July 24, 2020
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Market Commentary By:
Colin Cieszynski, CFA, CMT
Chief Market Strategist
+1 (647) 282-4428
Stock markets around the world have been in retreat overnight and this morning, dragged downward by rising political tensions between the US and China. Overnight, China ordered the US to close its consulate in Chengdu, retaliating for the US ordering to close its Houston consulate earlier this week. Adding fuel to the fire, President Trump stated yesterday that the China trade deal â€śmeans less to meâ€ť following the COVID-19 pandemic.
US Index futures are falling this morning with Dow futures down 0.3% and NASDAQ futures down 0.9% adding to yesterdayâ€™s losses of 1.3% for the Dow and 2.3% for the NASDAQ. Overseas markets have also been retreating with Shanghai falling 3.9%, Hong Kong dropping 2.2%, Frankfurt sliding 1.6% and London dropping 1.1%. Commodity markets have been mixed. China-sensitive copper is down 1.5% while WTI and Brent crude oil are up 0.5%-0.6%.
Capital continues to flow out of the US Dollar into other defensive havens. The Japanese Yen is up 0.5% today and Gold is also up slightly, consolidating gains into the $1,890s per ounce Gold has moved to within striking distance of its previous all-time high of $1,920.80 set back in September of 2011.
Overnight economic news has been positive. Flash PMI reports for July coming out of Europe have been consistently in expansion territory of 50 or above and several have come in above expectations. Highlights include: Germany Service (56.7 vs street 50.5), UK Manufacturing (53.6 vs street 52.0) and France Service (57.8 vs street 52.3). UK retail sales for June were also stronger than expected, rising 13.5% from May, beating the 7.5% street estimate, and falling only 1.6% from a year earlier which was better than the 6.4% decline that had been widely expected. US flash PMI is due at 9:45 am EDT with analysts expecting readings of 51.5 for Services and 51.0 for Manufacturing.
Itâ€™s another busy day for earnings reports as we move through the heart of earnings season. Intel is down 14.0% in premarket trading today. Although the chipmaker beat the street on earnings ($1.23 vs street $1.11), the company announced delays to its next generation of chips and posted soft EPS guidance for next quarter ($1.10 vs street $1.14). Competitor Advanced Micro Devices is up 7.7% premarket on this news.
A number of other US companies have posted positive earnings and related news including: American Express ($0.29 vs street -$0.11, consumer spending rebounded through May and June), Verizon ($1.18 vs street $1.15), Honeywell ($1.26 vs street $1.11) and Skyworks Solutions* ($1.25 vs street $1.12, 14% dividend increase). In a sign of the times, Boston Beer Company crushed earnings estimates ($4.88 vs street $2.33) as beverage sales jumped 42% over a year ago to $452M with consumption shifting to at-home as bars and restaurants were shuttered.
*Shares of Skyworks Solutions are held in some portfolios managed by SIA Wealth Management.
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