Things you should know
- ECB does nothing but hints at a September cut
- Big Day for Earnings – 55 + companies announce
- Next up – The FED – What will Jay do?
Stocks rallied to new highs – even in the face of some really poor results by some very KEY companies…..lower margins, pressure from the trade war, slowdown in global growth all being cited as reasons for the miss, while other companies in the semi-conductor space blew the roof off the house and offered up very positive guidance going forward and so you wait to see who has the most impact on investor psyche……And clearly, it appears as if investors/traders/algo’s chose to accentuate the positive and eliminate the negatives. While the mkt struggled going into the open – the tone changed early on as investors pushed the bad news from BA and CAT aside and chose to focus on the improving story in the tech space. TXN rallied 7.4% on the back of a great earnings call and forward guidance and that took the semi’s with it….The Semiconductor ETF’s had a great day as well as the passive investors chose to go all in and make broad bets on the group. The I-shares SOXX ETF – rallied 3% while the Vaneck SMH ETF surged by 2.6%. By the end of the day the S&P rallied by 14 pts or 0.47% ending the day at 3019 (it’s 12th record close for 2019) while the Nasdaq was helped along by the outperformance of the semi names – (which excited the tech sector) ending the day up 70 pts or 0.85%, the Russell joined the fun adding 25 pts or 1.6% while the Dow suffered at the hands of both BA and CAT – causing that index to lose 79 pts or 0.29%.
And this all happened while Special Prosecutor Bob Mueller sat in front of two special house committees defending his handling and his report of ‘the investigation’ that took more than 2 yrs and millions of tax payer dollars to complete….and while it was all very dramatic – in the end neither side came out the winner – The Democrats did not get any new ammunition that might give new life to an impeachment process while the Republicans didn’t get any new information that allows them to throw doubt on the credibility of the report. So, can we just move on? Is anyone else disgusted yet? Let’s just recognize – politics is a dirty game, and it gets dirtier with each election cycle…..I for one would rather concentrate on what will move the country forward, What will cause all Americans to participate in this strong robust economy vs the mudslinging that is taking place in DC.
All this being said – today is Judgement day for the ECB – at 7:45 am this morning – Mario Draghi – ECB (European Central Bank) President will emerge and tell the world (investors/traders and algo’s) what he thinks and what he plans on doing – Will this be another ‘We will do whatever it takes’ moment or will he just offer up the idea that he is prepared to cut when he gets more information (think September). Does he want to ‘pre-empt’ the FED’s July 31st rate cut announcement by announcing his own cut or will he let the FED take the lead on the next move? The understanding was that he was prepared to cut but the rumor now seems to be that he will not actually announce a cut today, but that he will assure mkts that a cut is coming….and in my opinion – that would be a mistake. He has been hinting at more stimulus for months, he has told the world that he needs to wait for more data, well guess what – he has the data and it points to continued weakness….. so, can he jawbone the mkts into stability or does he have to put his money where his mouth is and do something definitive?
Jawboning is when you ‘attempt to persuade or pressure by the force of one’s authority’ – without actually doing something. So, as President of the ECB – he does carry some authority – so when he speaks people do listen, but has he worn out that strategy? Is it time for time for him to demonstrate leadership and cut rates by the 10 bps that the mkt is assuming or can he ride this one more time? It comes down to credibility – and that is the same issue for the FED…. – FED chair Jay Powell has done the same thing – he has painted himself into a corner and essentially HAS to announce a 25 bps rate cut next week – or get branded as “the boy who cried wolf”…..The mkts will not take kindly to no cut and if that happens you can expect a swift sell off – a sell off that would fall squarely on his shoulders and cause all kinds of commentary about his leadership…..and you can be sure that Trump would have a field day with it…..
This morning – mkts around the world are all in the green…Asian mkts responding to the action in the US yesterday…..(think the strength in the Semi’s) as well as the expected ECB rate cut and the FED rate cut – now playing a more central role as it is ‘judgment day’ for the Europeans. Meanwhile – Phil Lowe – Governor of the RBA (Reserve Bank of Australia) re-iterates his thinking about low rates – saying that “it is reasonable to expect an extended period of low interest rates” and that low rates are ‘here to stay’ as he signals that the RBA is open to cutting interest rates even further than the current 1% rate in that country…..(Oh boy – is he hinting at going negative?). By the end of the day – Japan + 0.22%, Hong Kong + 0.25%, China + 0.82% and ASX + 0.61%
The European mkt centers area also cautiously higher as the clock ticks on the ECB announcement. The announcement happens at 12:45 pm – UK time (7:45 am EST) followed by a press conference hosted by Draghi at 8:30 am EST. ECB LEAVES RATES UNCHANGED BUT HINTS AT SEPTEMBER….. As noted above – the KEY will be how definitive he is…will he cut or will he jawbone? My friend Tom Essaye of the 7’s report lays it out like this:
“If they cut rates and announce the start of a new QE plan, that’ll be a dovish surprise (good for stocks), if they effectively promise a rate cut and more QE at the September meeting, that will meet expectations (not a big market reaction) and if they merely state both moves are possibilities if growth slows further, that will be a hawkish disappointment (stocks likely will fall). “ So stay tuned – the clock is ticking. FTSE +0.12%, CAC 40 + 0.19%, DAX -0.15%, EUROSTOXX + 0.17%, SPAIN + 0.10% and ITALY -0.04%.
US futs are a mixed – the Dow is bouncing back after a negative day yesterday and are up 58 pts, while the S&P is down 2, the Nasdaq is off 13 pts and the Russell is flat. Today is also one of the biggest day for earnings reports…..55 + companies are due to walk the runway today….so stay tuned. Eco data includes Durable goods exp of +0.7% (would be a huge turnaround over last month), Cap Goods Order Non-Defense of +0.2%, Cap Goods Orders Shipped – exp of -0.2%, Wholesale Inv of +0.5%, Init Jobless Claims of 218k, Cont. Claims of 1.68 mil and the Kansas City Fed Survey of 3.
Yesterday’ move leaves the S&P at new highs…so you need to depend on trendlines to get a sense of the next move….As noted in my note from last week – the trendline did suggest that 3025 was a possible high and that is confirmed by today’s trendline drawn from the April highs to now……Support remains at the 2975 level with more serious support at 2950 ish. Much will depend on what the ECB does and says – that will give some insight into what the FED will also say next week – when they talk about the ‘global economy’.
Take good care
Grilled Shrimp on a Bed of Orzo
An easy summer dish.
For this you will need: about 2 doz large, clean & deveined shrimp, 10/12 skewers, olive oil, oregano, fresh lemon juice, minced garlic, s&p, feta cheese and some Orzo ( Orzo is a rice shaped pasta – used in many types of pasta salads or soups or in this case as a bed for the shrimps) .
**if you are using wooden skewers – you must soak them in water for at least 20 mins.**
Now – pierce the shrimps onto the skewers – maybe 4 at most per. Set aside in a deep pyrex dish.
Next mix the olive oil, garlic, oregano, some lemon juice, s&p – shake well and then pour ½ over the shrimps. Place in fridge and let marinate.
Heat the grill – using a grill brush –clean the grill rack.
Bring a pot of salted water to a rolling boil and add the orzo…cook for about 8 mins or so…do not let it get mushy….keep it a bit aldente. Strain and mix with the feta. Now pour the remaining mix into the pasta with the feta and stir well to coat. Place the orzo in a large family style platter and make a bed.
Next – remove the shrimps from fridge and place on hot grill….be sure to not burn….should take no more than 5 to 7 mins max. Now place the skewers on top of the orzo and feta. Take a picture to remind yourself of this great and simple dish
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