Markets continue to pull back and volatility is on the rise given the latest trade news from China. IBD has gone to a “market under pressure” reading and Dan the Man over at BTS is still sitting on a 30/70 mix of treasury and high yield bonds which means they are cautiously optimistic but realize that unpredictable tweets are a source of risk. The Dow closed down 98 points at 26,485. Trading volume was way down. For the week the Dow lost 2.1% or 738 points.
Over half of the companies in the S&P 500 Index have reported earnings and the average growth rate looks to be over 3% which is much better than the 2% decline the gurus had expected. While the jury is still out on these earnings season the early results look fair.
The July labor report showed that 164,000 new jobs were created which was better than expected. The unemployment rate held steady at 3.7% and wages grew better than expected with a 3.2% growth rate which is higher than the 2.8% growth rate from 2018. The flies in the ointment however were a downward revision of 41k jobs in the prior two months labor report and a decline in the “hours worked” component.
US Steel reported a 2% decrease in sales and a 69% drop in profits for the quarter, which was way better than the gurus had estimated, and even better than the company had forecast. Shares were lower however after the company said it is not backing off on its ambitious capital improvement projects which so far this year have cost over $300 million. The gurus were worried that all this investment activity is eating into cash reserves. The company said its US business is good but that in Europe it has been like 5 miles of bad road as China has been dumping more steel into Europe since US markets were closed to them by tariffs that were put on in 2016 by President Obama and strengthened under President Trump. European steel companies are asking the EU to do something about China’s dumping but if they make a move they most likely will get hit with retaliation. It will be interesting to see how this works out but this is another sign that global trade issues are on the rise.
Its Seafair in Seattle which means hydro’s and Blue Angles!