The markets continue to hit new highs, but trading volume is mild which indicates that this is more of a “skeptical” breakout. Kind of like a chicken pecking open an egg. We continue to see high levels of fear which is healthy but next week we will get earnings reports and this will tell us more of what each company is seeing in its business instead of just listening to gurus make educated guesses. At the close the Dow was up 243 to 27,332 on lighter trading volume. For the week the Dow tacked on 1.4% and is now up almost 17% for the year.
Federal Reserve Chair Jerome Powell made the rounds on capitol hill with hearings before the House and the Senate. The remarks by Powell indicated the Fed has moved toward a more accommodative monetary policy and increased the odds of lower interest rates. The outlook for the economy, from the Fed’s point of view, seems to be that the US economy is being weighed down by trade tensions.
Things in the car industry continue to evolve. Ford Motor and VW today agreed to extend an agreement on electric vehicles and autonomous driving. Ford CEO Jim “Buddy” Hackett said the deal gives both companies economies of scale meaning they can get into the space faster together. As part of the deal VW is investing $2.6 billion into Ford’s autonomous platform. The partnership with VW also allows Ford to access the VW global footprint. Meanwhile Germany’s Mercedes lowered its earnings forecast thanks in part to vehicle recalls and the effects of a diesel emission scandal. While they did not mention losing sales to Tesla, I think that also might be a factor since this is the 4th time in the past year that Mercedes has lowered its guidance. Shares on the Frankfurt exchange fell 5% on the news. Over in Fremont, CA Tesla shares continue to regain lost ground as short sellers appear to be repenting on their short bets as the Tesla sales figures appear robust. In anecdotal evidence, I talked to an owner of a BMW i3 last night and he said when his lease comes up, he will be looking for a different EV since BMW has not come out with any upgrades to the i3. He said he is leaning toward getting a Tesla.