Weekly Market Update: US/China trade talks push towards the finish line; Central Bank Hawks have reason to hibernate
Stocks spent much of the week on a continued upswing, largely on lingering hopes for a breakthrough in US-China trade talks. By week's end, reports had circulated that the two sides were drafting a six-point MOU related to key structural issues after reaching a consensus on main topics in principal. Some of those expectations were tempered by subsequent reports suggesting the two sides remained far apart on intellectual property and other important structural differences, but there was enough movement -- namely China’s commitment to purchase $1.2T in US goods -- to discuss the planning of a potential summit in late March. The Yuan moved up after Chinese officials reiterated that the currency would not be used as a pawn in the trade debate. Ultimately President Trump at an Oval Office meeting on Friday reiterated openness to extending the March 1 China tariff deadline should progress continue to be made after the Chinese Vice Premier Liu announced his delegation would be staying in DC for two additional days of trade talks.
Oil prices continued upward to levels not seen since November even though US domestic production reached 12M bpd for the first time. The Greenback edged lower, which coincided with a further breakout in gold prices. Apr gold futures crossed $1,340 for the first time since May 2018 before backing off late in the week. Global Treasury yields largely stayed suppressed, with the US 10-year ending back below 2.65% and the Bund staying below 10 bps. Wednesday’s FOMC minutes and a slew of Fed speakers that followed affirmed the 'patient' narrative has been adopted by a consensus and many view the balance sheet unwind coming to an end sometime this year. Central bankers had little reason to feel hawkish as continued sluggish economic readings were turned in by key European and Asian economies while the US data softened notably, as well. For the week the S&P rose 0.6%, the Dow added 0.6% and the NASDAQ gained 0.7%.
The focus was on more quarterly earnings in corporate news for this President’s Day-shortened week. Walmart’s holiday quarter came in ahead of expectations on both top and bottom line, as well as on same store sales, despite the poor Dec sales data released by the Commerce Dept last week. Avis Budget lifted on an earnings beat, helping Hertz shares, noting lower fleet costs and improved pricing. Domino’s dropped on disappointing same store sales and margins hit by inflationary pressures. Kraft Heinz fell precipitously after announcing a weak earnings report that included news of an SEC investigation and a dividend cut. Stamps.com market cap was nearly halved after it said it would discontinue its exclusive partnership with USPS.