News that President Trump is not happy with how China is responding to the threat of sanctions on $200B of Chinese goods sent the markets lower Monday. Larry Kudlow, the President’s National Economics Council head, said an announcement from the White House is likely very soon. This was followed by a White House statement that an announcement would be made after the markets closed Monday. Kudlow, in a CNBC interview, went on to say the Republicans likely will not pass a second tax cut before the midterms. Talk of an announcement of more cuts had buoyed the markets the past few weeks. While tariffs on $200B in Chinese goods is nothing new, the market may be beginning to doubt the President’s strategy. The fear that a full blown trade war with China will erupt should at a minimum keep the market in check, and may signal increased volatility short term.

General Mills (GIS) reports earnings on Tuesday. The packaged goods company is struggling to dig out of a hole in 2018. The stock is down almost 20% on the year, and has struggled with competition from private label on the low end and boutique operators on the high end. Analysts will be looking for a plan moving forward that addresses competition and compressing margins. Also reporting on Tuesday is Autozone (AZO). Automotive parts companies have done quite well this year, but competitors like Advance Auto Parts (AAP) look a little vulnerable at these levels. Investors should watch Autozone carefully for its impact on the overall sector.

Redbook retail numbers and the housing market index will both be released Tuesday morning. The housing market index, which measures sentiment among homebuilders, is expected to remain flat due to rising costs and a lack of workers. Wednesday, investors will examine housing starts, mortgage applications, the current account for trade, and petroleum inventories. The current account numbers will be closely scrutinized in this trade environment, and petroleum numbers will be closely watched to determine what the impact of Florence has been. Housing starts are expected to bounce back after a weak June and July. The consensus is at the high end of the range, and calls for 1.24 million new home starts. A miss will definitely be a negative for the market.     

Wednesday investors will hear earnings reports from Red Hat (RHT) and Copart (CPRT). Red Hat had a great first half of 2018, but then came crashing down after its last earnings call. Slowing growth was the culprit last quarter. Analysts are looking for additional business moving to the cloud, and how that transition is progressing for the open source company. As the economy has ratcheted higher in 2018, so has Copart. The online auto auctioneer reported increased revenue last quarter of almost 28%. The stock may be priced for perfection at this point. Investors may be interested to hear of any impacts from Hurricane Florence on future earnings for the company.

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