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The Morning Call--The Global Economy Continues To Deteriorate

|Includes: NIKE, Inc. (NKE)

The Morning Call

3/22/19

The Market

Technical

The Averages (DJIA 25962, S&P 2854) roared yesterday, reversing the initial sell off following the FOMC meeting. The S&P closed well above the 2800 as well as the 2811/2815 former resistance levels; so, technically, at this point, I see no reason to doubt further upside in prices.

Volume was flat and breadth was mixed.

The VIX declined 2%, but still finished above the late February/early March double bottom.

The long bond rose another ¼ %---remaining above the quad top for a second day; if it remains there through the close next Monday, it will reestablish a very short term uptrend.

Treasury yields are the lowest since the recession

And.

US Yields Could Still Have Quite A Bit More Downside

***overnight, global yields falling.

10Y Yield Collapses, Curve Crash Sparks Imminent Recession Warning

The dollar was up 5/8%, bouncing off its 100 DMA and gaining back all of Wednesday decline.

The Resurgent Dollar Has Erased Entire Powell Plunge, Now What?

GLD fell ½ %, but this did little to damage its chart.

Bottom line: the S&P ended above 2800/2811/2815; so, there remains little visible resistance between its current price and its all-time high. More important, it reversed its initial negative reaction to the FOMC meeting, suggesting that investors are way more happy about a dovish Fed than they are worried about a slowing economy.

The pin action in the long bond pointed to further worries among the fixed income investors about a slowing economy (recession?). The dollar seemed to be supporting equity investors, reflecting the notion that while the US economy maybe weak, it is stronger than the rest of the world. GLD was off on a strong dollar,

Thursday in the charts.

Plunge-Protectors Rescue Stocks & The Dollar; Bonds & Bullion Not Buying It

Fundamental

Headlines

Yesterday’s data was upbeat: weekly jobless claims rose less than anticipated and the March Philly Fed manufacturing index was stronger than expected.

Overseas, February UK retail sales were much better than forecast.

The bulk of yesterday’s dialogue centered on the more dovish stance on monetary policy codified in the statement of the latest FOMC minutes.

The Fed has surrendered.

"The Fed Has Surrendered" - Jakobsen Explains What Comes Next

What Powell couldn’t say.

What Powell Couldn't Admit: Recession Is Coming

The odds of a recession.

Political Calculations: 1 in 16 Chance of U.S. Recession Starting Before April 2020

Bottom line: as you know, I am skeptical about any benefits to the economy of the Fed’s latest move. The above articles support that position. But just so you know, I looked for some expert to applaud it (hint, hint Paul Krugman)---couldn’t find any. I will continue to look. That said, my concerns as well as the above analysts is how the central bank stampede to easier money plays out when either inflation rears its ugly head or the global economy continues to stagnate in spite of the surfeit of liquidity. But that is six, twelve maybe eighteen months away. In the meantime, free money = higher stock prices.

If any of our stocks enter their Sell Half Range, I will act accordingly.

In the meantime, some of our stocks are already in their own private bear market. If any reach their Buy Range, I will also act accordingly.

Where are we in the current cycle?

Where Are We in the Current Cycle? - Matthew Garrott

News on Stocks in Our Portfolios

Nike (NYSE:NKE): Q3 GAAP EPS of $0.68 beats by $0.03.

Revenue of $9.61B (+7.0% Y/Y) beats by $10M.

Economics

This Week’s Data

US

The February leading economic indicators rose 0.2% versus estimates of +0.1%.

International

March EU consumer confidence came in at -7.4 versus consensus of -10.8.

The March EU flash composite PMI was reported at 51.3 versus expectations of 52.0; the flash manufacturing PMI was 47.6 versus 49.5 (the German flash manufacturing PMI was 44.7 versus 48.0); the flash services PMI was 52.7, in line.

German Manufacturing Craters, Sending Bund Yields Negative

February Japanese flash manufacturing PMI was 48.9 versus projections of 49.2; February inflation was +0.4% versus estimates of +0.3%.

Other

US home prices tumbling.

https://www.zerohedge.com/news/2019-03-21/us-housing-hits-brick-wall-house-price-deceleration-staggering

US oil ‘weapon’ could change geopolitics.

https://www.nakedcapitalism.com/2019/03/u-s-oil-weapon-could-change-geopolitics-forever.html

The Brexit drama just keeps getting worse.

https://www.zerohedge.com/news/2019-03-21/its-shit-show-likelihood-uk-crashing-out-eu-next-week-higher-it-has-ever-been

More.

https://www.zerohedge.com/news/2019-03-21/moment-truth-looms-second-referendum-plan-all-along-or-head-fake

***overnight, EU agrees to a two week delay.

https://www.zerohedge.com/news/2019-03-21/pound-rallies-eu-agrees-2-week-unconditional-brexit-delay

What I am reading today

Four important investment factors.

https://www.usatoday.com/story/money/personalfinance/2019/03/20/investing-tips-secrets-financial-planning-could-make-you-rich/39198991/

Second chances are important.

https://thereformedbroker.com/2019/03/21/second-chances-are-important/

Trump advocates Israeli sovereignty over the Golan Heights.

https://www.zerohedge.com/news/2019-03-21/trump-tweets-mideast-bombshell-us-must-back-israeli-sovereignty-over-golan-heights

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Disclosure: I am/we are long NKE.