Friday, September 27, 2019

Drama at the UN and in Washington lead markets lower Weekly Market Update: Drama at the UN and in Washington lead markets lower

Stock markets moved modestly lower this week and trading remained choppy due to headline risk. As usual President Trump was at the epicenter of headlines that swung sentiment. In another brash speech at the UN Trump chastised China again, doubling down on many of his administration’s hawkish foreign policy stances. The speech and his appearances on the sidelines in New York came alongside a new whistleblower report raising new allegations against the President. By mid-week House speaker Pelosi formally called for an ‘impeachment inquiry’. The President spent much of the week defending his actions while dismissing the Democrats attempt at oversight as nothing more than another politically motivated witch hunt. Indices gyrated around the developing story despite a general market narrative that regardless of what is ultimately uncovered, Trump may be distracted but will not be removed from office by the Senate.

US/China trade talks stayed largely on a positive trajectory heading into next week’s communist party anniversary in China. President Trump had some tough talk for China during his UN speech on Tuesday and reports surfaced on Friday that the White House has begun preliminary consideration of a potential effort to limit portfolio flows into China, which might include delisting Chinese firms from US exchanges. Chinese rhetoric was less bellicose, and there were reports that China was stepping up purchases of US commodities.

Global interest rates went nowhere as weak global economic readings and Central banks continued willingness to cut rates kept a relatively tight lid on Treasury yields. The dollar firmed sending the Euro to a fresh two and half year low. Cable moved lower after the UK’s Supreme Court thwarted PM Johnson’s effort to suspend parliament. Oil prices dropped throughout the week giving back all the gains that followed the Saudi Aramco attack just two weeks ago. For the week, the S&P fell 1%, the DJIA lost 0.4%, and the Nasdaq declined 2.2%.

In corporate news this week, Nike reported a big quarterly earnings and revenue beat, boosted by strong digital sales and high demand for athletic products. Micron dinged the semiconductor stocks after reporting a disappointing forecast and weaker than anticipated margins. IBKR announced a new ‘Lite’ offering launching in October to provide commission-free, unlimited trades on US exchange-listed stocks and ETFs, which weighed on competitors E*trade and Ameritrade. A leaked memo from Tesla's CEO to employees said the company has a shot at a record 100K deliveries this quarter. Layoffs and furloughs at GM facilities continued as the two sides still remained at odds over a new contract agreement for a second week. Beyond Meat heated up again on the announcement of a new pilot program with McDonald’s. eBay CEO Devin Wenig departed his company abruptly, while the We Company’s CEO Adam Neumann stepped down amid the company’s ongoing IPO woes, though he will remain chairman.