Market Direction Week of July 9, 2018©

Market Direction:BULLISH alert issued 2/15/2018 

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Last Week Review: Stocks finished higher on the week, helped by a stronger-than-expected jobs report on Friday. Trade developments also impacted markets as the U.S. imposed a 25% tariff on $34 billion of Chinese imports, the first part of the $50 billion announced earlier this year. China responded immediately by placing tariffs on U.S. shipments (of approximately the same dollar amount) on goods including soybeans and automobiles. While trade tensions are escalating, we still believe a trade war is a low-probability event because we see tariffs as more of a negotiating tactic than a definite and desired outcome. The more likely outcome is some sort of renegotiated trade agreement without implementing a majority of the announced tariffs. However, in the near term we expect that the back-and-forth rhetoric will lead to elevated levels of volatility within the global markets.

The minutes from June’s FOMC meeting came out yesterday and while Fed policymakers cited rising trade war risks and concerns around a flattening yield curve, it wasn’t enough to alter their recent rate hike trajectory. Probabilities are down slightly across the board this morning, versus yesterday’s close (likely due to the increasing trade war pressure), but week-over-week the probability of a September rate hike has increased from 77% to 81%.

How the market finished last week, the S&P 500 up 1.5%, the Nasdaq up 2.4%, and the Dow up 0.8%.

This Week: According to Yardeni Research, the S&P 500 is expected to report $39.20 in pro forma earnings for the second quarter, which would represent a 20.7% increase year-over-year. In addition, the +20.7% estimate is up from +20.6% a week earlier and +19.8% at the end of the first quarter. There were a few companies that report earnings this week, but Q2 earnings is unofficially going to kick off Friday (July 13th).

US earnings season starts with PepsiCo on Tuesday, and the US banks on Friday that will command attention.

Barratt Developments, ASOS and Ocado are all key UK names to look out for this week. Economic highlights include China’s consumer price index (CPI), a Bank of Canada (BoC) meeting and US CPI.

Economic Calendar: JOLTS (7/10), Producer Price Index (7/11), Consumer Price Index (7/12), Import and Export Prices (7/13), University of Michigan Sentiment (7/13)

Some of the major earnings announcements on deck: PEP, FAST, WFC, OZRK, JPM.

$tockMarketDirection proprietary model is currently BULLISH. We strongly encourage you to monitor positions closely, exercise proper money management strategies and follow us at $tockMarketDirection for ALERTS we may issue advising a change in the current market direction. Stay tuned and follow us. If you have a testimonial or comment of how this website has helped you we would like to know, email us. Share with a friend. Cha-ching.

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