TradeTheNews.com Weekly
Market Update: US stocks unravel ahead of earnings season
Fri, 12 Oct 2018 16:13 PM EST
US stock indices broke down this week and volatility spiked signaling to some
the potential end of the historical outperformance enjoyed by US stocks this
year relative to overseas markets. To be sure foreign shares slid too with many
finding their way into bear market territory while US markets fell back below
key technical levels. On Thursday, the S&P 500 closed below its 200-day
moving average for the first time since early April, while small caps and the
NASDAQ fared even worse. Last week’s abrupt move up in rates along with further
reflection on comments offered by Fed Chairman Powell about policy
normalization were widely blamed as the catalysts. The lingering trade war and
weakening Yuan coincided with fresh corporate signals of accelerating inflation,
which, along with seasonal factors and technically driven momentum, resulted in
a toxic mix. Crude prices slumped, gold found a bid and VIX was up 30% over
just two sessions. Treasury yields moderated by Friday despite disappointing
investor demand for two of the three US Treasury coupon sales this week. For
the week the S&P500 lost 4.1%, the DJIA fell 4.2%, and the Nasdaq slipped
3.7%.
In corporate news this week, earnings season kicked off with a few major banks
reporting quarterly results. JPMorgan and Citi announced a profit beat, but
Wells Fargo missed on its bottom line as it continues to cut costs. PPG lowered
its guidance due to softening demand in China, weaker automotive sales, and
rising costs, and the coatings supplier announced a 10% global price increase
for its automotive OEM coatings. Square shares fell sharply after the company
said its long-time CFO Sarah Friar would be stepping down to become CEO of tech
startup Nextdoor. According to reports, Sears Holdings has hired advisers to
prepare the company for bankruptcy, but the retailer is reportedly nearing a
financing deal to keep its doors open at least through Christmas. On the
M&A front, TransDigm announced it would acquire Esterline Technologies in a
$4B deal to expand its platform in the aerospace and defense space. The DOJ
confirmed it would approve the $69B CVS-Aetna merger deal, contingent on
divestment of Aetna’s Medicare Part D business to Wellcare.
SUN 10/7
(CN) Fitch Report: MMF assets have risen by 50% over the last 12 months to
CNY8.6T ($1.3T), despite regulatory tightening: In Q2 the Yu'E Bao (largest
money market fund in China) had the highest outflows in its history, assets
declined to CNY1.45T v CNY1.69T (record) q/q
MON 10/8
*(EU) EURO ZONE OCT SENTIX INVESTOR CONFIDENCE: 11.4 V 11.6E
PPG Announces 10% global price increase for automotive OEM coatings due to
"unprecedented cost pressures"
PPG Cuts Q3 $1.41-1.45 v $1.59e; Rev ~$3.8B v $3.87Be, attributed to softening
demand in China, weaker automotive sales, and rising costs
TUES 10/9
(CN) US Officials warn China that Trump will not discuss trade at G20 unless
China produces a detailed list of concessions first - FT
(ZA) South Africa President Ramaphosa confirms former South Africa Central Bank
Gov Mboweni named as new Fin Min - press
WEDS 10/10
USD/CNY (US) US Treasury Sec Mnuchin has warned China on competitive currency
devaluation - FT
*(UK) AUG INDUSTRIAL PRODUCTION M/M: 0.2% V 0.1%E; Y/Y: 1.3% V 1.0%E
(DE) German Economic Ministry cuts 2018 and 2019 GDP growth forecasts (as
speculated)
(US) Treasury to issue new rules requiring all foreign investors in certain
deals involving critical technology to submit to national security reviews or
face fines as high as the value of their proposed transactions from Nov 10th -
press
*(US) SEPT PPI FINAL DEMAND M/M: 0.2% V 0.2%E; Y/Y: 2.6% V 2.7%E
ESL To be acquired by TransDigm for $122.50/shr in cash valued at $4.0B
(US) Association of American Railroads weekly rail traffic report for week
ending Oct 6th: 554.2K, +1.2% y/y
COST Reports Sept SSS (ex gas) +7.3%, US SSS (ex gas) +7.7%
FLR Reports prelim Q3 Rev $4.6B v $4.99Be, new awards $9B
(UK) UK and EU are said to have agreed in principle on an all-UK backstop plan
- UK's Telegraph
(US) Pres Trump: I think the Fed has "gone crazy" and is too tight;
the Fed is making a mistake
THURS 10/11
*(IT) ITALY DEBT AGENCY (TESORO) SELLS TOTAL €6.5B VS. €5.0-6.5B INDICATED
RANGE IN 2021, 2025, 2033 AND 2037 BTP BONDS
DAL Reports Q3 $1.80 v $1.74e, Rev $11.8B v $11.9Be
(US) SEC Chair Clayton: changes in quarterly reporting requirements is unlikely
for bigger companies; SEC may consider less frequent reports from small firms
*(US) DOE CRUDE: +6.0M V +1.5ME; GASOLINE: +1.0M V +0.5ME; DISTILLATE: -2.7M V
-1.5ME
(TR) Secret agreement reportedly has been brokered for release of Pastor
Brunson in Turkey; deal said to include a commitment by the U.S. to ease
economic pressure on Turkey - NBC News
(CN) US Treasury staff finds China is not manipulating currency - press
(SG) SINGAPORE MONETARY AUTHORITY (MAS): SEMIANNUAL MONETARY POLICY STATEMENT:
TO INCREASE SLIGHTLY THE SLOPE OF S$NEER POLICY BAND, maintains the width and
center of currency band (2nd straight tightening move)
*(CN) CHINA JAN-SEPT TRADE BALANCE (CNY): 1.44T
(CN) CHINA SEPT TRADE BALANCE: $31.7B V $19.2BE
(CN) CHINA SEPT TRADE BALANCE (CNY): 213.2B V 136.2BE
FRI 10/12
JPM Reports Q3 $2.34 v $2.24e, Managed Rev $27.8B v $27.2Be
C Reports Q3 $1.73 v $1.67e, Rev $18.4B v $18.4Be
(TR) Turkish court releases US Pastor Andrew Brunson on time served
(US) OCT PRELIMINARY UNIVERSITY OF MICHIGAN CONFIDENCE: 99.0 V 100.5E
(UK) UK and EU are said to be discussing extending the Brexit transition phase
beyond the 21 months so far negotiated - Guardian
(US) Fed's Evans (non-voter, dove): It’s time to adjust policy stance to at
least 'neutral'; not worried about inflation; Slightly restrictive policy makes
sense; slightly restrictive could mean about 50 bps above neutral - CNBC
interview
