While last week was heavy with earnings reports, this week will be heavy with policy, trade and economic data. Markets were mixed today as traders took profits on tech stocks while shares of banks and healthcare countered the tech selloff. At the close the Dow was up 28 points on light trading volume at 27,221. Apple reports earnings tomorrow after the close.
The Federal Reserve will hold its two-day rate policy meeting starting tomorrow and the general feeling among gurus is that Chairman Powell will cut interest rates in an effort to ease the potential headwinds coming from Asia and Europe. While the US economy continues to poke along with a strong labor market, China has lost an estimated 2 million manufacturing jobs due to tariffs and is also facing riots in Hong Kong and pork prices that rose 30% just in June due to African swine flu. Japan and South Korea are also now in a trade dispute and in Europe, ECB President Draghi announced the need for drastic action in September to counter slowing manufacturing. With BoJo now captain of the English side the odds makers are counting on a hard Brexit which could be chaotic and is pushing the pound/sterling lower against global currencies.
The price of energy continues to be soft. WTI crude currently trades at $56 and change with prices stuck in a range between $53 and $63. Natural gas meanwhile has been on a steady decline thanks to abundant supplies coming from the Marcellus shale and Permian basin. A year ago, nat gas inventories were below average but a combination of cooler weather, increasing renewable energy output and robust well head production has reversed that trend and sent prices to a low of $2.11 per mbtu. Last year at this time the price was $2.90 per mbtu. As they say in the chicken coop, natural gas is: “Cheep Cheep, Cheep!