Morning Commentary
It was a rough week for the market, especially Blue-Chip names that populated the Dow Jones Industrial Average. A confluence of trends slammed the index that barely avoided a ninth straight losing session.
On Friday, the entire market limped into the weekend as sellers stepped up in the last moments of trading.
The good news is the S&P 500 proved it could rally without technology or financials, which are almost 40% of the total weight of the index.
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What’s the Deal with Financials?
I continue to point to the sloppy action in financials. The big banks are yellow flags, although it might be more of an issue for their business models than a reflection of a wider economic threat brewing. Meanwhile, an eclectic mix of names in the sectors are doing well.
Energy rallied as West Texas Intermediate (WTI) rallied 5.5% after the Organization of the Petroleum Exporting Countries (OPEC) hiked its official output goals on Friday morning. OPEC is in a major quandary as several of its members couldn’t participate in higher production goals even if it was announced.
Later in the session, we learned the U.S. oil rig count was relatively unchanged and has remained flat for the past four weeks. The ability of independent oil companies will go a long way toward determining if this big bounce becomes a sustained rally.
The question is: can the big losing sectors of 2018 (energy, materials, and industrials) gain any traction?
Materials have been weighed down by International Paper (IP) and Freeport-McMoRan (FCX). I still like this sector, but my conviction has been tempered by disappointment.
In addition, Industrials have been dragged down by Caterpillar (CAT), Boeing (BA) and Baker Hughes (BHGE), which seem like screaming buys for long-term investors.
There weren’t a lot of big names reporting last week, but this is the week to expect pre-earnings warnings.
Today’s Session
In the absence of any other news, the trade war escalation takes center stage. There are numerous developments, including a report the Trump Administration is crafting rules that would block firms with 25%+ Chinese ownership from buying U.S. companies involved in “industrially significant technology.” According to the WSJ, the action is still being fleshed out, and some think the ownership ceiling would be lowered.
When the latest round of China tariffs was announced, it was clear those industries associated with China’s 2025 plan to eventually dominate the world would be the real battleground. The amount of technology America has allowed China to steal thus far boggles the mind, and it is past time to draw a line in the sand with new rules and real deterrents.
It’s uncomfortable for the market, as global elites don’t care where growth comes from or how much this unfair transfer of technology and wealth impacts Americans.
Developments
PBOC
The People’s Bank of China is easing capital restrictions for banks in an effort to soften the blow from U.S. tariffs, which have already hammered China’s equity market.
Interestingly, the terms of these new easier restrictions reveal a serious financial crisis brewing in China’s debt. The Debt-to-Equity swap means banks must convert debt into equity.
Harley
Harley says it will move some manufacturing to international locations not impacted by EU increased tariffs on motorbikes. The company says changes, and holding down suggested wholesale prices, will cost $100.0 million annually. (The shares will open lower, but I think they are already oversold, and the stock is a long term buy.)
Comments |
Thank you Charles, & FBN, wisdom of facts, thru the haze & noise of false news Bloomberg reports, never have source name always wants to be anonymous. We ARE BUYING today firesales, soo many foolish things cause people to sell, when they should buy & hold long.. Do you ever notice , China ,& other countries reports that hurt USA markets/ companies & pres Trump, happen on days President Trump has a planned rally?? All to often the fake news clears up after the rally or speaking event, & large hedges, investors, DEMS., have bought huge selloff stocks, or bought back shares during the" NO NAME SOURCE, rumor of the sky is falling, sell everything now!"?? It has been more & more common since state of the union speech, & pres Trump 1yr anniversary speech, etc... As always market issues are USA TODAY is stronger than ever, No one has actually been involved with TRADE WAR, other than leaks, & false news reports as FACTS... CHINA is in trouble with its economic growth, EU, & Others as well. SO blockbuster false news reports are strategically linked to president Trump speeches, or anniversary speech. #1Tax cuts, #2 Cutting out & removing Regulations, & #3Defense spending, the USA is at ALL TIME LOWEST UNEMPLOYED in years , decades, history, & NOT REBUILDING OTHER COUNTRIES NOW. So again, We ARE BUYING TODAY. Playing fields are being negotiated not NEGLECTED as in the past. Pres Trump want 100% FREE TRADE EVERYWHERE RECIPROCAL IN ALL COUNTRIES..but thieves, corruption, & payoffs by former presidents, administration, & Clinton, Obama, others MUST now be fixed, & is being done.. Please tell others, the facts they won't hear from false news reports & fake news, on unnamed sources ( anti trump protesters,& anti USA activists are the UNNAMED SOURCES!) We are FULLY 100% supporting pres Trump, & USA ,& ALL OUR VETERANS. Ed on 6/25/2018 1:56:51 PM |
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