On the face of it, the market recorded an excellent day but that masks some of the intraday movement. Trump’s announcement that a decision on Iran was impending, though, doused the market with cold war, leading it to backtrack after energy shares took a hit. The question on the front-burner now is whether Trump will decertify the 2015 Iran nuclear pact crafted and engineered by his predecessor, Barack Obama. Of late crude has rallied, representing a driving force for the market.
Trump’s 18 word tweet was all it took: “I will be announcing my decision on the Iran Deal tomorrow from the White House at 2:00 pm.” What’s at stake? If the Trump White House abandons the pact, we’d see economic sanctions placed again on Iran, cutting the country’s production and thus global oil supply.
Also, on the geopolitical front, U.S. negotiators failed to reach an agreement with China. China’s state media noted that more negotiations would be requisite to nipping a trade war. As for NAFTA, representatives from Canada, Mexico and the U.S. met to discuss the fate of the trade agreement.
Weighing in on the effects of Trump’s Iran decision was, Premier Wealth/First Allied senior wealth strategist, Mark Martiak: “We’re waiting on more clarity about the Iran deal. If Trump pulls out, which other leaders have urged him not to do, then supply will be cut, which will have the same impact as rising demand in terms of driving up prices. But even beyond that, we’re entering the summer driving season and the energy sector has been down for so long that it looks poised for a rebound.”
Market Summary: The S&P 500 and the NASDAQ ended up for the second straight session, the Dow pushing its winning streak to 3. The Dow tacked on 0.39%, the SPY closing up 0.34%. The NASDAQ saw the biggest gains of the day, trading up 0.77%. All-in-all, 7 of the 11 sectors on the S&P 500 ended up. Energy, as mentioned earlier, had been trading up as much as 2%, only to fall back and record daily gains 1/10th of that, i.e. 0.2%. Time and time again, it’s been a Trump tweet that sends whole sectors rising or diving.
IT ended up 0.8%. The Russel 2000 (RUT) shined, with gains of 0.9%.
Some of the stocks in the limelight yesterday were energy companies. Chevron (CVX), having been up as much as 2.3%, ended the day lower by 0.5%. Exxon (XOM) fell from being up 2.8% to record nice gains of 1.1%.
An Israeli company, Frutarom (FRUT) was in the spotlight after International Flavors & Fragrances (IFF) announced a $7.1 billion stock and cash deal to purchase the company. In response, IFF tumbled 11%.
Berkshire Hathaway (BRK.A) class A shares were up 1%, the conglomerate reporting a rare loss over the weekend. It is crucial to note that the loss was in large part due to changes in accounting rules and practices, Warren Buffett commenting that operating profits could be a better gauge of the company’s strength than net income. Buffett praised Apple’s buybacks, quipping that it would only add to his company’s share of the iPhone maker’s corporate earnings. Likewise, he made short shrift of cryptocurrencies, so if you’re going long on blockchain technology, cryptocurrency or Bitcoin, it’s likely the time to reconsider; the Oracle of Obama was not flattering about Bitcoin, comparing it to “rat poison.” Perhaps it should be called “Bit Con” rather than “Bitcoin!”
Another interesting development was the interplay – in real time – between Elon Musk and Buffett, Musk paying little heed to Buffett’s sacrosanct idea of economic moats. Musk, who has been an industry disrupter, has commented that innovation will be the true moat, or force propelling company earnings over time. “I think ‘moats’ are lame,” Musk commented during an earnings call. He likewise added, “If your only defense against invading armies is a moat, you will not last long,” summing up his view as follows, “What matters is the pace of innovation — that is the fundamental determinant of competitiveness.”
Buffett had tongue and cheek words of his own for Musk, who seeks to disrupt the automobile world and ultimately, that of space travel: “Elon may turn things upside down in some areas.” Quipping, “I don’t think he’d want to take us on in candy.”
Economic Calendar: Fed Chair, Jerome Powell will be speaking today. Another prime event will be the release of the NFIB Small Business Optimism Index, at 6:00 AM. The Redbook will be released at 8:55, with the JOLTS, the Fed’s preferred job openings index, coming out at 10:00.
Tuesday’s Hot Stocks: HTZ, ZG, SNAP, AMC, MOS, C
Have a great trading day!