U.S. Retail, Factory Data Top Estimates in Positive Signs
The value of overall retail sales climbed 0.7% in July after a downwardly revised 0.3% increase in the prior month, according to Commerce Department figures released Thursday. The New York Fed’s Empire State index for August, which covers manufacturers in New York, bucked expectations for a decline, while a similar gauge for the Philadelphia Fed’s region fell by less than projected. (…)
China Signals U.S. Tariff Delay Not Enough to Stop Retaliation
(…) top negotiators held a phone call earlier this week and the U.S. delayed the imposition of some of the new tariffs. Negotiators also agreed to have another phone call in the coming two weeks and people familiar said earlier the Chinese delegation is sticking to their plan to travel to the U.S. in September for face-to-face meetings.
The statement indicates that China doesn’t think the U.S. delaying some of the tariffs is enough, said Zhou Xiaoming, a former Ministry of Commerce official and diplomat. China is very serious and is sticking to the position that no new tariffs should be imposed at all, he said, adding that China’s retaliation “may not be limited to tariffs.” (…)
Less than 12 hours before the Chinese statement on retaliation, Trump appeared to float the possibility of another meeting with Xi. In a flurry of tweets, Trump defended his tariffs decisions, praised Xi and urged the Chinese president to “humanely” resolve the protests that have gripped Hong Kong for more than two months.
He ended the posts with an apparent overture to Xi — writing “Personal meeting?” — without clarifying whether he was suggesting another summit. (…)
Manhattan, Brooklyn Rents Soar to New Highs Manhattan and Brooklyn rents in July surged to their highest levels in at least a decade, turning the hunt for an apartment into a madcap ordeal for some renters.
In Brooklyn the median rent rose to $3,000 a month, a record. Manhattan rents hit $3,595 a month, which was only $100 a month below the record set in February 2009, according to a market report by Douglas Elliman Real Estate. (…)
He said median Manhattan rents, after taking into account landlord concessions, spiked 6.5% from the figure in July 2018, the biggest such increase in about four years. In Brooklyn, the comparable figure was up 3.1%. (…)
EARNINGS WATCH
Earnings Outlook for S&P 500 Companies Looks Bleak Wall Street analysts have cut third-quarter profit estimates, painting a bleak picture for investors already grappling with a trade war, economic weakness and ominous signs from the bond market
(…) At best, earnings across the companies in the S&P 500 will grow 1.5% this year, FactSet projects, far short of estimates for growth of more than 6% that analysts initially forecast in January. Worse, a few analysts predict earnings could end up contracting for 2019 as a whole.
Dozens of companies including Eastman Chemical Co. EMN -5.17% , Macy’s Inc.M -13.22% and Caterpillar Inc. CAT -3.19% have issued downbeat outlooks for the rest of the year, contributing to the pullback in profit expectations.
“Everyone in April and through the beginning of May thought that the economy was going to get better in the back half of the year, trade war was going to sort of settle, certainly not escalate,” Eastman Chemical Chief Executive Mark Costa said on an earnings call last month. “And now we’re just in a very different world where I don’t think that’s true….There’s not a lot of signs of economic recovery coming in the second half.” (…)
Analysts’ latest revisions show the S&P 500 faces a 3.15% contraction in third-quarter earnings from a year earlier, according to FactSet. And for the fourth quarter, the S&P 500 is now on track to increase profits by less than 4%, down from the nearly 10% growth rate analysts expected at the beginning of the year. (…)
Tariffs aren’t the only factor to blame for the weaker outlooks. Second-quarter profit margins across all S&P 500 sectors are down from a year earlier, according to FactSet. Rising labor and commodity costs, as well as a strong dollar, have helped to dent profits. (…)
The S&P 500 has slumped 4.7% in August, including Wednesday’s 2.9% drop, leaving the broad index roughly where it was 12 months ago. And moves in the bond market have signaled an economic slowdown could be on the horizon. (…)
Refinitiv/IBES has other stats:
Q3 earnings are seen down 1.6% (-0.2% ex-Energy), Full year 2019: +1.7%.
Pre-announcements: 58 negative vs 53 at the same time during Q2. Positives: 19 vs 15.
The S&P 500 Tends to Rise After an Inverted Yield Curve An inverted yield curve in the Treasury market is scaring investors. Yet the S&P 500 actually tends to gain following such a signal.
(…) According to Dow Jones Market Data, the index has gained an average of 2.53% three months after the yield curve first inverted between 1978 and 2005. Six months after the start of these inversions, the broad stock index’s gains were an average of 4.87%. A year afterward, the index gained an average of 13.48%. Two and three years out, the S&P rose an average of 14.73% and 16.41%, respectively.
Three months after yields inverted on Dec. 20, 2005, the S&P gained 4.16%. Six months afterward, it was up 1.76%, and a year on it increased 13.62%. Two years later, it was up 18.44%. Three years on, it dropped 28.65% amid the financial crisis.
Sometimes, the S&P 500 has dipped in the short term. When the curve inverted on May 26, 1998, the index was down 0.90% three months later, but six months afterward was up 8.49%. It also fell three and six months after the start of the inversion on Aug. 17, 1978, but a year later was up 3.06%.
The biggest S&P 500 increase three years following the start of an inverted yield curve was tied to a Dec. 9, 1988 inversion. The S&P continued to post gains, and three years later ended 36.54% higher.
I have not done the verification but beware of averages.
TECHNICALS WATCH
CMG Wealth’s technical indicators are mostly positive, including this 13/34–Week EMA Trend Chart:
STOCKS VS BONDS
SentimenTrader’s stock/bond ratio is –3.1 as of yesterday’s close. This ratio normally fluctuates between –2.0 and +2.0. It rarely gets above +3.0 or below –3.0. “When the ratio hits -3, it suggests that stocks are deeply undervalued relative to bonds, and we rarely see a more extreme condition.”
Recent times at –3.0 or below, FYI:
- May 31, 2019
- December 17, 2018
- June 27, 2016
- August 24, 2015
- June 1, 2012
- August 4, 2011
- October 6, 2008
- …