Thursday, August 16, 2018

Markets rally on hopes for US-China trade talks and Walmart earnings

Dow jumped up 352, advancers over decliners 4-1 & NAZ jumped up 54.  The MLP index inched higher in the 282s & the REIT index rose 2+ to the 357s (nearing its record highs).  Junk bond funds went up & there was a little selling in Treasuries. Oil rose pennies in the 65s & gold recovered all of 2 to 1187.

AMJ (Alerian MLP Index tracking fund)

CL=FCrude Oil65.13
 +0.12 +0.2%

GC=FGold  1,187.30
 +2.30 +0.2%

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Stocks were on track for a rebound with the Dow jumping triple digits, supported by some earnings & optimism about a potential China-US agreement to avert a trade war.  China said a delegation would attend the next round of trade talks with US counterparts in DC later this month.  China & the US have gone back & forth with tit-for-tat tariffs & have threatened further tariffs on exports worth hundreds of $B.  The announcement came from China's Ministry of Commerce.  Larry Kudlow, President Trump's top economic adviser, said that “We've got a Chinese delegation coming next week – a kind of second-level delegation, so maybe they'll reopen those talks.”  Housing starts & weekly jobless claims were released.  US initial jobless claims dipped 2K to 212K in the prior week, while US housing starts rose 0.9% in Jul to 1.17M.  Stocks tumbled yesterday with the Dow falling by triple digits as traders worried about the escalating trade feud between the US & Turkey, while shrugging off the latest positive US economic data.  The Dow slipped 137 (0.5%) to 25,162 & the S&P 500 was down 21, closing at 2818.  The NAZ fell 96 (1.2%) to 7774.

Stocks rebound, boosted by earnings and hopes of a US-China trade deal

Walmart’s (WMT), a Dow stock & DIvidend Aristocrat, Q2 topped expectations as the company's US comparable-store sales experienced their strongest growth in more than 10 years while its US e-commerce sales posted a 40% rise.  The retailer hiked its 2019 earnings guidance & said it is on track to increase US e-commerce sales by 40% for the full year.  EPS was $1.29 on revenue of $128B.  Analysts forecast EPS of $1.22 on revenue of $125.97B.  In the comparable qtr last year EPS was $1.08.  The company raised its full-year adjusted EPS guidance to $4.90-$5.05, excluding Flipkart.  The company's US comparable sales increased 4.5%, the strongest growth in more than a decade, led by grocery, apparel & seasonal sales.  Comparable-store sales are sales in stores that have been open at least one year.  Sam's Club comparable-store sales increased 5%, the strongest growth in 6 years.  Net sales at Walmart Intl rose to $29.5B, an increase of 4%.  The company added that it saw significant progress with expanded online goods, including 1100 popular new brands.  Grocery pickup is now available at more than 1800 locations & the company is on track to reach about 40% of the US population by yearend with grocery delivery.  The stock shot up 9.07 (10%).
If you would  like to learn more about WMT, click on  this link:

Walmart's store sales best in over 10 years

White House economic advisor Larry Kudlow confirmed that the US & China will resume trade talks later this month, but warned that Pres Trump has a strong resolve to make sure the administration gets a good deal.  Kudlow is the director of the National Economic Council & one of Trump's top advisors.  His office likely will be involved when a Chinese delegation visits the US later in Aug for trade talks, though he said the under secretary of the Treasury for intl affairs, will act as lead.  "The Chinese government, in its totality, must not underestimate President Trump's toughness and willingness to continue this battle to eliminate tariffs and nontariff barriers and quotas, to stop the theft of intellectual property and to stop the forced transfer of technology," Kudlow said.  "Those are the asks that we've been making now for quite some time."  His statements come amid market optimism that the 2 sides will be able to avert a trade war that some fear could spill over globally & stanch the economic momentum the US has seen during the Trump administration.  The pres has vowed to renegotiate global trade deals that have worked against the US & he has targeted China specifically for tariffs on $50B worth of goods so far.Kudlow was measured in his optimism about the upcoming negotiations even amid his hopes for the economy.  "Let's just see what happens," he said.  "Sometimes talks can produce better outcomes than expected."  Among Trump's main grievances are lopsided tariffs that make China far less hospitable for US goods than Chinese goods are in America.  The administration has specifically targeted the elimination of intellectual property theft as its goals in the talks.

White House economic advisor Kudlow confirms trade talks to resume with China later this month

After several years of rich home price gains, the market appears to have found a limit to what people can afford.  Sellers are finally responding by increasingly lowering prices.  Approximately 14% of all listings in Jun saw a price cut, that's up from a recent low of 11.7%  at the end of 2016, according to a new report from Zillow.  In addition, home price growth is slowing in nearly half of the 35 largest US metropolitan markets.  Rising mortgage rates & affordability are behind the change.  As the housing market recovered from its epic crash in the last decade, home prices began to gain slowly.  And then they suddenly took off in the last few years.  The simple reason was supply and demand.  As millennials aged into their homebuying years, homebuilders did not & are still not meeting the rising demand.  In addition, Ms of single-family homes lost to foreclosure were purchased by investors & turned into single-family rentals, further depleting the for-sale housing stock.  The market was thus suffering a critical shortage, just as demand was taking off.  Prices had nowhere to go but up, until now.

Housing tipping back to a buyer's market as sellers cut prices

The bulls are feeling good today on resuming trade talks with China.  These should be very important for China with slowing growth, not helped by tariff wars.  Trade is an important part of its economy.  The Dow needs to go up roughly 1K for another record.  That's not very far for the bulls.

Dow Jones Industrials

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