Small market moves following SOTU and corporate earnings

SOTU Aftermath

Markets are having little reaction to President Trump’s State of the Union as little was done to raise expectations we could see him successful in overcoming partisan roadblocks.  The address reaffirmed his campaign promises on border security, drug price reform, fair trade, revitalize nation’s infrastructure and create an immigration system that is safe and secure and to pursue a foreign policy that puts America’s interest first.   This was Trumps first address to Congress since the Democrats took the House.  The atmosphere at times replicated moments you see at one of his campaign rallies, but the end result is that it did not yield much substance in driving forward his new agenda for the second half of his term.  The clock is ticking for Trump to make progress on an infrastructure deal and healthcare/drug pricing reform, but it will be an uphill battle to win Democratic support before the end of the year.  After the end of the year, the focus will be on the 2020 elections and he will not be able to push anything forward.

Trade Balance data shows tariffs effect

The US dollar kept its strong footing after the US trade deficit narrowed more than expected, to a 5-month low.  Imports are showing the effects of the trade war, falling to the lowest level in two years.  The November data confirm that China will see worse readings if they do not secure a trade deal with the US.

DAX

Dax futures extended declines after a report showed factory orders in Germany fell worst than expected, prompting recession concerns.  Europe’s largest economy continues to show terrible readings that show weakness in construction, manufacturing fell into contraction for first time in four years and deteriorating business confidence.  German data is expected to stabilize, but we could see Germany fall into a technical recession this year.  All eyes will be on the fourth quarter GDP on February 22^nd.

Euro

Germany needs to lead the economic rebound for the euro zone if we will see the ECB finally raise rates at the end of the year.  The euro is poised for a rally and will probably take off once we start to see Germany stabilize.

GM

General Motors delivered better than expected results and guidance while telling a similar story we have seen all earnings season; the US is strong and China continues to weaken.  The stock is trading higher as the company delivered strong results in what has been a difficult quarter for other car makers.  GM is targeting flat sales from China in 2019 and they will take measures to reduce Chinese costs.

GSK

GlaxoSmithKline shares are trading higher as earnings topped the highest estimate.  The UK drugmaker is preparing for generic competition an will raise spending to enhance their cancer and asthma products.

Oil

Crude prices trade lower for a third consecutive day as momentum from the OPEC + production cuts and sanctions on Venezuelan crude appears to be fading.  Softening US economic expectations along with a weak Europe and China paint of picture of lower demand in 2019 that could cap oil’s rebound.  The effects of the polar vortex is expected to weigh on recent data and we could see the markets shrug off the weekly oil readings.

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