Yesterday was not an easy day for the NASDAQ. The tech-leaning index seemed to have all the ingredients for a successful day, the Google parent, Alphabet (GOOGL) reporting stellar numbers two days ago after closing. In yesterday’s trading, the company dazzle, closing up 3.9% after its quarterly figures beat the Street’s estimates. That though, was not enough for the NASDAQ.
Of the FAANG stocks, Amazon (AMZN) climbed 1.5%, Facebook (FB) tacking on 1.8%. The duo will be reporting later this week. All-in-all, some 35% of the stocks on the S&P 500 will be reporting this week, making it the perfect week for trading. This is the busiest week of the season. All together, 174 stocks on the index are expected to report, with 11 blue-chip Dow stocks also set to release their earnings figures. Not that we’ve necessarily seen the results show up in stock performance, but on the S&P 500, 77% of reporting companies have beaten revenue expectation, 87% outstripping the market’s earnings consensus. In brief, Wall Street companies have shown stellar results, surpassing the 5-year average for revenue and earnings beats. These are just a handful of the big companies reporting this week, Advanced Micro Devices (AMD), Intel (INTC), Ford (F), GM, along with the restaurants, McDonalds (MCD), and Chipotle (CMG). Boeing (BA) and Coca Cola (KO) will be reporting today.
Also, be primed for the numbers of social networking sights, Twitter (TWTR) and Facebook (FB). The latter 2 have faced accusations that false information and fictitious accounts have not been handled effectively, so that could be a focal point in today’s guidance. The week prior, Facebook announced that it was ending its affiliation with another data-analytics company for the time being; it, Facebook, claimed, may have violated the policies in its contractual agreement. Accused likewise of pandering to certain more radical elements, company CEO, Zuckerberg, himself Jewish, faced a backlash after defending Holocaust deniers because, to encapsulate his argument, they did not have ill attempt. At the same time, Facebook’s numbers have been on par, perhaps especially in light of the strength of Instagram and WhatsApp, two of its marquee services that have fueled growth and which have seemingly been inured from recent controversies. Twitter, for its part, has risen 39% over the past 3 months, so whatever guidance it gives will certainly move the stocks today.
On the manufacturing front, the Wall Street Journal reported, “Manufacturers are booking more orders and delivering higher profits in a strong U.S. economy, many buoyed by a rebound in oil prices that has spurred demand from domestic drillers. U.S. aerospace and auto manufacturers have also reported strong orders. Sales in Europe and China have been more resilient than many analysts expected, thanks in part to a weaker U.S. dollar during the second quarter. Industrial companies have delivered more forecast-beating sales, profits and margins for the second quarter than any sector except financial services and consumer staples, said analysts at Credit Suisse.”
One of the sectors that saw movement yesterday was agriculture, after Trump’s Agriculture Secretary announced that the government would be offering a type of institutionalized welfare for companies in the hard-hit sector. From soybeans to sorghum, cotton and corn, wheat and pork, all of these export products have been hard-hit by retaliatory tariffs. Deere & Co. (DE) was up 3.2%, Caterpillar (CAT) edging up 1.2%. AGCO Corp. saw gains of 0.6%.
As noted yesterday, China’s pork tariffs have hit 62%, meaning that exporters barely stand a chance presuming some level of price elasticity. Republicans, in the meantime, have engaged in a fine balancing act, hedging for Trump’s support, but distancing themselves from him in so far as his policies have hurt their constituent base. As a case in point, Republican Senator, Mike Rounds, of South Dakota, gave voice to these concerns: “What’s the strategy, what’s the end game here? At what point do we start seeing things move out of the chaotic state they are in now and to where we actually see new trade agreements?”
So what’s the best advice? Follow the fundamentals – and especially, corporate guidance – but know that a mere tweet from Trump with capital letters can override any effect the nuts and bolts numbers can have. Trump, like a conductor, is setting the pace here; waving his baton, he’s pointed from one player to the next. In our case, it’s barbs, threats, carrot and stick politics but make no doubt about it, it’s not the EU, but rather the U.S. with its economic muscle that’s calling the shots. Be on the lookout, too, for any development regarding the very high profile meeting today between the EU chief negotiator, European Commission President Jean-Claude Juncker, and President Donald J. Trump. Trump is trying to set the stage, tweeting yesterday, “Tariffs are the greatest!” Then, he added, “Either a country which has treated the United States unfairly on Trade negotiates a fair deal, or it gets hit with Tariffs.” At the same time, a coalition of The National Retail Federation and 65 other business groups voiced their concern, claiming that the tariffs do not achieve their intended goal. “If the goal is to open markets for U.S. goods and services abroad, the use of tariffs goes against that goal.”
Economic Calendar: Besides new trade war developments, today’s Economic Calendar will be scant with June new home sales coming out at 10:00.
IPOs: AQST, BE
Hot Stocks: SYK, LULU, T, IRBT
Have a great trading day!