Yesterday was a slow late summer session that never really got traction.  All the major equity indices were lower, including the NASDAQ, which stumbled in the last hour of trading.  That was interesting considering investors have begun not only plowing back into technology but focusing on oversold names and sectors. 

S&P 500 Index	-0.17%
Communication Services (XLC)	-0.41%
Consumer Discretionary (XLY)	-0.11%
Consumer Staples (XLP)	-0.24%
Energy (XLE)	-0.47%
Financials (XLF)	-0.46%
Health Care (XLV)	-0.05%
Industrials (XLI)	-0.29%
Materials (XLB)	-0.68%
Real Estate (XLRE)	-0.24%
Technology (XLK)	+0.19%
Utilities (XLU)	-0.11%

The standouts were NVIDIA (NVDA), which has caught on fire since giving up on the crypto- currency market, and Advanced Micro Devices (AMD), which got an upgrade this morning, but it acts like maybe Intel is preparing a takeover bid (it’s been in the rumor mill more than a decade).

Cyber security stocks look very compelling after a couple of years of false starts.  FireEye (FEYE) is getting a lot of press for helping Google and Facebook weed out Iranian and Russian threats.   I like FireEye, but Palo Alto acts better.  

On that note, after the close, Autodesk (ADSK) took off on strong earnings, and one of my favorites, Splunk (SPLK) beat the street on revenue and earnings and increased guidance.   Hewlett Packard (HPE) beat on its earnings, but the initial reaction saw its shares slightly lower.

Showdown!

Today could be like a scene from the cowboy movie classic ‘High Noon.’

Jerome Powell will speak at Jackson Hole Wyoming, and he will be expected to push back against President Trump, while reiterating the Fed’s independence.   One just has to hope he doesn’t take action like Janet Yellen’s ill-fated first interest rate hike, which was seen as an attempt to push back against Wall Street and show who was boss.  A sharp two-week pullback got her mind right, and the rally didn’t miss a beat with additional rate hikes.

The Fed also has its own internal drama that the media will not pick up on, but it has significant market implications.  The tools and parameters designed to trigger higher rates is in dispute, as many experts are saying action will be ineffective because it will take too long to work its way through an overheated economy. 

Critics are saying tightening policy should be like a football thrown to the spot, inflation will be not behind the shoulder because unlike wide receivers that can turn and catch the ball, it will totally miss the inflation mark. 

Market

It also feels like Gary Cooper waiting alone against giant odds with respect to the would-be handshake between Mexico and America on trade.  If it happens, it could be the first of many dominoes, and the street will cheer, and maybe even the entire country when it’s all said and done.

Like the memorable scene when Deputy Sheriff Baker said to Will Kane: You cleaned this town up.  You made it fit for women and kids to live in.

If we get that trade news early enough before the street is only sagebrush and tumbleweed, we could see a strong pop in the Dow, which must close above 25,822 to spark a move back to its all-time high point.

By the way, the China delegation has gone home without a deal, and while the media is suggesting China’s Trade Minister is saber-rattling, he has been somewhat contrite in interviews and their communique isn’t filled with bluster.

Business Confidence

Non-Defense Capital Goods ex-Aircraft, which is seen as the pure measure of business investment, came in +1.4%, a very robust number = strong business confidence.

The American Dream

Housing Situation:  Americans are getting richer, but what about starter homes?

% Change in Sales from 1 Year Ago

• $0-100K -10.6%
• $100-250K 0.2%
• $250-500K 9.3%
• $500-750K 10.7%
• $750K-1M 14.3%
• $1M+ 16.2%

Note, DR Horton one of the largest homebuilders in the country saw its average home sold climb to $298,034 in the second quarter from $294,933 and the average value of homes on backlog is $301,070.

First time home buyers where 32% from 31% in June, but down from 33% a year earlier.

Single family homes where -0.2%, while the median cost of $272,300 was +4.6%

Condos were -4.8%, while median cost of $248,100 was+3.2%

Special Report The surge in upper-end home demand underscores American mobility and the strength of the economy, while a dearth of low-end housing underscores persistent issues for lower income earners.   Our analyst, Willie Walker, has written a housing investment update. Ask your rep for a copy or contact research@wstreet.com.

 

 

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