Art Hogan’s Week in Review – July 12, 2019

July 12, 2019

The market saw two round numbers taken out, and all-time highs for the big three indexes. The Dow Jones Industrials took out the 27000 level ending the week at 27332. The S&P 500 found the 3000 milepost this week and was able to close at 3011, up 20% year-to-date. The Nasdaq closed at 8244, an all-time high.

The key driver for the week was the semi-annual two-day trip to Capitol Hill that Federal Reserve Chairman Jerome Powell made. Chair Powell took a page out of the Keynes’ book and changed his mind on rates. While delivering the Monetary Policy Report, Powell certainly leaned into the facts that changed in the second quarter and left little doubt about which direction he sees rates going next. In testimony this week to the House Financial Services Committee, Powell said business investments across the U.S. have slowed “notably” recently as uncertainties over the economic outlook linger.

“Crosscurrents have reemerged,” Powell said. “Many FOMC participants saw that the case for a somewhat more accommodative monetary policy had strengthened. Since then, based on incoming data and other developments, it appears that uncertainties around trade tensions and concerns about the strength of the global economy continue to weigh on the U.S. economic outlook.”

Markets took Chair Powell’s comments to heart, and wasted little time pushing markets to all-time highs. All that’s left to debate is how big that rate cut might be. The most likely scenario is 25 basis points. But there’s still the possibility of a larger 50-basis-point cut. Either way, for now, Don’t Fight the Fed.

Highlights from last Week:

Both headline and core CPI rose one tenth more than expected. The core rate in particular rose 0.3% m/o/m and 2.1% y/o/y, the 16th straight month in a row with a 2 handle. Services inflation ex energy rose 0.3% for the 3rd month in the past 4. Versus last year, they rose 2.8%. The noteworthy aspect of the data was the 0.4% m/o/m jump in goods prices ex food and energy

Producer prices in June exceeded expectations both headline and core with .1% and .3% m/o/m gains respectively. Versus a year ago the headline rate rose 1.7% and the core rate was higher by 2.3%. That core rate print marks the 23rd straight month of 2%+ gains. Services inflation led the way with a .4% m/o/m gain while goods prices ex food and energy was flat.

Federal Reserve Chairman Jerome Powell spent a two days testifying before Congress, where there seems to be increasing agreement on the need for a rate cut. The latest data on inflation, meanwhile, were not enough to stop the Fed from its expected rate cut later this month. It would be the first cut since December 2008.

Oil moved higher on the heels of bullish news to its highest price in almost two months as a potential hurricane roiled the Gulf of Mexico and U.S. crude inventories dropped. WTI advanced 4.9% to $60.35, the highest close since May 22.

Next Week’s Catalysts

Earnings next week: Citi; Goldman; JPMorgan; Wells Fargo; J&J; Domino’s; CSX; United; Bank of America; US Bancorp; PNC; eBay; IBM; Netflix; Morgan Stanley; Union Pacific; UNH; Blackstone; SunTrust; Microsoft; Capital One; Chewy; AmEx; BlackRock;

Monday – China eco data (Q2 GDP along w/June IP, retail sales, FAI, and new home prices all out Sunday night/Monday morning), US Empire Manufacturing for Jul (8:30 am ET), Fed speakers (Williams), and earnings (Atlas Copco, C, and LUB before the open and JBHT and Rio Tinto after the close).

Tuesday – German ZEW for Jul (5 am ET), Eurozone trade balance for May
(5 am ET), US import/export prices for June (8:30 am ET), US retail sales for June (8:30 am ET), US IP/manufacturing production for June (9:15 am ET), US NAHB housing market index for July (10 am ET), US business inventories for May (10 am ET), Fed speakers (Bostic, Evans), and earnings (Burberry, CP, DPZ, Experian, FHN, FRC, GS, JNJ, JPM, PLD, SCHW, SNV, and WFC, before the open and CSX, CTAS, FNF, IBKR, SGEN, and UAL after the close).

Wednesday – US Housing starts/building permits for June (8:30 am ET), US Beige Book (2 pm ET), and earnings (ABT, ASML, BAC, BK, CMA, PGR, PNC, TXT, and USB before the open and AA, ADTN, CCI, CCK, EBAY,
IBM, NFLX, PLXS, SLG, TCBI, UMPQ, and URI after the close).

Thursday – US Philadelphia Fed for Jul (8:30 am ET), US Leading Index for June (10 am ET), Fed speakers (Bostic, Williams), and earnings (ADS, ALLY, BBT, DHR, DOV, Electrolux, GPC, HON, MS, MTB, Novartis, NUE, PM, PPG, SAP, STI, TSM, UNH, UNP, and WBS before the open and CHWY, COF, CRWD, ETFC, ISRG, MSFT, OZK, PBCT, RECN, and SKX after the close).

Friday – Japan CPI for June (Thursday night/Friday morning), US Michigan Confidence for Jul (10 am ET), Fed speakers (Bullard, Rosengren), analyst meetings (SCHW), and earnings (ALV, AXP, BLK, CFG, CLF, GNTX, KSU, MAN, RF, SLB, STT, SXT, and SFY)


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.