Market Morning: Fed Imbalance Sheet, May to Brussels, Gundlach Sees Recession

Stock Market Roundup

Fed Meeting Today, Balance Sheet Diet Speculation Abounds

Story continues below

The Federal Open Market Committee will conclude its two-day monetary policy meeting today and talk about it to the media. The Fed is widely expected to keep rates on hold, and since the Fed generally follows expectations there is virtually no chance of them hiking rates today. What traders will be looking at is Fed Chairman Jay Powell’s tone and facial expressions when speaking of his humongous balance sheet and how much weight it’s lost since going on a diet in October 2017 and how much excess Treasury bond weight it still has to lose. If indications are that the weight loss plan will continue, stocks will probably respond positively because investors will assume that the continuation of the diet means that the economy is strong enough to handle it. If there is any indication that the plan could be cut short or that Powell is unsure of himself when speaking of it, stocks will probably sell off.

SEE: Cannabis Stock News Daily Roundup January 29

Ms. May Goes To Brussels. Again.

She’s armed with an amendment now to replace the Irish backstop, a mechanism that would keep Northern Ireland essentially in the European Union without any representation in said institution, with no timetable as to when the backstop would expire. The point of the backstop is to prevent a hard border between Ireland and Northern Ireland, which separated because they couldn’t settle on whether it’s better to be Catholic or Protestant. But that was a long time ago. Anyway, she has two weeks to extract some sort of concessions from Brussels on the matter, but the Euro people over there say they’re not going to change anything, so it’s just another round of chicken. EU dares Britain to crash out, Britain threatens to crash out and watches the reaction on EU’s face, and 59 days later something happens, like an extension of the deadline because these politicians just love playing chicken all the time.

Recessionary Signal In Gap Between Current and Future Expectations?

Jeff Gundlach of DoubleLine capital thinks so. He doesn’t like the widening gap between current and future expectations for the economy, think it’s the “worst reading ever” even considering that the survey took place at the tail end of the most recent shut down when 800,000 people were short a paycheck. The difference between the indicators is now 33 points, the largest gap since 2006, at the peak of the last housing bubble and two years before the last financial crisis took hold. Cue the Twilight Zone theme music. Last time the S&P 500 (NYSEARCA:SPY) didn’t top until one year after expectations diverged, so we may have some time left yet to make last minutes preparations.

Should Amazon Buy FedEx? Some Analysts Say Yup, Sure

If Amazon (NASDAQ:AMZN) wants to become a shipping giant, it should buy FedEx (NYSE:FDX). Amazon has close to half FedEx’s current market cap in cash available on its balance sheet, and raising another $50 billion taking into account any possible premium shouldn’t be too hard for the giant, so it’s a considerable possibility. FedEx is down 35% over the past year, so Amazon would be getting a decent discount and then it could control its own shipping. Instead of building its own network, Amazon could save a lot of money just buying up FedEx shares, says Loop Capital Markets analyst Anthony Chukumba.

Walmart and Fanatics Unite To Sell Sports Apparel

Walmart (NYSE:WMT) is teaming up with Fanatics, an online sports retailer, to sell licensed sports apparel. Walmart is hoping it will be a long term partnership, the theory being that by strengthening its online presence it can fend off further encroachment from Amazon.

Philips Moving Manufacturing to China Due to Trade War

Looks like the trade war doesn’t help US manufacturing after all, at least for Koninklijke Philips (NYSE:PHG). Hundreds of millions of euros worth of production will be moved from the US to China in order to avoid tariffs. Philips estimates that the tariffs will cut its profits by about €69M this year, damage done directly by the tariffs themselves, though it also claims that the tariff war has dampened consumer confidence in China which will affect revenues going forward as well.


An ad to help with our costs