July 14, 2019

What happened this past week – North American large cap stock markets charged higher resulting in the S&P closing above the 3,000 mark for the first time. The environment was ripe for bulls who view a July rate cut as all but as inevitable despite improving economic data points. Firming economic data may have been offset by several high profile corporate preannouncements heading into Q2 earnings season. On Wednesday, Chairman Powell provided an all clear signal when he emphasized there is a risk weak inflation will be even more persistent than Fed currently anticipates. He also went on to say that the strong June jobs report had not altered his outlook, which equity markets viewed as decidedly reassuring. Thursday’s hotter than expected core CPI reading and a disappointing 30-year bond auction did little to shake stock market confidence. The U.S. Treasury yield curve steepened as futures markets continued to look for at least a 25 basis point cut at the month-end FOMC meeting. Data outside the U.S. firmed, helping rates to continue tracking higher in Europe. Trade issues moved to the back burner, overshadowed by central bank prognosticating. White House adviser Navarro acknowledged the U.S./China trade talks have entered into a “quiet period” and patience was warranted. Separately, the Administration confirmed it had opened a Section 301 probe on France in response to a digital tax that appeared to be gaining momentum throughout Europe. Crude prices moved up pushing WTI back above the $60/bbl mark. The first storm of the season scraped across the Northern Gulf causing oil platform shut-ins while weekly inventory data revealed significant drawdowns is stockpiles. For the week, North American large cap stock indices outperformed (i.e. the S&P gained 0.8%, and the DJIA added 1.5%, but the Russell slipped 0.5%), however overseas stock markets struggled (for example the German DAX lost 2.0% and mainland China retreated 2.7%). Your BSD Global Tech Hedge Fund advanced 1.1% on the week.

Calendar of events for the week of July 15 – the focus will be on economic data and earnings. The big economic numbers are out Sunday night/Monday morning with China’s Q2 GDP along with the country’s July IP, retail sales, FAI, and new home prices. U.S. retail sales for June (Tuesday) and the Michigan confidence numbers for July (Friday) also will be important. For earnings, the key reports include Citigroup (Monday morning); GS, JNJ, JPM, SCHW, and WFC (Tuesday morning); CSX and UAL (Tuesday night); ABT, ASML, BAC, BK, PNC, TXT, and USB (Wednesday morning); AA, EBAY, IBM, NFLX, and URI (Wednesday night); BBT, HON, MS, PM, SAP, STI, TSM, UNH, and UNP (Thursday morning); COF, ISRG, and MSFT (Thursday night); and AXP, BLK, CFG, RF, SLB, STT, and SYF(Friday morning). Other events during the week include AMZN Prime Day (July 15-16) and the tech antitrust hearing in Congress (July 16).