Beleaguered chip-makers — excluding Intel — get an A for effort this week, but still won’t save Wall Street from the first weekly loss of 2019.

The holiday-shortened week has been peppered with global growth and shutdown worries. And as investors wait for the federal government to get back to work,“let-them-eat-loans” comments from Commerce Secretary Wilbur Ross (h/t the Heisenberg Report), likely raised serious concerns the administration may be out of touch over the economic blowback from a lengthy shutdown.

Read: Stock market could feel drag from shutdown by next week, analysts warn

Bank of America Merrill Lynch, for one is worried, as they shared a chart Friday with clients that shows a worsening drag on first-quarter GDP the longer a shutdown stretches on. The direct impact will be made up, but lost private spending is gone forever, they warn.


Lonesome slowdown highway

Also see: ‘It’s extremely negative’ if shutdown lasts much longer: Morgan Stanley CEO

It’s back to earnings for our call of the day, also brought to you by Bank of America, whose strategists have declared a global earnings recession that can only be cured by a recovery in Asian export growth.

The bank points out that exports from the region are down around 4% year over year, which is in line with the picture of negative global earnings growth. Bank of America says it’s modeling global earnings growth of 0% for the next 12 months, well off the consensus for growth of 6%. The fact that stocks haven’t made new highs also backs up the picture of a global earnings rut, the strategists say.


Bank of America says investors will know the earnings recession has ended when the global purchasing managers index to rise to 53 from 51 and Asian export growth bounces back — via a rise in the ADXY Bloomberg JP Morgan Asia Dollar Index to over 108 (from a current 105.94), Korea’s Kospi Composite Index

SEU, +1.52%

 hitting 2,300 (Friday close: 2,177.73) and copper prices

HGH9, +0.25%

 rise to over $300.

Investors will also want to look for a sign China’s financial conditions are easing as policy makers “U-turn on deleveraging $20 trillion shadow banking system and stop rising defaults in a $3 trillion corporate bond market.” Note, the People’s Bank of China unveiled a bill-swap mechanism late Thursday, which some say could mean “the floodgates to stimulus” will soon be open.

Read: China releasing more cash to banks as PBOC works to offset economic slowdown

Until all this happens, the bank says investors will likely limit their asset purchases to credit, emerging markets, real-estate investment trusts and growth stocks.

The market

Dow

YMH9, +0.70%

S&P 500

ESH9, +0.73%

 and Nasdaq

NQH9, +0.99%

 futures are higher. On Thursday, the Dow

DJIA, -0.09%

 bucked an otherwise positive session for the S&P 500

SPX, +0.14%

 and Nasdaq

COMP, +0.68%

to end lower.

The dollar

DXY, -0.27%

is down, as the euro

EURUSD, +0.3715%

 climbs, while gold is modestly higher

US:GCU8

and crude

US:CLU8

is weaker as investors wait to see if the U.S. imposes sanctions on Venezuela amid a power struggle.

Europe stocks

SXXP, +0.64%

 are mostly higher, and in Asia, the Hang Seng Hong

HSI, +1.65%

 led a mostly upbeat day as tech shares rose.

The buzz

On the shutdown front, POTUS is reportedly readying a draft national emergency order, with $7 billion earmarked for his border wall. In a proclamation seen by CNN the president referred to “massive amounts of aliens.” Because of the shutdown, we won’t get durable goods or new home sales for Friday, but the show will go on where next week’s Fed meeting is concerned.

Trump ally Roger Stone has been arrested and charged with obstruction, false statements and witness tampering as part of Special Counsel Robert Mueller’s probe into Russian tampering in the 2016 election.

Intel

INTC, +3.80%

 broke ranks with an upbeat string of tech earnings this week, posting a revenue miss and a weak outlook, which has hit shares hard. But Western Digital

WDC, +6.70%

is up after an upbeat outlook soothed an earnings and sales miss.

Read: Intel’s cloud boom is no longer making it rain, and that’s a problem

Starbucks

SBUX, -2.54%

 is climbing on an earnings beat.

Colgate

CL, -0.24%

DR Horton

DHI, +2.68%

and AbbVie

ABBV, -2.91%

are on the earnings docket for Friday.

After a rough, scandal-filled year Facebook

FB, +1.06%

 CEO Mark Zuckerberg defends his company as “still evolving and improving,” in an op-ed for the WSJ.

Morgan Stanley

MS, -0.24%

 and Goldman

GS, +0.46%

 are asking for trades to be canceled after a $41 billion flash crash Thursday in shares of Singapore-listed Jardine Matheson Holdings

J36, -1.21%

The chart

Our chart of the day takes a whack at a basic problem with the growing pile of can’t-live-without- tech gadgets, under the category, the ones you love sometimes hurt you the most.

Observe the following Statista chart, from a blog post in Digital Information World.


“The basic problem here has to do with the fact that the Internet of Things creates so many different access points that hackers could potentially use to enter a system whereby viruses can infect entire networks of devices and steal untold amounts of data,” says the post, which adds that smart home technology, wireless earbuds and the like “can be a veritable feast” for hackers.

The quote
Getty Images

Rep. Alexandria Ocasio-Cortez

“O-C is popular because she says specific things. That her policies are bad is overwhelmed by public disgust for all the surrounding blather.” — That was a tweet from DoubleLine chief Jeffrey Gundlach, one of the first since the will-he-or-won’t-he-delete-his-Twitter-account crisis. He’s likely referring to the call by Rep. Alexandria Ocasio-Cortez, D-N.Y., for a 70% marginal tax rate, something that seemed to alarm Bridgewater boss Ray Dalio earlier this week.

She happens to be on the House Financial Services Committee, where Democrats may summon big banks to Washington.

Read: Here’s what some critics got wrong about it Ocasio-Cortez’s tax idea

Random reads

Spanish rescuers dig through stones toward a 2-year old, who fell into a deep borehole over a week ago

Dead horses, bats falling out of trees and free beer: Australia battles heat wave

Joe Montana is tossing his hat into the ring of cannabis investing

White House security experts rejected clearance for Jared Kushner, but were reportedly overruled

Don’t hate your skinny friends, it’s all in the genes

Brazil says U.S. missionary unlawfully made contact with isolated Amazon tribe, with potentially deadly results

Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. Be sure to check the Need to Know item. The emailed version will be sent out at about 7:30 a.m. Eastern.

Follow MarketWatch on Twitter, Instagram, Facebook.

Providing critical information for the U.S. trading day. Subscribe to MarketWatch’s free Need to Know newsletter. Sign up here.

Source link

2019-01-25