Markets Digest Moves, NON-OPEC Members Support Cuts

What You Need to Know Today

• Mkts back off as investors digest the move and the news

• NON-OPEC members approve the cuts

• ECB says not so fast on a rate cut – is the FED Next?

So as expected – stocks rallied yesterday around the world as global investors breathed a sigh of relief over the ‘handshake agreement’ at the G20.  The US and China have agreed to move forward and the response by investors/traders and algo’s was as expected.  That being said – remember what I said yesterday…..there is still a lot of work to do and the handshake deal does not guarantee that the final deal is anywhere near done at all – but we are, by all accounts, a couple of steps closer for sure.  Mkts started out very strong and did the ‘fade thing’ as the day wore on – as it became clear that there is still work to do….no matter – by the end of the day – the Dow added 117 pts or 0.44%, the S&P surged ahead by 22 pts or 0.77%, the Nasdaq tacked on 84 pts or 1.06% and the Russell moved ahead by 3 pts or 0.05%. 

Tech names and the Tech ETF (XLK) were hot….news that trade negotiations had ‘thawed’ sent those names surging….leaving the XLK 1.6% higher names like Apple, Amazon, Netflix, Advanced Micro & Amazon all up more than 1%.  Energy names – also got a boost after OPEC, Russia, Iraq and the non-OPEC allies all agreed to hold production cuts thru March 2020……On the other side – we saw pressure in some of the Industrial names as weaker manufacturing data weighed on investors’ minds……and the ‘flight to safety’ trade (treasuries and gold)  came a bit unglued as investors did an about face and sold gold and treasuries (think US/China trade).  Gold lost over 1.8% and treasury yields rose as bonds came under pressure in favor of stocks. 

This morning – we are seeing European stocks continue to cautiously move higher – which is a bit curious – after ECB policy makers do NOT see a need ‘rush into a rate cut’,  President Trump threatened $4 bil worth of tariffs on the EU- targeting Olives, Italian Cheeses and Scotch Whiskey – because of the long-running argument over European aircraft subsidies.   UK - PMI data this morning suggests that the UK construction industry is in distress…..suffering its biggest downturn in more than 10 yrs, and BREXIT continues to be an issue for the UK/EU – sending British 10 yr bond yields to their lowest level since October 2016.   On the political front the EU is trying to vote on a new leader…..Jean Claude Junker's role as President of the EU is coming to a close – so the member states need to elect a new leader that will lead the bloc thru 2025 and that is proving to be a bit of an issue.  You see you need to get 28 individual member states to agree (and that is a feat in itself)  and yesterday Italy and some of the Eastern Bloc states blocked the Dutch foreign minister – Frans Timmerman – from moving forward…..  And while this will not price stocks in the long term – the chaos that it creates will surely cause angst in the near term. 

US futs are a bit soft this morning – again no surprise – Dow futs are off 40 pts, S&P futs down 3, Nasdaq Futs giving up 13 and Russell futs giving up 2.  Talk of a rate cut continues to simmer -especially after the weak manufacturing data yesterday….Again – the expectation is for a cut – whether its 50 bps or 25 bps is not so much the issue (although the mkt was favoring a 50 bps cut) – the mkt is expecting a cut…so if the July meeting produces no cut – then watch the mkt retreat….but you can be sure that the FED will be floating those balloons prior to the meeting to test the water…..they will have some of the members drop hints at different events – the media will interview some of the talking heads in the next couple of weeks – to shine some light on the issue…..the question is how will the mkt react? Remember -  Fed Chair Powell already said (two weeks ago)  that he is not sure that a rate cut is necessary ‘right now’ – Jimmy Bullard – St Louis – also said that 50 bps would be ‘overkill’ so you can see how they are positioning it and now with a trade deal moving forward – you just might get the FED to say – let’s sit back and see how this goes – I mean rates are still accommodative at 2.5% - there is nothing high about them. 

Oil is also retreating a bit after the surge higher yesterday….we continue to tease at what is both ‘support and resistance’ at $59.50…..where all 3 trendlines have converged……and with the Non-Member OPEC states falling in line with Saudi Arabia, Russia and Iraq – my sense is that it will find plenty of support right here – especially now that we are in the peak of the summer driving season….and the demand for oil ramps up.  That being said – my sense is that we are still in the $55/$65 range – and with the trendlines all converging at $59.50 – it feels like it should stabilize right here.

Look for the S&P to waffle a bit – in the 2950/2970 range today……In the unlikely event that we get a real negative story – then I could see the S&P fall to the trendline support at 2881 – but I do not believe that will happen right now.  You can feel the coming holiday – expect volumes to begin to slow down – there is not eco data to drive the conversation so the mkts will focus on any trade news and any hint of the next FED move.  Remember – earnings begin next week – so expect some chatter about that as well.

Watermelon & Tomato Salad

Enjoy the weekend with this refreshing and delicious Watermelon and Tomato Salad.....The colors, and freshness of this chilled salad will make any summer BBQ table a pleasure to look at and more so – a delight to eat.  If you have never had this salad – you have to make it…and if you have had it then you can appreciate the simplicity of it.  

For this – you need:  Fresh garden tomatoes,  mint, watermelon, feta cheese, s&p, Olive oil, and balsamic vinegar…..

Cut the tomatoes in half and then slice the halves in slices (you understand what I mean – no?) .  Next slice the watermelon and cut away from the rind….cut into cubes and place a large bowl.  Now add the tomatoes, crumbled feta and chopped fresh mint… Drizzle with Olive oil and a splash of Balsamic – season lightly with s&p…(you can also hit it with a smidge of sugar)….cover and place in the fridge to keep chilled.  Spectacular.