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Morning Commentary

STILL WOBBLY

By Charles Payne, CEO & Principal Analyst
8/16/2019 9:30 AM

Yesterday, the market continued to gyrate but in a much tighter range than prior sessions. There was a sigh of relief as the Dow and the S&P finished higher, but the NASDAQ slipped under the weight of lower guidance from Cisco (CSCO). Of course, the cloud of uncertainty continues to cast a dark and foreboding shadow, even as economic data curbed fears of a recession.

The rally was decidedly cautious:

S&P 500 Index

+0.25%

 

Communication Services (XLC)

+0.17%

 

Consumer Discretionary (XLY)

 

-0.17%

Consumer Staples (XLP)

+1.50%

 

Energy (XLE)

 

-0.62%

Financials (XLF)

+0.50%

 

Health Care (XLV)

+0.35%

 

Industrials (XLI)

 

-0.11%

Materials (XLB)

+0.04%

 

Real Estate (XLRE)

+1.40%

 

Technology (XLK)

 

-0.18%

Utilities (XLU)

+1.29%

 

The Market Breadth was not very convincing, however.

NYSE

NASDAQ

Trade War

While on his way to a campaign event in New Hampshire, President Trump said China is making more positive overtures, including potential agricultural purchases. That would be great news. However, I must say, beneath the tweets and negative scuttlebutt, there were positives from China’s foreign ministry, including the revelation of constant communication between the two leaders.

Foreign Ministry Spokesperson Remarks on August 15, 2019

Q: On August 14, US President Trump said in his tweets that "Of course China wants to make a deal. Let them work humanely with Hong Kong first." He also suggested a possible meeting with the Chinese leader. I wonder what China’s comment is.

A: Hong Kong affairs are entirely China's internal affairs. As we noted, President Trump also said previously that "Hong Kong is a part of China. They'll have to deal with that themselves. They don't need advice." We hope the US side will keep its word.

China holds a consistent and clear position on China-US trade talks. We hope the US can work in concert with China to implement the two Presidents' consensus that was reached in Osaka, and to work out a mutually acceptable solution through equal-footed dialogue and consultation with mutual respect.

Regarding high-level communication, the Chinese and US Presidents have remained in contact with each other via meetings, phone calls and letters.

Portfolio

Communication Services

Consumer Discretionary

Consumer Staples

1

3

1

Energy

Financials

Healthcare

1

1

1

Industrial

Materials

Real Estate

2

3

1

Technology

Utilities

Cash

1

0

5

 
Obviously, the market is still tenuous but Nvidia (NVDA) could bring technology back today.

Today’s Session

Housing starts plunged to an annual rate of 1,191,000 or 4.0% , which missed Wall Street’s consensus of 1,240,000.  The headline is disheartening, but a closer look at the data, including permits, could signal a positive infection in single family homes.  There were increases in starts in North East, Midwest and West; only the South was lower.

Starts

United States Housing Starts

Permits

The annual pace of 1,336,000 units was a sharp 8.4% increase, and well above consensus of 1,270,000.  The increase was driven by a 10.7% increase in South and +13.7% increase in West.

On the tariff front, JPMorgan is out with comments on tariffs and the potential impact on the S&P 500*.

*Source Seeking Alpha

Overall, this morning, the market is reacting to positive comments on trade talks from President Trump.  I suspect we could see a strong truce, if not a deal, before the election The market was okay with current tariffs, and the notion there wouldn’t be a resolution before that now infamous tweet roiled the market.  If we get back there, a lot of anxiety will be eased, and coupled with Fed rate cuts, the wind will get behind the stock market.

I suspect we could see a strong truce, if not a deal, before the election.   If we get back there, a lot of anxiety will be eased, and coupled with Fed rate cuts, the wind will get behind the stock market.

 


 

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