Things you should know
- China allows Yuan to weaken
- Global Mkts Under Fire
- Trump Yet to Tweet
Stocks ended lower on Friday – marking their worst week in more than two months…..NFP report on Friday? Was in line – but it seemed to be tossed aside. No one was really paying any attention to it, as they were more concerned about the new tariffs that the President announced and the impact they could cause to the US and global mkts……..So, as expected, the rising escalation (think tensions) caused stocks around the globe to feel the pain, ending the day and week lower….The Dow lost 99 pts or 0.37%, the S&P gave up 21 pts or 0.73%, the Nasdaq lost 107 pts or 1.32% and the Russell fell by 17 pts or 1.10%.
The VIX (fear index) has been shot higher – and is now up some 66% since July 25th (one week ago) as the rhetoric heats up….As you can imagine –
treasuries, gold and utilities were the winners…..(think safety trades) and this morning – there are some that are now tossing Bitcoin into the ‘safety trade’ as that ‘asset’ has also shot up 30% since the 25th…… In my opinion, this has nothing to do with safety at all…. there is nothing about Bitcoin that screams safety like US treasuries, Gold or Utilities. I mean – Bitcoin = Safety? Not happening. And that is NOT a slam on Bitcoin at all – it’s just common sense…..you can’t put Bitcoin and Safety into the same sentence and have retail investors think it’s true – it is not. Period. Gold is Gold…..Bitcoin is NOT GOLD (or treasuries or utilities).
Now over the weekend – there wasn’t much to upset the mkts – until last night…..(or Monday in China). In a blatant response to the newest Trump threat – Xi Xi and his people allowed the Chinese Yuan (also known as the Renminbi) to fall, relative to the US $. In addition, he also instructed the state-owned Chinese agriculture companies to ‘suspend the import of US agriculture products” . Surprisingly – Trump has yet to Tweet anything in relation to this latest move – but we can be sure that it’s only a matter of time…… This move is sure to irritate him beyond belief since he has been saying all along that the Chinese have been manipulating their currency …which causes me to ask – Didn’t we just do the same thing? I mean – let’s be honest – lower US interest rates caused the dollar to fall – and if Donny keeps screaming for lower rates isn’t he also pushing for a weaker dollar? (Remember – a weaker dollar makes US exports cheaper abroad…..and imports more expensive). Just sayin – NO ONE should be surprised at this latest move by the Chinese and if Treasury Sec Stevey Mnuchin and Trade Rep Bobby Lighthizer are – then that’s a whole new issue…..
Now, this latest move by the Chinese only solidifies another US rate cut in September…..The Vegas ‘bookies’ are now calling for a 100% chance of a rate cut in September and a 60% chance in October……Oh boy……
So what’s happening? Stocks around the world overnight and this morning are under pressure….Asian stocks fell by nearly 2% as the Chinese allow the Yuan to pierce 7 vs. the US $. Investors there react to the latest hit to trade by hitting the SELL button and unrest in Hong Kong builds. DO NOT DISCOUNT THE UNREST IN HONG KONG AS AN ADD’L ISSUE FOR THE YUAN. Carrie Lam – the Hong Kong CEO said overnight that the city was ‘on the verge of a very dangerous situation’ – flights got cancelled, train service being cancelled, general strikes across the city causing even more difficulty. In the rest of Asia – concerns over the increasing battle between DC and Beijing continue to tell the story. Japan -1.74%, Hong Kong -2.85%, China -1.9% and ASX -1.90%.
In Europe – the negative tone is washing across the continent…..The algo’s apparently in control as they read the headlines and initiate SELL orders in what is likely a ‘Sell first, Ask questions later’ move. Look – like mkts around the world – the Eurostoxx 50 Index – which is an index of the 50 leading BLUE CHIP names in the Eurozone had been up 22% as of July 25th……This morning, after the pounding global mkts have been taking – that index is now down 12% from the highs leaving it up only 10% for the year…and that is the theme around the world. Since July 25th – the FTSE is off 10%, CAC 40 IS DOWN 12%, DAX -11%, Eurostoxx -10%, SPAIN is now only +2% after having lost 13% since Mid-April…and the Italians? They were up 24% and are now only ahead by 13%….so the theme of stocks under pressure due to global economic concerns is alive and well…..
US futs are DOWN….and down big….the Dow is off by 372 pts at 7:30 am…the S&P is off by 45 pts, the Nasdaq is off by 145 pts and the Russell is down by 28 pts….for all of these indexes, those moves represent anywhere from losses of 1.5% – 2% – in line with what and how global mkts are performing and have performed overnight. That being the case – if it holds true then US mkt indexes will also all be lower by nearly 10% ytd
by end of day…and if Donny stokes the fires via Twitter – then it could be worse. That being said – this should not be a surprise for anyone….the talk of an uptick in angst (think tariffs) and the realization that a trade is NOT happening anytime soon – HAS TO cause global mkts to re-price risk – and that is exactly what is happening….We have now broken BOTH the 50 and 100 dma’s on the S&P, the Nasdaq, and the Dow and we have broken all 3 trendlines on the Russell. Remember a couple of weeks ago – I made mention that the Dow Transports were NOT confirming the ‘Dow Signal’ when both the Dow Industrials and Dow Transports make new highs…and that has been a lingering problem…..
Now that being said – it is not the end of the world at all….moves like this will take the fluff out of the mkt for sure and bring prices back to levels where new money will find a home….Think about it – when the mkt is ahead by 20+% – that means that many stocks are racing ahead, forcing some investors to not chase and be patient…well guess what? Your patience is about to pay off…..Now this could continue for a bit – so don’t go all in today…..pick your spots, pick the names that have taken a nice hit but still have a good strong story to tell….While it appears ugly – there is always a silver lining….
S&P has now broken two trendline supports – and is looking to trade sub 2900 this morning…..the next trendline support (the 200 dma) is at 2790……which is only down 5% from Friday’s close, and if that happens – while it will put us in ‘correction’ mode, the broader mkts will still be up on the year… As we move into the second half – there is a lot of data to come. Expect lower rates in the US and abroad, expect more volatility as Portfolio Managers figure out how to allocate into year end.
OIL this morning is lower….for all of the reasons we detailed…..and for the expected disruption in demand – again, I still believe it is a supply issue more than a demand issue. Oil is holding the $55 level as it attempts to stabilize…….Now the Iranians captured another oil tanker – this time it was an Iraqi one….and that is helping oil find some support. Later in the week – we will hear from both the EIA and API (Energy Info Admin & the American Petroleum Institute) about oil reserves and drawdowns or build up in supply.
Gold – that continues to surge…as the flight to safety is the talk of the day and weeks ahead….It is up 13 pts right now at $1,471 with no resistance in sight….the trendline suggests that $1,485 is a level where it could run before finding some resistance, but if the angst continues to build we could see $1,500/oz relatively soon. Stay tuned.
Take good care.
Chicken w/ HOT Italian Sausages and Cherry Peppers
Global mkts are under pressure – they are HOT with anger…..Weakening Yuan, Higher Tariffs, Slowing global growth…..
You will need: Thighs & legs, (bone in/skin on), s&p, olive oil, hot Italian sausage, Cherry peppers, garlic, white wine, chicken broth, marinated artichoke hearts, thin sliced potatoes, s&p and flour. Total time 1 hr…start to finish….
Preheat oven to 375 degrees – Preheat grill for cooking the sausages
Season chicken pieces with s&p – heat up oil in frying pan – when hot – reduce heat to med/hi – now add chicken and brown on all sides – maybe 10 mins total. While this is cooking – place the sliced potatoes in the baking dish – season with s&p – add a splash of oil. Now remove the chicken from the frying pan and place in the baking dish and put in the oven and continue to cook for about 30 mins….
Next – cook the sausage on the grill – careful not to burn….maybe like 10 mins total….remove from grill and let rest for 3 or 4 mins then cut into bite size pieces. In the meantime – add the chopped garlic to frying pan (that still has the juices and oil from chicken) along with sliced cherry peppers – sauté. Now add the sausage and some white wine and reduce (5 mins) – next add chicken broth and the artichoke hearts….sauté for another 5 – 8 mins…
In a separate bowl – whisk together some flour and milk (you can use water) and add to the frying pan – allowing it to cook and thicken a bit….do not let it get too thick – you can add a bit of broth if you need to. Re-introduce the chicken/potatoes to the frying pan and allow to simmer for 2 or 3 more mins.
Now serve on a large warmed platter family style.