Author Archives: Lenore Hawkins & Chris Versace

About Lenore Hawkins & Chris Versace

Lenore Hawkins serves as the Chief Macro Strategist for Tematica Research. With over 20 years of experience in finance, strategic planning, risk management, asset valuation and operations optimization, her focus is primarily on macroeconomic influences and identification of those long-term themes that create investing headwinds or tailwinds. Chris Versace is Tematica's Chief Investment Officer and editor of Tematica Investing newsletter. All of that capitalizes on his near 20 years in the investment industry, nearly all of it breaking down industries and recommending stocks.
Daily Markets: ‘Phase One’ Trade Deal To Be Signed Today; Investors Wonder About Its Details

Daily Markets: ‘Phase One’ Trade Deal To Be Signed Today; Investors Wonder About Its Details

Today is the day many have been waiting for as China and the US are expected to officially ink their phase one trade deal later this morning. In a potential “buy the rumor, sell the news moment,” Asian equities finished the day lower, and European equity indices are currently mixed, but little changed as are US equity futures. Weighing on the market’s trade deal mood are recent comments that existing tariffs on “billions of dollars” of Chinese goods coming into the US are likely to remain in place until after the US presidential election and the completion of the phase two agreement. Moreover, it’s being reported US and China have “an understanding” that no sooner than 10 months after the signing of the agreement, the US will “review progress and potentially consider additional cuts on tariffs affecting $360 billion of imports from China.”  

To some this likely raises some questions over the scale and scope of the phase one agreement, the full text of which is expected to be released…

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Daily Markets: Earnings Season Kicks Off

Daily Markets: Earnings Season Kicks Off

Today kicks off December quarter earnings season with earnings for the S&P 500 expected to have declined by 2% in the December quarter according to FactSet. If earnings do in fact contract during the December quarter, it will be the fourth consecutive quarter of year-over-year net income declines for the S&P 500. Despite this, the index managed to make yet another new high as investors begin to focus on EPS growth prospects for the coming year; per FactSet the S&P 500 group of companies are expected to grow their collective EPS by 9.5% growth YoY in 2020. That rebound is expected to be led by the 4.7% YoY growth in earnings for the S&P 500 in the current quarter and strengthen throughout the year.  

We’d note the S&P 500 is trading at a P/E ratio of…

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Daily Markets: Earnings to Pick Up Velocity This Week

Daily Markets: Earnings to Pick Up Velocity This Week

Last Friday stocks gave back all their earlier gains to leave the major US equity indices lower on the day. The major indices took a hit on Friday in response to the December Employment Report from the Bureau of Labor Statistics that showed nonfarm payrolls rose just 145k in December, well below expectations for 160k with an additional 14k downward revision to the prior two months. Aside from the miss relative to expectations, what we find even more concerning is the retail sector reportedly added 41k new employees for the holiday season, which disappointed outside of online sales. We’ll be looking closely for such a reversal in that category inside the January Employment Report.

For the first full week of trading in 2020, the Nasdaq 100 gained 2%, followed by the Nasdaq Composite’s gain of 1.8% and the S&P 500’s 1% move. Although the major equity indices all closed in the red last Friday, the Dow Jones Industrial Average managed to briefly make a new intraday high, breaking through 29,000. If the Dow can manage to hold that level today, it will be the third new thousand-level mark since the start of 2019. 

From an economic data and earnings report perspective, today is poised to be a quiet one, however, …

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Daily Markets: Investors Unclench; US-China Phase 1 Deal Imminent

Daily Markets: Investors Unclench; US-China Phase 1 Deal Imminent

The S&P 500 set a new intraday high and the Nasdaq Composite Index closed at a record high yesterday as investors breathed a sigh of relief and unclenched following President Trump’s statement that he would tighten sanctions on Iran – which would remain in place “until Iran changes its behavior” — rather than use military force. The de-escalation rally that ensued saw nine of the 11 S&P 500 sectors move higher yesterday, was followed across the globe with Asian equities closing the day higher.  Lending a helping hand to the market’s mood today was China’s confirmation Vice Premier Liu He will sign a “Phase 1” deal next week in Washington.

European markets are trading higher across the board, shrugging off renewed timing concerns over the UK’s exiting the European Union. While  Boris Johnson’s position is the U.K. won’t extend its transition period beyond 2020, and that he wants a Canada-style trade accord (under which 98% of goods traded are free of tariffs), European Commission President Ursula von der Leyen has said it is “basically impossible” to negotiate all aspects of its future relationship with the EU by the end of 2020. Did anyone really expect drama around Brexit to not follow us into 2020?

Despite mixed retail comp sales reports being had this morning…

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Daily Markets: All Eyes on Iran

Daily Markets: All Eyes on Iran

Yesterday stocks tried to shake off the stress of the rising conflict between the US-Iran, but all the majority equity indices closed in the red. Early this morning US stock market futures dropped on the news that more than a dozen ballistic missiles were launched from Iran at two military bases in Iraq that host US military and coalition personnel. While Asian equities closed in the red today, European equities and US equity futures rebounded from their lows as more information came in surrounding the Iranian missile launch, including reports of no causalities, and Iranian Foreign Minister Mohamad Javad Zarif tweeting, “We do not seek escalation or war, but will defend ourselves against any aggression.” 

This morning also saw yet another tragedy as 167 passengers and all nine crew members onboard Ukrainian International Airlines flight 752 out of Tehran were killed when the plane crashed within minutes of take-off. The Boeing 737-800 was headed to Kyiv shortly after 6 am local time. Iran’s press immediately reported that the plane crashed due to mechanical problems, but no further details were given. Video on Twitter (TWTR) showed the plane in flames as it fell to earth.

The Ukrainian Embassy in Iran quickly issued a statement citing engine failure based on preliminary information, then later removed the statement and said, “any statements regarding the causes of the accident prior to the decision of the commission are not official.” Boeing (BA) issued a statement, “We are aware of the media reports out of Iran and we are gathering more information.”  No doubt many will speculate on the improbable coincidence that a plane flying out of Iran, which just so happens to be lobbing missiles at Iraq at the time, crashes minutes after takeoff followed by nearly immediate claims of technical failure. For what it’s worth, this crash occurred just after US aviation regulators issued new restrictions barring civilian flights over Iraq and Iran.

The larger question…

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Daily Markets: Has The Flight-to-Safety Trade Ended Already?

Daily Markets: Has The Flight-to-Safety Trade Ended Already?

The flight to safety trade reversed mid-day yesterday and is continuing this morning even though Bloomberg is reporting Iran considering thirteen response scenarios to the death of Qassem Soleimani. President Trump yesterday threatened 52 sites for retaliation against Iran, including some of cultural significance, and sanctions on Iraq. Mr. Market is back to being unimpressed.

Asian equities closed higher across the board led by the 1.6% climb in Japan’s Nikkei index despite the country’s December Services PMI falling into contraction territory (See today’s Data Download for more). European equities were also higher by mid-day trading and US equities imply a modest positive move when the market opens. Oil futures and gold are both down while the US Dollar index is marginally higher.

Despite yesterday’s negative start,…

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Daily Markets: Markets Face US-Iran Fallout

Daily Markets: Markets Face US-Iran Fallout

Who would have guessed back in December that the US-China trade war, which utterly dominated market headlines, would be pushed to the back-burner by threats between the US and Iran lobbed back and forth across Twitter? We are pretty sure Twitter’s founder Jack Dorsey did not imagine his creation being used by the President as a medium for formal communication with Congress

After Friday saw the Nasdaq, S&P 500 and Dow experience their biggest one-day declines in a month, as tensions between the US and Iran escalated over the weekend, today major equity indices… 

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Daily Markets: 2020 Looks to Begin the Way 2019 Ended

Daily Markets: 2020 Looks to Begin the Way 2019 Ended

Welcome to the first day of trading in 2020! Equity markets in Asia finished the day mixed with markets in Japan and New Zealand closed. The major stock indices in Europe were mostly in the green by midday trading except for Switzerland and Russia while US equity futures indicate positive moves at the open. Even though several pieces of global economic data will be had today, market activity will likely remain on the quiet side today and tomorrow as we round out New Year’s week.

Like reading a map it’s usually best to understand where you’ve been to see where you are going. With that in mind, looking back at2019, the Nasdaq 100 was the strongest performing index, gaining 38%, with the Nasdaq Composite a close second at 35.2%. The Dow Jones Industrial Average gained 22.3% thanks in large part to Apple (AAPL), which rose 85% over the year, generating nearly 18% of the Dow’s gains. Apple was also the biggest contributor (at 2.7%) to the S&P 500’s 28.8% gain for 2019. Microsoft (MSFT) was the second biggest contributor at 1.8%. 

Given the gains in both Apple and Microsoft shares, it’s not so surprising the strongest S&P 500 sector in 2019 was technology, which gained 49.7% for the year. By comparison, the weakest sector was energy, which rose 11.2%. Internationally, Russia’s equity market enjoyed the greatest gains despite the pain in the energy market, rising 51.4%. It’s bond market also was the strongest performer, up 24.6%.  The weakest equity market was in Argentina, which lost 20.7%, primarily thanks to the collapsing peso which ironically resulted in it delivering the strongest performing currency thanks to interest returns, gaining 26.8%. The worst bond market was in Sweden, down 0.9%. The best performing commodity was unleaded gasoline, which gained 45.3% while natural gas was the weakest, falling 37.2%. 

Turning back to the new year…

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Daily Markets: The Santa Claus Rally is in Full Swing

Daily Markets: The Santa Claus Rally is in Full Swing

The equity markets have now been closing higher for five consecutive days, marking the longest winning streak since… wait for it…  November. This is giving investors the usual Christmas rally after last year’s brutal lump of December coal. While yesterday did technically see a higher close for the major indices, it was only by a smidgen (technical term) with the Dow Jones Industrial Average and the Nasdaq Composite up 0.1% and the S&P 500 basically flat.

Equity markets in Asia closed mixed, but relatively flat outside of Japan’s Nikkei, which closed down 0.6%, and India’s Sensex that rose 0.5%. As we write this morning’s note, the major European equity indices are up modestly due to rating upgrades for the UK from both S&P Global Ratings and Fitch Ratings as well as some better than expected economic data out of Germany (see today’s Data Download, below). Citing the reduced risk of a no-deal Brexit, S&P shifted its outlook for the UK to stable from negative while Fitch removed the UK from its Rating Watch Negative list. Futures indicate a slightly positive move at the open for the US equity markets.

As melt-up of the last few days shows…

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Daily Markets: Boeing, Uber Making Moves; FedEx Earnings On Tap

Daily Markets: Boeing, Uber Making Moves; FedEx Earnings On Tap

Yesterday major US indices rose to new highs in the fourth day of positive closes, but your authors here remain traumatized after coffee futures rose 7%, the biggest rally for the commodity since 2015. The coffee market panic was driven by an off-cycle crop year in Brazil coupled with strong global demand – perhaps all those late-night trade negotiations between the US and China coupled with Brexit uncertainty?

Click here to read more including key economic data for the day and stocks making headlines and other news.