The news flow created slightly more fear than greed, as Fed officials talked down the likelihood of a 50-basis point rate cut and President Trump on Tuesday reiterated his threat to impose further tariffs on Chinese imports.
Earnings season got off to a mixed start with CSX lowering its full-year guidance as CEO James Foote called the economic backdrop “one of the most puzzling I have experienced in my career” which has spanned more than 40 years. Other companies fared better, such as the banks and Microsoft, and with about 15% of companies in the S&P 500 reporting results, the expected decline has moderated to -2.1% from -3% at the end of June.
Nevertheless, net profit margins are under pressure as a result of wages and raw material costs, and 9 companies have mentioned trade tensions as a significant headwind. The economic releases, most notably the Empire State Manufacturing Survey and the University of Michigan Consumer Sentiment Index both showed a steady economy (begging the question why the Fed has made this dovish tilt).
On Friday, Iranian forces seized a British-flagged oil tanker in the strait of Hormuz, and the U.S. apparently shot down an Iranian drone in response. The market sold off Friday afternoon, with the S&P 500 closing down 1.23% for the week. The yield on the Ten-Year Treasury slipped 4 basis points to 2.05% and the dollar remained steady.
A special shout-out to my Birchwood Club tennis teammates for our first-round playoff victory on Friday night. It was a sultry evening in Deerfield, the sun had long set over the Illinois 294 Tollway, when court 1 partners Fenton and Primer finally disposed of their worthy adversaries from Tennaqua in a lengthy third set tiebreaker to advance Birchwood to the semi-finals.
Corporate earnings should be in focus, with more than 130 of the S&P 500 reporting second quarter results including high-profile companies such as Alphabet (
Across the pond Mario Draghi is expected to signal an imminent further easing of interest rates as well as more asset purchases in his final meeting as President of the ECB. Those moves will help set the table for the Fed to cut rates at the end of the month.
Stocks on the Move:
Related: The FOMOTINA Rally
Equities Contributor: IRIS.xyz
Source: Equities News