Stocks fell off a cliff this week as the President was not happy with the trade negotiations in Shanghai and threatened another 10% tariff on $300 billion in Chinese goods September 1st. The announcement sent equities reeling downward on Thursday and the selloff continued into Friday. The Dow fell 2.6% or 707 points for the week. The S&P 500, which is loaded with multinational names, gave back 3.1% and the tech-heavy Nasdaq was lower by nearly 4%. Transports were week along with most small and mid-cap stocks. Not surprisingly, safe-haven gold rallied $27.10/oz. to settle on Friday at $1,445.60/oz. The only market sectors that were positive were utilities (0.25%) and real estate investments, which gained 2.1%. Technology, highly dependent on China and global trade normalcy, tanked 4.6%. Despite a relatively flat change in crude oil prices on the week, slowing worldwide growth prospects sent energy shares lower, too.
The much-anticipated Federal Reserve one-quarter point rate cut was disappointing to traders who expected possibly a half point cut and/or the possibility of more reductions down the road. Fed Chairman Jerome Powell, in remarks after the FOMC meeting, did not guarantee that further cuts would follow calling it a “mid-cycle adjustment” and the Dow fell 333 points during the news conference. Economic data this week was a mixed bagged. The Conference Board’s consumer sentiment survey for June hit a 2019 high and consumer spending rose 0.3%. But the U.S. economy added just 164,000 jobs in July, a decline from June. June and May’s results were revised downward as well. The unemployment rate stayed the same at 3.7%. The tariff’s potential blow to already slowing world trade sent the 10-year Treasury note’s yield to 1.864%, the lowest since November 2016 and the biggest one-week decline in more than seven years.
In all, none of this is seriously denting the resilience on the corporate earnings front, with many more companies than not continuing to beat expectations. Overall, about 75% of the those reporting so far for the second quarter have surpassed earnings consensus estimates. Although that rate is down a bit from several weeks ago, and could fade further, the aggregate results are still reassuring. Although we should expect more volatility from headline news on trade talks, the bull market may have further to go. There remains areas of strength for a durable economic expansion led by the consumer, generally favorable earnings and an accommodative Federal Reserve.
Here is the answer to last week’s trivia question: Which brand is NOT part of Whirlpool Corp.’s family of appliances? Amana, Frigidaire, Kitchen Aid or Hotpoint. Answer: Frigidaire, once a division of General Motors, is now part of Electrolux.
Today’s Trivia Question: The ticker symbol “K” is assigned to what New York Stock Exchange listed company? Kellogg, Kraft-Heinz, Kimberly-Clark or Kroger.