Tuesday, July 30, 2019

Lower markets as worries on a trade deal with China grow

Dow fell 23, advancers over decliners 5-4 & NAZ was off 19.  The MLP index fell 1+ to the 248s & the REIT index pared its advance & finished up 2 to the 389s.  Junk bond funds fluctuated & Treasuries were weak.  Oil jumped up 1+ to the 58s & gold gained 10 to 1443 (more on both  below).

AMJ (Alerian MLP Index tracking fund)

Americans’ spending moderated slightly in Jun but remained strong, a sign that high consumer confidence & low unemployment continue to fuel economic growth.  Personal-consumption expenditures, a measure of household spending on everything from airline tickets to furniture, increased a seasonally adjusted 0.3% in Jun from the prior month, the Commerce Dept said.

U.S. Consumer Spending Slowed Slightly in June

Merck (MRK), a Dow stock, reported Q2 earnings & revenue that easily beat expectations & narrowed its earnings & revenue forecast for the year.  The company expects full-year EPS of $4.84-4.94 versus the $4.75 forecast by analysts.  It sees 2019 revenue of $45.2-46.2B.  Analysts were expecting revenue of $44.74B.  The reduction in the earnings range reflects the inclusion of a charge of about $1.1B  related to the acquisition of biotech firm Peloton Therapeutics, announced in May.  “Our science-led strategy and execution across our key growth pillars have driven another quarter of accelerating revenue growth with strength across our global portfolio,” CEO Ken Frazier said.  Sales of Keytruda immunotherapy surged 58% in the qtr to $2.6B.   Keytruda, which boosts the immune system to attack cancer, has driven growth & put pressure on the competition.  Sales of Gardasil vaccine to prevent certain types of cancer were up 45.7% to $886M.  Sales of vaccines to children, which includes the company's MMR vaccine for measles, jumped 58% to $675M.  The stock went up 78¢.
If you would like to learn more about MRK, click on this link:

Merck smashes Wall Street earnings and revenue estimates

Home prices moved higher, & while the gains were shrinking in May on a national level, some markets are seeing stronger price appreciation yet again.  Nationally, home prices rose 3.4% annually in May, down from the 3.5% annual gain in Apr, according to the S&P CoreLogic Case-Shiller home price indices.  The 10-city price composite rose 2.2%, down from 2.3% the month before.  The 20-city composite showed a 2.4% annual gain, down from 2.5% in Apr.  “Nationally, year-over-year home price gains were lower in May than in April, but not dramatically so and a broad-based moderation continued,” said Philip Murphy, managing director & global head of index governance at S&P Dow Jones Indices.  Other more recent indices have shown price gains growing.  This particular read is a 3-month running average ended in May, so it is less current.  Home prices in some major markets have been heating up due to tight supply of houses for sale.  Inventories had been rising at the start of this year but are now flat nationally & lower in some cities, compared with a year ago.  Inventory is also most slim on the low end of the market, where demand is strongest.  The median existing-home price in Jun reached an all-time high of $285K, up 4.3% from Jun 2018 ($273K), according to the National Association of Realtors.

Seven cities see home prices heating up again, but Seattle prices are sinking

Gold futures settled higher, marking a 3rd straight session of gains, as investors digested economic data suggesting the US economy remains healthy with low inflation, while waiting for a Federal Reserve decision on interest rates tomorrow.  Aug gold added $9.30 (0.7%) to finish at $1429 an ounce, after gaining only 0.1% yesterday.  The metal marked its 3rd straight climb, representing its longest such streak since a 4-session advance ended Jun 25.  US personal-consumption expenditures, a measure of household spending, increased a seasonally adjusted 0.3% in Jun from the prior month, the Commerce Dept said.  The report showed inflation, a key measure of economic health for the Fed, was muted.  The personal-consumption expenditures, the Federal Reserve's preferred inflation measure, rose 0.1% in Jun & was up 1.4% from a year earlier. The rate-setting FOMC is widely expected to cut rates by at least 25 basis points at the conclusion of its 2-day policy gathering tomorrow.  The yellow metal has benefited from hope that the FOMC will reduce benchmark borrowing costs & signal a willingness to do what it takes to sustain US economic expansion in a record-setting 11th year of expansion.

Gold marks longest string of gains in 5 weeks ahead of Fed decision

US oil futures scored a 4th straight gain, with traders bidding up crude a day ahead of the conclusion of a Federal Reserve policy meeting that's expected to deliver a qtr percentage point interest rate cut.  The resumption of US-China trade talks were also viewed as a positive, despite downbeat comments from Pres Trump.  West Texas Intermediate crude for Sep delivery rose $1.18 (2.1%) to end at $58.05 a barrel after the benchmark rose 1.2% yesterday.  Meanwhile, Oct Brent crude the global benchmark, rose $1.01 to $64.63 a barrel, a gain of 1.6%.  The Fed is seen as virtually certain to cut interest rates, most likely by a qtr of a percentage point tomorrow.  Oil traders said the move could provide a lift to crude by soothing worries about demand fostered by signs of a slowing global economy, though the main catalyst could be through a weaker $.  A weaker $ can be a positive for commodities priced in the US unit, making them cheaper to users of other currencies.  While support also tied in part to the resumption of US-China trade talks, enthusiasm was tempered after Trump delivered a series of tweets accusing Beijing of negotiating in bad faith.

Oil pushes higher as investors focus on trade talks, Fed meeting

Stock indices meandered, spending most of the day in the red.  The interest rate cut is widley baked into the market, so China trade talks are getting most of the attention from investors.  That outlook is glum, to say the least.  But the Dow still remains within 1% of its record highs

Dow Jones Industrials

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