Market in a Minute: May 6–10, 2019
by Rich and Sheila Jamison
Equities fell last week amid US/China trade talk setbacks. Upbeat rhetoric Friday pared the losses. All S&P sectors fell with the trade-sensitive sectors – information technology, materials and industrials – leading the retreat.
The US 10-year Treasury note fell to 2.46%. WTI crude oil’s price remained flat. The CBOE’s Volatility Index (VIX) rose to 16.0.
The stock market entered the week near all-time highs before China backed away from multiple concessions it made earlier in trade negotiations. Chief among the issues is the Chinese government's unwillingness to write many of the commitments it made into law. China’s sharp reversal prompted president Trump to announce market-rattling increases in existing tariffs on $200 billion of goods imported from China and threaten to impose a 25% tariff on an additional $325 billion in Chinese goods. China vowed to take "appropriate countermeasures" but still sent its chief negotiator, Vice Premier Liu He, to Washington to continue talks. Though hopes for an agreement have diminished, President Trump, said Thursday afternoon that a deal is still possible.
Geopolitical tensions increased last week.
We dispatched an aircraft carrier strike group and a bomber task force to the Middle East amid indications of planned attacks on our interests in the region by Iran or its proxies. Iran announced it would end some of its commitments under the 2015 nuclear agreement unless Europe, China and Russia agree to facilitate Iranian oil sales and banking transactions within 60 days. European leaders quickly rejected the ultimatum.
Multiple short-range missile tests by the North Korean military have raised concerns that ballistic missile tests could be revived. Tension increased further when the US seized a North Korean ship carrying coal in violation of UN sanctions.
Fears of increased authoritarianism in Turkey arose on word that Istanbul’s mayoral election, which the ruling party lost in March, would be re-run. The opposition party's candidate holds a small lead over the candidate from Turkish president Erdogan's party.
Earnings Season Winds Down
With 90% of the S&P 500 Index companies Q1 results in, blended earnings show that earnings growth declined less than 1% year-over-year (y-o-y). Revenues are expected to rise 5.3% y-o-y.
Uber made its highly anticipated public debut on Friday. It began trading at a disappointing $42 per share – below its IPO price of $45, which already had been set at the lower end of the expected $44 to $50 range.
Chevron will not counter Occidental Petroleum's revised bid for Anadarko Petroleum. Instead, it will take the billion-dollar breakup fee that was in its deal with Anadarko and walk away.
Germany’s economy, the Eurozone's largest, is expected to grow just 0.5% in 2019, down from the EU's earlier forecast of 1.1%. For the Eurozone as a whole, growth outlook was trimmed to 1.1% versus an earlier 1.2% forecast
Total social financing, the Chinese economy’s broadest measure of credit and liquidity, grew much slower than expected in April (half of March's pace). Analysts expect the slowdown to prompt China's central bank to further ease monetary policy, especially as trade tensions with the US grow.
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