Commenting on today’s trading in which the trade agreement with China was the most notable item, Gorilla Trades strategist Ken Berman said:
The Nasdaq struggled to stay in the green for the second day in a row, despite leading the way higher in recent months, but the tech benchmark’s slight dip still doesn’t qualify even as a pullback. Traders had plenty of catalysts to digest today, from the trade deal to the promised tax cuts, and while stocks ended with only minuscule gains, the tech sector’s relative weakness might be the first sign of a looming correction.
Q4 2019 hedge fund letters, conferences and more
In a rare interview with Harvard Business School that was published online earlier this month, (it has since been taken down) value investor Seth Klarman spoke at length about his investment process, philosophy and the changes value investors have had to overcome during the past decade. Klarman’s hedge fund, the Boston-based Baupost has one of Read More
The major indices all closed slightly higher but well below near their record intraday highs, due to an afternoon dip, which was sparked by the slightly disappointing final details of the trade agreement with China. The Dow was up 91, or 0.3%, to 29,030, the Nasdaq gained 7, or 0.1%, to 9,259 while the S&P 500 rose by 6, or 0.2%, to 3,289. Advancing issues outnumbered decliners by a less than 5-to-4 ratio on the NYSE, where volume was slightly above average.
White House advisor Larry Kudlow teased the second batch of the Trump administration’s rate cuts today, which should arrive in the second half of the year, targeting the middle class. Although Mr. Kudlow left a lot of questions unanswered about the plan that he dubbed “Tax Cuts 2.0”, equities got an early boost from his words. Today’s lower-than-expected Producer Price Index (PPI) confirmed that despite the solid growth in the services sector, there is still some demand-side weakness, especially in manufacturing, and the stimulus from the tax cuts could come in handy for the administration before the elections.
The final version of the highly-anticipated ‘phase one’ trade agreement was mostly in line with expectations, but some analysts voiced their concerns regarding the feasibility of some of the details of the deal. China’s plea of buying $200 billion of goods and services in two years seems to be hardest to fulfill, and the fact that the agreement hasn’t addressed some of the key structural issues and the sensitive area of Intellectual Property (IP), the second phase of the talks could be rough. A large part of the China tariffs also remain in place, so the global economy might continue to face headwinds.
Trade agreement and Bank earnings
The financial sector remained in focus today, as Bank of America (BAC, -1.8%) and Goldman Sachs (GS, -0.2%) reported earnings, and while the former behemoth beat on both on top and bottom lines, its stock finished deep in the red, dragging bank shares lower. Even as BAC also weighed on the Dow, the industrial average still performed better than the other large-cap benchmarks, thanks mostly to United Health (UNH, +2.8%) great quarterly numbers. Tomorrow’s session will be highlighted by the earnings of Morgan Stanley (MS, +0.2%), concluding the earnings season for the mega-cap banks.
Besides the earnings reports, the two most important economic releases off the week, retail sales and the Philly Fed Index will be coming out tomorrow before the opening bell. As the European Central Bank’s (ECB) latest meeting will also be out, a tumultuous pre-market session is all but guaranteed. Core retail sales are expected to surge higher by 0.5%, thanks to the blowout holiday sales, while the headline measure is also forecast to increase by a healthy 0.3%. The manufacturing index is also expected to tick higher, after barely holding up above zero in December, even as the recent reports from the sector were less than convincing. Stay tuned!