The market never really got out the gate with any gusto as the NASDAQ is still reeling from Facebook, despite powerful results from Amazon.  I think hot money and momentum traders are at a crossroads of sorts.  It’s something that had to happen sooner or later.

The NASDAQ composite is so elevated, it would take a much bigger slide to trigger panic. For now, the series of higher lows remain in place as shares are changing hands well above the 50-day moving average.

NASDAQ

Sentiment & Tariffs

That indecision made it easy to tilt stocks lower when University of Michigan Sentiment read was released.  The headline 97.9 was better than the consensus of 97.3, as jobs and income continue to power sentiment.

But the issue of tariff fear has crept deeper into to the psyche of respondents.

Michigan Consumer Sentiment	June 2018	July 2018	June 2017	M/M Change	Y/Y Change
Index of Consumer Sentiment	97.9	98.2	93.4	-0.3%	+4.8%
Current Economic Conditions	114.4	116.5	113.4	-1.8%	+0.9%
Index of Consumer Expectations	87.3	86.3	80.5	+1.2%	+8.4%

 

From University of Michigan

Consumers have kept their confidence at high levels due to favorable job and income prospects

 Concerns about tariffs greatly accelerated in the July survey.

Across all households, 35% spontaneously mentioned that the tariffs would have a negative economic impact in July, up from 21% in June and 15% in May.

Consumers who had negative concerns about the tariffs voiced a much more pessimistic economic outlook, had inflation expectations that were 0.6 percentage points higher than those who hadn't mentioned tariffs, and were more likely to anticipate that the unemployment rate would rise during the year ahead.

Of course, these negative economic expectations could quickly disappear if the trade issues with Europe are promptly settled and immediately followed by agreements with China, Canada, and Mexico. Resolution is critical to forestall decreases in consumer discretionary spending as a precaution against a worsening economy.

My Takeaway

Negative mentions to tariffs are more pronounced along party lines, as 45% of Democrats voiced concern in July up from 26% in May, and concern among Republicans increased 300% from June to July.   As the report mentions, this anxiety can go away overnight with a resolution of notable progress.

My thoughts are sentiment remains elevated and should remain that way as long as job openings remain near record levels and wages continue to edge higher.  While I don’t think tariff concerns will curb consumer confidence and spending, the topic has crossed into the mainstream as a negative political talking point, which means it will echo loud.  Ironically, this could mean swifter resolution.

Conversely, I’m impressed with the jump in the expectations component, which had been floundering.  It tells me despite concerns, most consumer see the current trade flap getting resolved.

The Market

Retail apparel stocks are weak today after Columbia Sportswear (COLM) lowered its guidance due to rising cost pressures.  The company reported earnings of $0.16 per share, above consensus by $0.26.  Revenues rose 20.7% to $481.62M, 6.25% above the consensus of $453.27M.  Columbia’s first half revenue rose above the billion-dollar level for the first time in the company’s history.   

Full-year EPS guidance fell short of estimates by 6%, and the stock is trading down over 7%.  CEO Timothy Boyle discussed cost pressures on the firm’s conference call.  Saying, "We do face cost increases related to some accessories. And we are anticipating immaterial cost increases for some construction and fixturing as a result of steel and aluminum tariffs. That said, the escalating global trade battles have the potential to be very disruptive to our business as well as our vendors, our customers and to many of the countries where we do business including the United States."

Technology is being pressured by Intel (INTC) and Twitter (TWTR) after they reported disappointing earnings, the stocks are down 8.6% and 19.5%, respectively.  Internet security companies are under pressure after Imperva (IMPV) issued downside guidance.      

Buy the rumor, sell the news, is an old Wall Street adage that seems apropos for today’s market action.  Selling is accelerating as traders are wary of taking on risk heading into the weekend. 

• The Dow is down 0.45%
• The Nasdaq is down 1.63%
• The S&P 500 is lower by 0.80%
• The Russell is lower by 1.7%

Comments

Fear is always spread, but OPPORTUNITY has to be taken. We bought 3K shares of LRCX st firesale prices, held, & waited for the pop, sold some for huge profits, let rest gain dividends. Also sold ALL our puts on FB, NFLX, TWTR. Life is good be invested. Thank you Charles & FBN for being the FACTS & TRUTH news. USA GDP 4.1% & EU now will talk reciprocal TRADE, even Mexico wants a deal, Thank you Charles for being the VOICE of the USA workers, & Thank you president Trump for proving" the new norm" was a BIG LIE! J on 7/28/2018 3:42:19 PM

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