Futures vs FV: SP -9.57; DJ -85.02; NASD -21.22
Futures have not found their morning lows as a modest turn lower grew some teeth around 8:00ET. Stories of an escalated trade war with the EU is the big news of the day, as unheralded as the story is. Trump has threatened $11B in tariffs on the EU for its Airbus subsidies. The EU has responded, stating the effect of US tariffs on the EU is overblown and that it would institute its own retaliation to the retaliatory tariffs in a game of playground bravado. Of course the EU says tariffs won't hurt it -- it would be extremely poor, Neville Chamberlain-esque negotiating tactics to admit the opposite.
Upgrades: DIS; FB; AAPL; CMCSA
Downgrades: X; BA; SAP
Warnings: AAL (737 Max issues)
WMT: Robots are being rolled out more and more for inventory, etc. in its stores. A case study in what happens if minimum wages are foisted upon companies when the margins in the business do not support those increased wages. Efficiency finds a way, and thus here comes automation and the robots. But that is okay because those losing their jobs to the robots will go out, get more education and get a better job right? We all wish, but recent history suggests they tend to join the ranks of benefits takers.
Bonds: 2.508% vs 2.522%
EUR/USD: 1.1275 vs 1.1262
USD/JPY: 111.12 vs 111.47
Oil: 64.23, -0.17
Gold: 1309.90, +8.00
Futures are modestly off the session lows but the major indices are in the process of digesting the week-plus gains. Hard to call it more than that: SP500's current move matches the prior leg higher, and runs tend to be somewhat symmetrical. Thus, the sluggishness is in market terms normal.
As noted last night, there are new groups attempting to emerge as current leaders continue to work well and make modest tests of their own. With the good patterns still setting up, that further suggests this is a pause in the move. Thus, we continue looking for good opportunities to the upside.
Jon Johnson, Chief Market Strategist
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