual may have been responsible for the strike

Next Week’s Catalysts

Monday – German IFO for June (4 am ET), the Dallas Fed for June (10:30 am ET), US-China tariffs (the USTR comment period on the next tranche of Chinese tariffs ends 6/24; the tariffs could in theory go into effect at any time as of 6/25 although Trump said he would wait until after the G20 before making a decision), and analyst meetings (Alstom).

Tuesday – BOJ minutes from the April policy meeting (Monday night/Tuesday morning), US home price data for Apr (9 am ET), the US Richmond Fed Index for June (10 am ET), US new home sales for May (10 am ET), US Conference Board confidence for June (10 am ET), Powell’s speech before the Council on Foreign Relations in NYC (1 pm ET), Fed speakers (Williams, Bostic, Powell, Barkin, and Bullard), and earnings (BNED, FDS, and LEN before the open and AVAV, FDX, MU, and SNX after the close).

Wednesday – US wholesale/retail inventories for May (8:30 am ET), US durable/capital goods data for May (8:30 am ET), US advance goods trade balance for May (8:30 am ET), earnings (ATU, BB, GIS, INFO, PAYX, SCHN, and UNF before the open and FUL, KBH, MLHR, PIR, RAD, and WOR after the close).

Thursday – China industrial profits for May (Wednesday night/Thursday morning), Japan retail sales for May (Wednesday night/Thursday morning), Eurozone confidence measures for June (5 am ET), US Q1 GDP revisions (8:30 am ET), US pending home sales for May (10 am ET), and earnings (ACN, APOG, CAG, GMS, MKC, PDCO, and WBA before the open and CAMP, NKE, and SGH after the close).

Friday – Japan IP for May (Thursday night/Friday morning), Japan vehicle production for Apr and housing starts/construction orders for May (Fri morning), the Eurozone CPI for June (5 am ET), the start of the G20 summit in Japan (6/28-29), US personal income/spending for May (8:30 am ET), the US PCE for May (8:30 am ET), the Chicago PMI for June (9:45 am ET), Michigan confidence for June (10 am ET), and earnings (STZ before the open).

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.