Stocks pulled back after the Federal Reserve said it was in “wait and see” mode meaning that they might not lower interest rates in July as most gurus expect. The news was not what the markets wanted to hear as they had already priced in an interest rate cut, which sent traders to the sell window causing a 179 point decline, as the Dow closed at 26,548.
Last Friday the Dodd-Frank annual bank stress test results were released, and all 18 banks required to take the stress test passed with flying colors meaning that they kept their capital ratios in tack and survived a scenario of 10% unemployment and a global recession. Raymond James analyst David Long wrote that the biggest winners were Bank of America, PNC, Bank of New York and State Street. He said these results will pave the way for these banks to raise their dividends and increase stock buybacks. US banks in general are sitting on near record levels of reserves, have double the capital ratios they had prior to the 2008 crisis and trade at historically low relative valuations. Big investors like Warren Buffett have been buyers of bank stocks and research teams at firms like Fidelity constantly cite banks as one of the most undervalued sectors in the market.
Reports say that President Trump will meet with President Xi on Saturday. The stakes are high and there are so many moving parts to this story as President Xi is facing pressure from hard liners within the CCP over protests in Hong Kong and risks to the Chinese economy as supply chains begin moving out of China and with the swine flu decimating an unprecedented 20% of its pork industry….so far! China has decreased soybean imports by 12% since it does not need as much animal feed and increased its pork imports from non-US sources to keep people fed. Meanwhile in the US, farmers are feeling the pinch as soybean exports to China are off 55% YTD plus gurus are worried that if progress is not made on Saturday then additional tariffs could be placed on the remaining $300 billion in Chinese imports which includes shoes, cloths and computers.