US-China trade war
James Bullard, the President of the Federal Reserve Bank of St. Louis, has made a case for a rate cut given the low inflation. Today, Bullard said in Hong Kong that “a downward policy rate adjustment even with relatively good real economic performance may help maintain the credibility of the FOMC’s inflation target going forward.”
US president Donald Trump has long criticized the Federal Reserve for its hawkish stance. Until last year, Trump had called upon the Federal Reserve to stop its rate hikes. This year, when the Fed abruptly ended its rate hikes and signaled no more rate hikes for 2019, Trump has on more than one occasion said that the Fed should cut rates.
Amid the escalation in the US-China trade war, Trump tweeted earlier this month that “China will be pumping money into their system and probably reducing interest rates, as always, in order to make up for the business they are, and will be, losing. If the Federal Reserve ever did a ‘match,’ it would be game over, we win!” Bullard’s comments would be music to Trump’s ears, as he has long advocated for lower rates. However, it’s worth noting that before his election in 2016, Trump had criticized the Fed for keeping rates too low and creating a “false economy.”
Consumers caught in the trade war
Meanwhile, amid the escalation in the trade war wherein the United States has increased tariffs on Chinese goods, companies like Walmart (WMT) and Amazon (AMZN) might have to hike prices. Nike (NKE) and Adidas have also requested President Trump reconsider higher tariffs on Chinese shoes. Read Consumers Are a Casualty on Both Sides of the US-China Trade War for more analysis. US markets have also seen downwards price action this month, and the SPDR S&P 500 ETF (SPY) is down 2.6% so far in May.
Marathon Petroleum is ranked first among the six refiners with 59% implied gains based on analysts' target price.
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.
Amazon is discontinuing its Amazon Restaurants service, which has been delivering food for restaurants in parts of the United States. Amazon Restaurants launched in the United States in 2015 and entered the British market the following year. However, it met strong opposition in the British market.