Markets continued a trend of sell the rallies today, even though the three major indexes finished in the black. News that the U.S. and China were making progress on tariffs, and that President Trump was willing to consider intervention in the detention of the Chinese CFO of Huawei, sent markets soaring after the open. The rally on headline trade news was once again sold as traders turned negative in the afternoon, leaving the DJIA up .64%, the S&P 500 clinging to a gain of .54%, and the Nasdaq up .95%. The tech heavy Nasdaq had been up as much as 2.35% earlier in the day. Investors are running out of time for any meaningful rally in December, and face the prospect of another Fed rate hike next week. Continued unsettling trade news, rate hike fears, a crumbling housing market, and general international unrest, both with BREXIT and riots in Paris, have kept the market on an uneven kilter as 2018 is drawing to an end. Investors can likely expect more up and down trading until some of these major issues are resolved.
Tech earnings will be front-and-center Thursday when Adobe (ADBE) and Ciena Corp. (CIEN) report. Adobe will look to placate investors who have begun to rely on the Saas company to produce ever increasing earnings. Last quarter the company hit another earnings record, increasing earnings 24%, beating both company and analyst projections. Expectations for Ciena are a little more down to earth, with an expected 4.8% year-over-year earnings increase projected. The stock has performed well in 2018, and will look to assure investors who have driven the stock to a 50% gain thus far. Also reporting Thursday is warehouse retailer Costco (COST). Reporting 10% comparable store sales for November late last week, investors are expecting another great number from the membership store as we head into year end.
Thursday analysts will review weekly jobless claims, import and export prices and the EIA nat gas report. The recent uptick in jobless claims is expected to level off, with claims projected at 228K, down slightly from last week’s 231K. Thursday afternoon the Treasury budget and the Fed balance sheet numbers will be released. While it usually attracts little attention, the Treasury budget may garner mention this week with the possible partial shutdown of the U.S. Government looming in a few weeks. The Fed balance sheet has been in focus lately as the Fed is using a reduction in the balance sheet to tighten monetary policy. The balance sheet has shrunk from a high of $4.5 trillion to just over $4 trillion currently. The Fed shrinks the balance sheet by decreasing the amount of reinvestment it performs from maturing securities. Another $11 billion is expected to be removed from the balance sheet this week.
Retail sales and industrial production numbers will be released Friday. Industrial production, which rose only .1% in October, is expected to rebound slightly rising .3%. Also released Friday will be the PMI composite flash reading along with the Baker-Hughes rig count numbers and business inventories.
Indian multinational ICICI Bank (IBN) is projected to report earnings on Friday. With a $62 billion market cap, the bank has traded relatively flat in 2018. Earnings are expected to come in at $.05 per share. Analysts are also expecting numbers from Telecom Italia (TI) to close out the week. The NYSE traded ADR of the Italian communications company has fallen on hard times this year. The stock is down 26% so far in 2018.
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