Markets Tread Carefully before Q3
The major indexes all ended marginally down, taking a step back after all three had hit new historic highs on the previous trading. In yesterday’s trading there were a lot of factors, political and economic pulling in opposite directions. Trump was again in the spotlight, stirring the pot with a new executive order. Long threatening to gut Obamacare with or without Congress, with a sign of the pen yesterday Trump directed federal agencies to weigh expanding coverage in low cost plans not subject to Affordable Care Act rules.
UnitedHealth Group (UNH), a blue chip stock, ended off 1.20%. All-in-all, the health care sector ended mixed. Trump’s hope is likewise that employers will band together to form bodies that will negotiate for health insurance packages designated for their employees; that would pit them against large health care providers – and new health care providers that would crop up to offer services to these employees. All of these factors create a destabilizing force. To complicate matters more, Trump has threatened to discontinue subsidies to Obamacare providers, Congress yet to allocate funds for any of the programs. Trump may announce the cuts as early as today, a coalition of states – including N.Y. and California – already preparing a suit to preserve the subsidies.
What’s all the more remarkable given market developments – from political unrest to natural disasters to international trade pacts now in limbo – is that the S&P 500 hasn’t seen a 3% drop-off since November 7, 2016. That’s the longest stretch since 1996. We’re talking about the second longest period ever without a drop of that magnitude. Volatility is at a low, complacency prevailing in the face of all evidence to the contrary; nothing seems to be able to derail this market! The prospect of even nuclear war with the Korean Peninsula, not to mention historically high valuations, nothing seems to be able to place a damper on the bull rally now 9 years and counting. Though the market ended off yesterday, all three major benchmarks ended at historic highs the day prior. The last time volatility was so low was way back when in 1993!
The big players in the market yesterday were Wall Street banks, their results generally upbeat. With that said, Goldman Sachs put pressure on the Dow, a price-weighted gauge. Though J.P. Morgan Chase (JPM) released top and bottom line numbers that beat out expectations, trading revenue was weak, the period being a quiet one for markets. The stock shed 0.88%. Lastly, Citigroup (C), which reported higher than expected profits, slid 3.4%. The bank and insurer ETF, the Financial Select Sector SPDR (XLF), fell 0.8%.
Analysts are saying that Q3 corporate results, spearheaded yesterday by the big banks, could extend the market’s record setting streak.
On the Economic Calendar, initial weekly jobless claims fell 15,000 to 243 thousand, making it the lowest level in 6 weeks’ time. The Producer Price Index (PPI) rose 0.4%, matching the consensus.
Oil fell after the International Energy Agency reported a monthly rise in global crude supplies. Oil, though, regained some of the lost ground after a U.S. government report showed that domestic stockpiles had fallen for the third week in a row.
In today’s calendar, be primed and ready for the CPI at 8:30, retail sales coming out at the same hour. Business inventories and consumer sentiment will then be released at 10:00, the rig count coming out at 13:00 with the federal budget to be released at 14:00.
Daily Summary: The Dow fell 0.1%, the S&P 500 losing 0.17% and the NASDAQ shedding 0.2%.
|Monday||Columbus Day – Markets Open|
|Tuesday||6:00||NFIB Small Business Optimism Index||105.4||Medium|
|Thursday||8:30||Jobless Claims||252 K||Medium|
|Friday||8:30||Consumer Price Index||0.6 %||High|
|Friday||8:30||Retail Sales||1.9 %||Medium|
|Friday||10:00||Business Inventories||0.6 %||Medium|
|DAL||Delta Air Lines, Inc.||AM||Wednesday|
|DPZ||Domino’s Pizza, Inc.||AM||Thursday|
|JPM||JPMorgan Chase & Co.||AM||Thursday|
|BAC||Bank of America Corporation||AM||Friday|
|WFC||Wells Fargo & Company||AM||Friday|
|JBHT||J.B. Hunt Transport Services, Inc.||AM||Friday|
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