Don’s Notebook August 1, 2018


The big question today is, because of the strength of the economy and the question of the Fed’s independence, will there be any a decision for an immediate rate hike? Today’s direction indicators favor neither bulls nor bears.  The Trump administration is considering more than doubling the tariffs on $200 billion in Chinese imports from 10 percent to 25 percent, according to people familiar with the deliberations.

Overnight Notes:

  • The MSCI Asia Pacific Index gained 0.4 percent while Japan’s Topix index closed 0.9 percent higher as strong earnings lifted technology stocks.
  • In Europe, the Stoxx 600 Index was 0.3 percent lower earlier this morning as renewed fears over a trade war proved a drag on commodity stocks.

Fed Reports and Associated Notes: At 2:00 p.m. Eastern Time today the Federal Reserve will announce its latest monetary policy decision, with the Federal Open Market Committee almost certain to hold rates unchanged. Today’s decision will not be followed by a press conference.

  • Policy makers will probably be mulling whether their view that the stock market will remain healthy is correct, and President Trump’s recent comments on the bank’s policy stance.
  • The answer will lie in the FOMC voting and whether there are any cracks in what has been 8 to 0 majorities.
  • Earlier today the Reserve Bank of India hiked its key rate to 6.5 percent.
  • The ADP unemployment rate has underestimated the strength of the last two employment reports making perhaps today’s much higher-than-expected 219,000 result for July a noticeable indication of strength for Friday’s report.
  • MBA Mortgage Applications report for home mortgages fell a seasonally adjusted 3 percent in the July 27 week, posting the third weekly decline in a row, while applications for refinancing declined 2 percent.

Treasury Refunding Notes: There were no surprises in the Treasury’s announcement of the quarterly refunding, a $78 billion package to refund $38.2 billion Treasury notes maturing on August 15, 2018 and raise $39.8 million in new cash.

Apple/Tesla Notes: Another solid quarter for Apple Inc. pushed the company closer to a $1 trillion valuation as investors focus on strong iPhone demand and growth in services revenue.

  • Shares in the company were trading at $197.10 in the pre-market, with $203.45 the level needed for a $1 trillion market cap.

Tesla Inc. reports earnings today, with reports this morning saying the company is looking to raise funds in China to finance at least part of the cost of a $5 billion factory it is planning to build there.

Earnings Notes:

  • Ceasars Entertainment, Hyatt Hotels, Oneok, AutoNation, Pitney Bowes, C.H. Robinson Worldwide, Diebold, Nixdorf, Anadarko Petroleum and Chesapeake Energy are among the notable names hosting earnings calls.
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