September 20, 2019 – This week, like last week, was relatively quite for stocks until Friday. There was plenty of political news, but stocks shook most of it off until Friday.
The week started with reports that the cancellation of a trip to several farms by Chinese officials had been prompted by U.S. officials and that talks were still going well. Enthusiasm from that news was tempered by soft economic data from Europe.
Tuesday also started off on a positive note, but reports that House Speaker Nancy Pelosi would announce an impeachment inquiry into President Trump’s interactions with Ukraine sent things lower. There was a brief rally when President Trump announced that he would release a transcript of a call with Ukrainian President Zelensky. That spike wasn’t enough to push things back into the green, but seemed to confirm that the impeachment news was driving the action.
Wednesday saw more developments on the impeachment issue, as well as a new promise from China to purchase additional pork products. The release of a memo describing the content’s of a phone call between Trump was Zelensky did considerably less to tamp down the controversy than the president expected and he ended up giving a press conference from the U.N. General Assembly, where among other things he announced a trade deal with Japan and said there was a “good chance” of a deal with China.
Thursday’s session was pretty quiet as the House Intelligence Committee hearing with the Acting Director of National Intelligence captured a lot of attention.
Friday saw the release of monthly data on personal income, spending and prices. Incomes rose in-line with expectations, while spending fell short. The core PCE Price Index showed a .01% increase, which was a short of estimates for .02%.
PCE is the Federal Reserve’s preferred measure of inflation, so the softness there may be meaningful going forward and certainly does nothing to suggest the central bank was incorrect to cut rates last week.
More interesting is the slowdown in spending growth, which went from 0.5% in July to 0.1% in August, even as income growth went from 0.1% in July to 0.4% in August. That deceleration could be a blip, but seems to line up with recent trends in consumer confidence, which while still high, have shown some cause for concern in recent months.
The negativity in markets Friday was mainly trade related though. Micron Technologies fell sharply and dragged a number of other tech names lower after a Thursday-evening quarterly report that beat earnings estimates, but also contained weak margin guidance and record inventories. The company cited trade uncertainties as a headwind going forward.
Things got even worse when media outlets reported the White House is considering limiting U.S. investors’ access to Chinese investments, which would limit the flow of investment dollars into China. Potential steps could include de-listing Chinese companies from the stock market or forcing government pension funds to sell Chinese investments.
It’s not clear exactly what will happen on that front, or how China might retaliate, but traders are starting to be skeptical about how much progress those talks are making when we keep seeing these new escalations.
Monday marks the end of the third quarter, so there could be some increased volume during the trading session.
On the week, the S&P 500 lost 1.01%, the NASDAQ fell 2.19%, and the Dow Jones Industrial Average lost 0.43%.