The Waiting Game

The waiting game.  Equities had a mixed day as traders awaited a Fed decision and a surge of economic and corporate data.  With little domestic data to ponder traders turned their eyes overseas and were not sure they liked what they saw.

 

MY TWO CENTS

 

1. Cable is on the ropes!  Cableis a term or art used by currency traders to refer to the British Pound Sterling exchange rate.  My regular readers know that I am always critical of important not-so-shiny facts not being factored in by traders, who prefer instead to list only those market factors that support their bullish positions. All of the BREXIT shenanigans over the past months have been largely overlooked by the mainstream media, but now in the wake of Boris Johnson’s recent appointment as UK’s PM, a few more folks have begun to take note.  Yesterday, I reported that the probability for a no-deal BREXIT has increased in odds with Johnson, who ran on a BREXIT at any costplatform.  The fact is that a hard BREXIT will come at a huge cost to Britain and its trading partners.  The UK, as many modern nations, relies on international trade not only for income, but also to provide quality of life for its citizens, and a hard BREXIT will cause a huge disruption.  Assuming that the UK can stay out of the sites of the Trump administration’s aggressive trade negotiations and keep status quo with its top trading partner, that will not be enough, as the next four largest trading partners, all EU members make up around 30% of exports, more than double of that with the US.  While it may not seem like a lot, the British Pound lost almost -2% in the past two sessions, breaking below an important support level.  That represents a large move by currency standards.  Someone is starting to take notice.

 

2. Unicorn magic.  Yesterday, after the close, Beyond Meat, of recent exuberant growth fame and retail investor darling, announced earnings.  The results showed that they beat Wall Street estimates for Revenues by +27.58% but missed earnings by -186.57%.  So selling fake meat costs a bit more than expected.  As the once private unicorn can no longer rely on venture capital and speculative private equity, it must now turn to the public markets to help it grow.  With yesterday’s release, the company announced that it was offering another 3 million shares in a secondary offering, just three month’s after its IPO.  Got cash??  Investors didn’t like that and the stock traded off by as much as -14% in after hours trade.  Oh, and those other famous unicorns Uber and Lyft are showing some signs of public market reality as well.  Uber is cutting 1/3 of its global marketing team in response to slowing revenue and Lyft’s COO resigned and will reportedly not be replaced.

 

THE MARKETS

 

Stocks had a mixed close as traders await the Fed and a truckload of economic data which begins to hit wires today.  The S&P500 fell by -0.16%, the Dow Jones Industrial Average advanced by +0.11%, the Russell 2000 dropped by -0.63%, and the NASDAQ 100 fell by -0.35%.  Bonds climbed slightly and 10-year treasury yields came in by -1 basis point to 2.06%.

 

WHAT’S NXT

 

– The Bureau of Economic Analysis will release Personal Income and Spending which are expected to have grown by +0.4% and +0.3% respectively, compared to last month’s growth of +0.5% and +0.4%.  The year over year core PCE Deflator is expected to be 1.7% compared to last month’s 1.6%.  The Deflator is the Fed’s favorite gauge for inflation.

– Pending Home Sales are expected to have grown by +0.5% down from last month’s growth of +1.1%.

– The Conference Board’s Consumer Confidence Index is expected to have risen to 125.0 from last month’s 121.5.  Pay attention to the components of the release. Consumers have remained the strongest supporters of the current expansion.

– Before the bell we will hear from Under Armor, Corning, Proctor and Gamble, Cummins, DR Hortons, Altria, Merck, HCA Healthcare, and Celgene, amongst others.  After the bell earnings include Apple, AMD, Giliad Sciences, Electronic Arts, and Amgen.

daily chartbook 2019-07-30