Stocks traded in a mixed fashion with industrials, materials, and real estate making gains while tech got whacked. The Dow finished up 20 points to close at 20,995, whereas the NASDAQ lost almost 1%. Chip stocks were pulling back after a research note from Morgan Stanley which warned that memory chip demand is weakening, inventory was building, and pricing pressures are on the rise. Shawn Kim, the MS guru who wrote the report noted that there is too much supply and that Q3 earnings risks in memory related chips was warranting a cautious approach. Micron took the brunt of it losing nearly 10% on the day, closing just below $45 a share, but oddly enough Kim adjusted his 1-year price target for the stock from $100 a share to $75 a share.
The Chinese markets continue to get pounded as well. Money is flowing out of their markets and into cash holdings at the bank as deposits are up nearly 9% for the year. Corporate bonds are defaulting at a higher than usual rate, and their “shadow banking” market has rapidly deteriorated. People there were putting their money in peer to peer (P2P) lending institutions, but defaults have been rampant with one platform having as high as a 35% default rate. More than 4,000 platforms have closed and just within the last month, 164 have been deemed “problematic”, which means investors are not able to withdraw their funds. The Chinese government continues to try to regulate their concerning financial industry by banning implicit guarantees on certain investment products, cutting off money being shipped overseas, shutting down cryptocurrency exchanges, and limiting buying on real estate.
Starbucks has officially opened in Italy. The Seattle based coffee outfit opened a reserve roastery in Milan fulfilling a dream by founder Howard “Sergeant” Schultz. Starbucks has begun rolling out reserve roasteries and plans to eventually have 1,000 of them across the globe. The local one in Seattle is very interesting. It is huge, packed with people and it is pricey. You can buy a $20 cup of coffee at this joint.
Lastly, it was just announced that the House is looking to make the personal tax cuts permanent. In addition, they will also be looking to reduce some restrictions and regulations on retirement accounts.