Like we wrote yesterday, the topic that’s dominating live day trading is the prospect – and now advent – of a trade war. It would seem that Trump was absent on the day in grade school when the teacher taught the students the well-known adage, “You win more friends with honey than with vinegar.” There’s no doubt that the Chinese are fierce negotiators and it’s vital to show toughness; Trump’s brashness though is not only costing the global economy valuable GDP growth but is also positioning the U.S. as a place that’s less palatable to do business. In the famous words of Buffett, he beats himself up more for his acts of omission than commission. And that’s exactly the case here; it’s impossible to truly gauge how much potential growth the world economy is missing out on but more from America’s perspective, in this game of oneupsmanship or chicken, it is well-nigh impossible to know how many deals American manufacturers have lost and how many business have opted not to relocate to the U.S.
Is there a way to know what’s transpiring in a foreign company’s headquarters every time Trump unleashes a new diatribe, lashing out gratuitously at allies, meddling in their internal politics, the likes of which was seen in a Trump tweet about Merkel this past week?! The answer is a resounding no, but that notwithstanding, what behooves us is to opt for the best approach and find the best day trading stock picks. Live trading has not gotten easier because there’s no way to know when Trump will throw Beijing a bone to get Jinping back to the negotiating table. As for the rest of the G7, there’s no way to know which new alliances they will forge in trying to circumvent Trump’s tariffs and out-spar America. Berkshire Hathaway’s Vice Chairman, Charlie Munger has himself pointed out the lack of parity in U.S.-China trade agreements and has backed up Trump’s tough stance, but that notwithstanding, there’s no economist out there who thinks that this trade war is going to grow global GDP. And now, things are getting messy. The Dow down 6 consecutive days, U.S. industrialists and manufacturers hard hit, it’s becoming the paradigm of a classical economic construct where it’s more expectations that fuel reality than reality itself. By the same token that expectations for higher prices fuels inflations, fear of engagement with the unknown is placing a damper on economic growth, something being noted by the Fed as well.
You don’t have to go any farther than Atlanta’s Fed President Raphael Bostic. As for the central business district he presides over, these were his pithy words: “Optimism has almost completely faded.” And if you need his remarks in full, here you go: “I began the year with a decided upside tilt to my risk profile for growth, reflecting business optimism following the passage of tax reform. However, that optimism has almost completely faded among my contacts, replaced by concerns about trade policy and tariffs.” Bostic, likewise, accentuated the missed opportunities: “Perceived uncertainty has risen markedly,” adding, “Projects already under way are continuing, but I get the sense that the bar for new investment is currently quite high. ‘Risk off’ behavior appears to be the dominant sentiment among my contacts.”
As noted, the biggest losers yesterday were industrials, which are trade-sensitive, Boeing (BA) shedding 3.84%, Caterpillar (CAT) off 3.62%, and 3M (MMM) shedding 2.34%. At the daily low, the Dow traded down as much as 240 points. On a statistical level, the last time the Dow fell so many days consecutively was March ’17, the blue chip index now trading in the red for the year. With few sectors unscathed, the pockets of safety were utilities, up 1.1%, telecom, which tacked on 1.4% and real estate, which added a mere 0.1%. Consumer staples, though, saw nice gains of 0.5%. On the flipside, materials and industrials traded off around 2%.
A few stocks in the limelight were Apple (AAPL) which fell 2.1%, after a release the day prior noted that Cook had warned Trump that even if its suppliers were exempt from tariffs, it could be hurt regardless by other punitive measures taken by the Chinese.
This being a relatively slow week in so far as corporate and economic news goes, trading live online will be more than anything a matter of keeping your eye on the ball and watching every new trade-related development.
Another topic of note is obviously Walgreens Boots Alliance (WBA) replacing GE on the Dow. An original blue chip member when the index was founded, GE has been a member for 111 contiguous years; yet, that will come to an end before trading opens on June 26th. GE has floundered in recent years, though David Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices tried to frame the matter as GE no longer representative as a bellwether of sorts of the U.S. economy: “Since [GE first joined the Dow] the U.S. economy has changed: consumer, finance, health care and technology companies are more prominent today and the relative importance of industrial companies is less,” Blitzer expounding, “Walgreens is a national retail drug store chain offering prescription and non-prescription drugs, related health services and general goods. With its addition, the DJIA will be more representative of the consumer and health care sectors of the U.S. economy. Today’s change to the DJIA will make the index a better measure of the economy and the stock market.”
Economic Diary: MBA Mortgage Applications will be released at 7:00, followed by Current Account numbers at 8:30. Existing Home Sales will be released at 10:00. Economists are forecasting a rise of 1.1% to an annualized 5.52 million homes. The EIA Petroleum Status report will be released at 10:30.
Market Summary: All of the major indexes fell on the day, most notable being the Dow which fell for its 6th consecutive trading session. The blue chip index was off 1.15% on the day, the S&P 500 following suit with losses of 0.40%. The NASDAQ, the least scathed, fell 0.28%.
Hot Stocks: WBA, SYNA, LZB, SBUX, GE, WBA
Have a great trading day!