Underlying economic performance could be key driver
The US Fed has gradually increased interest rates without spooking the fixed income markets and continues to project future hikes, provided the economy remains on track for its 2% inflation target (WIP) and the longer-run unemployment range stays at 4.5%–5.0%. Economic indicators from the US continued to outperform expectations. The consumer confidence index for March 2016 hit a 16-year high of 125.6 as compared to 116.1 in February.
Jobs figures for March will be reported this month and are expected to remain upbeat after an impressive addition of 235,000 jobs in February. The consensus survey reports point towards a minor drop in the manufacturing (XLI) and services (IYC) indexes, but this likely won’t be a major problem, as no one expects another rate hike before May this year.
What to expect once tax reforms are announced
Once Trump announces proposed tax cuts and infrastructure spending plans, we can expect that the US Fed could be forced to act sooner than expected, forcing US yields to surge higher as rate normalization takes its toll on bond markets (BND). We don’t know when these announcements will be made, but they could come soon. In the next part of this series, we’ll explore how these developments may affect global equities (VEU), US equities (USMV), and currency markets.
After the election results were announced in the US, the Dollar Index (UUP) surged to levels above the 103 mark in anticipation of fiscal stimulus, tax breaks, improving economic conditions, and the possibility of rate hikes.
Broadcom (AVGO) stock fell ~8.5% after markets closed yesterday following the semiconductor giant's fiscal 2019 second-quarter earnings release. It missed analysts' revenue estimate and cut its fiscal 2019 revenue guidance by $2 billion to $22.5 billion due to sluggishness in its semiconductor solutions business.
The SPDR Gold Shares ETF (GLD), which tracks physical gold prices, has underperformed the broader markets year-to-date, rising just 4.4% compared to the S&P 500’s (SPY) gain of 15.9% as of June 14. The sentiment for gold, however, has been turning around.
Safe havens such as Treasuries and gold were back in favor on June 14 as stocks fell due to rising tensions in the Middle East, concerns over growth, and the looming threat of the US-China trade war. The tech-heavy Nasdaq Composite Index fell 0.67% in the first hour of trading.
Lululemon (LULU) stock rose 2.1% on June 13 in reaction to better-than-expected first-quarter results and an upgraded outlook for fiscal 2019 overall. The company's first-quarter adjusted EPS grew 34.5% to $0.74 on revenue growth of 20.4% to $782.32 million. Analysts had expected EPS of $0.70 and revenue of $755.31 million. Here's why the outlook got an upgrade.
As of 4:40 AM Eastern Time today, US crude oil active futures were at $51.83, ~4% below their closing level in the previous week. If US crude oil prices stay at those levels today, they'll mark their third week of decline in five weeks.
Kimberly-Clark (KMB) stock has risen 20.5% this year, boosted by the company’s better-than-expected sales and earnings during its last reported quarter. However, its stock could stop climbing. Here's why.