What You Need to Know Today

  • And the earnings train continues

  • Capitol Hill slams members of the Tech industry

  • Trump stirs up China trade

And so it begins……..Welcome to earnings season….and expect that the focus for the next 3 weeks will be the micro data (individual company reports/guidance)…..and while we all expect the overall season to be down y/y – the issue is will it be worse than ‘expected’?  Remember – estimates have been SLASHED already – so the current estimates represent a LOW bar – so quite honestly – the companies that MISS this season – oh boy…they are in trouble…… and so far – we have heard from the money center banks and they all have handily beat the estimates….who would have thought?  And as discussed – expect the mkt to continue to churn as it digests the daily barrage of earnings…..After making new highs last week   - we have been churning in a tight range – 3000/3025…..and yesterday was no different…..….…By the closing bell the Dow gave up 23 pts, the S&P lost 10 pts, the Nasdaq backed off by 35 pts and the Russell which continues to struggle ended the day flat.    

On the other hand we continue to get broader macro data and yesterday saw stronger than expected Retail Sales  – which brings up the other question…..does that change the thinking at the FED?  I mean the eco data is not weak – and we even saw that last week while Fed Chair Powell was testifying (think wholesale inventories, CPI ex food and energy, Real avg weekly earnings, PPI, and PPI ex food and energy, never mind the blowout NFP number earlier in the month) and now we saw Retail Sales at +0.7% vs. the expected +0.3%......So should we ask?  Do rates in this country really need to come down?  Not sure, but what I found interesting yesterday was that a lot of the conversation has now once again turned to a 50 bps cut vs. the expected 25 bps…..with the thinking being – just go to where we’re gonna anyway -so just do it now…..Hmmmmm

In other news  - The 2 day ‘make believe’ shopping holiday – created by another one of the FANG stocks is now over…..so expect to hear all about what a huge success it was, and what it means to the competition….……. Blah, blah, blah,……..And did you see the testimony on Capitol Hill yesterday?   The FANG stocks are on the hot seat….and rightly so  - and the overarching question remains – Privacy over Libra and other digital currencies………..Why would we expect any amount of financial privacy from companies that have failed miserably at providing personal privacy? And how exactly are they going to use all of this personal financial information to their advantage to ultimately benefit themselves and shareholders – because last time I checked – they are all public company that have shareholders who expect results……so, it seems to me to be a bit disingenuous to say that they won’t have any special privileges or access to all of this ‘new data’ that is clearly worth something…….  Just sayin’…… And today is round two – between DC and the Tech industry – so stay tuned. 

Look, the next 3 weeks will be full of reports that speak directly to the health of US companies and the strength of the US and global economy and the impact (or not) of the ongoing trade war between the US and China.  So while investors/traders and algo’s have all taken the mkt to new highs – it is time to take a breath….do the current valuations match the expectations?  We are about to find out.  

Overnight – trading was relatively quiet around the world as global investors reconcile earnings with the forward guidance.    Asian stocks fell in light trading after Donny takes to twitter again suggesting that the US and China still have a long way to go and that America could still place tariffs on an add’l $325 bil worth of goods.  Japan and South Korea still locked in a bit of a trade dispute is only adding to the anxiety.  By the end of the day – Japan -0.31%, Hong Kong -0.09%, China – 0.06% and ASX gained 0.49%.

European stocks are doing the same really – just churning and digesting…EU (European Union) inflation data coming in at +1.3% which is a bit higher than expected but still below what the ECB (European Central Bank) is aiming for…..(2%) – so the expectation is that the ECB will continue down the path of monetary easing.  UK inflation came in on target at 2% pleasing the BoE (Bank of England)  for the second month in a row.   Away from that its all about earnings. FTSE -0.25%, CAC 40 – 0.17%, DAX- 0.20%, EUROSTOXX – 0.04%, SPAIN -0.47% and ITALY – 0.14%.

US Futs are down (very small)  …Dow futures -5 pts, S&P -2 pts, Nasdaq -2 pts and the Russell down 1 pt.  Eco data today includes Mortgage Apps -1.1% (actual), Housing Starts exp -0.7%, Building Permits +0.1% and at 2 pm we get the Fed’s Beige Book – which details the state of the union according to the 12 regional Federal Reserve Banks.  I suspect that that will show neutral to weaker data – so that it supports Powell’s testimony last week and gives him cover to proceed with a rate cut vs. doing nothing.  And more earnings…..so stay tuned.  I still think we are in the 2975/3025 range and while S&P 3000 looks like a big round number that should offer support – don’t get your hopes up…..If we breach 3000 then expect the algo’s to get more aggressive on the sell side causing the buy side algo’s to back off a bit. 

Today is day 2 of the  ‘TECH Hearing’ in DC……Silicon Valley is bracing themselves for a grilling in front of a House Investigation committee over their power sway across the country and the world.  Look for all the big boys to be in attendance –…..as they will be forced to defend their business practices (identified as monopolistic)  and their enormous power and what that means to the mktplace.  In the end – it will be more show and tell……

Oil – which fell yesterday  piercing all 3 levels of resistance after word that Iran is prepared to talk to the US caused some of the tension in the mkts to subside as the expectation was for Iranian crude to come back on line…..(that was later proved to be false as Iran came out and denied any such negotiation – causing oil mkts to rally again…..….in addition crude inventories only fell by 1.4 mil vs the exp 2.7 mil and today at 2:30 we will get more inventory data from the Energy Info Administration…..support is at $57.84  - oil is currently at $58.17…..

And gold continues to be a safe haven in light of lower interest rates and ongoing trade and geo-political tensions around the world.  The breakout at $1326 back in early June has allowed the precious metal to surge better than 8% trading as high as $1415/oz.  This morning – gold is under a bit of pressure -$5/oz as stronger retails sales and a firmer dollar are causing the trader types to take some money off the table.   Look for it to base in the $1395/$1400 range.


Pan Seared, Butter Bathed Rib Eye

This is a simple, yet mouthwatering recipe – but you need a thick cast iron pan that can go from the oven to the stove top. 

For this you need:  1 – 1lb rib-eye steak, peanut oil, kosher salt, black pepper, 3 crushed garlic cloves, and butter. 

Preheat your oven to 450 degrees. – place the cast iron pan into the oven and allow it to heat the pan.   

Using some of the peanut oil – massage the rib-eye on both sides and then season with the kosher salt and black pepper.  Set aside until the pan Is ready,.

Once the cast iron pan is heated – remove it from the oven – (remember to use mitts)  - and place on the stove top burner set to medium.  Place the rib-eye in the skillet and let it sizzle for 2 mins….now flip the steak – top it with the crushed garlic and place the whole thing back in the oven – let it cook for 7 mins….

Remove from the oven and place back on the stovetop – flip the steak over and add the butter….(3 or 4 slices should do) – the butter will melt immediately – tilt the pan and using a spoon – scoop up the butter and the garlic and keep dripping it over the steak – turn the heat off and  cover with tin foil and let it rest for 5 mins.  Serve on a warmed plate with your favorite veggie or potato, a large mixed green salad and a nice robust bottle of red wine.

General Disclosures

Information and commentary provided by ButcherJoseph Asset Management, LLC (“BJAM”), are opinions and should not be construed as facts. The market commentary is for informational purposes only and should not be deemed as a solicitation to invest or increase investments in BJAM products or the products of BJAM affiliates. The information contained herein constitutes general information and is not directed to, designed for, or individually tailored to, any particular investor or potential investor. This report is not intended to be a client-specific suitability analysis or recommendation, an offer to participate in any investment, or a recommendation to buy, hold or sell securities. Do not use this report as the sole basis for investment decisions. Do not select an asset class or investment product based on performance alone. Consider all relevant information, including your existing portfolio, investment objectives, risk tolerance, liquidity needs and investment time horizon. There can be no guarantee that any of the described objectives can be achieved. BJAM does not undertake to advise you of any change in its opinions or the information contained in this report. Past performance is not a guarantee of future results. Information provided from third parties was obtained from sources believed to be reliable, but no reservation or warranty is made as to its accuracy or completeness.

Different types of investments involve varying degrees of risk and there can be no assurance that any specific investment will be profitable. The price of any investment may rise or fall due to changes in the broad markets or changes in a company’s financial condition and may do so unpredictably. BJAM does not make any representation that any strategy will or is likely to achieve returns similar to those shown in any performance results that may be illustrated in this presentation. There is no assurance that a portfolio will achieve its investment objective.

Definitions and Indices

The S&P 500 Index is a stock market index based on the market capitalization of 500 leading companies publicly traded in the U.S. stock market, as determined by Standard & Poor’s.


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