Economic data out of China, indicating the country’s economy may be slowing, hit global markets hard on Friday. Industrial output grew by only 5.4% in the quarter, a growth rate last seen in the Chinese economy in 2016. The Chinese statistics bureau reporting the data said, the impact of tariffs in the trade war with the U.S have not yet been felt and are not reflected in the numbers. This may be the case, or it may be a negotiating tool for ongoing trade talks. Either way, markets again traded down on the headline data putting the S&P 500 back into correction territory, down over 10% from its highs. The S&P finished off 1.91%, the DJIA was down 2.02%, and the Nasdaq fell 2.26%. Offering no solace, Goldman Sachs economists stated they belief there is a good chance no trade deal is reached before the 90-day freeze on U.S. tariffs is removed in March. For its part, China has agreed to reduce tariffs on automobiles from the U.S. from the current 40% to 15%. Adding to the market damage, a report out of Reuters that Johnson & Johnson (JNJ) knew for over 40 years that its baby powder contained asbestos sent the stock reeling. Johnson & Johnson strongly denied the claims, but that did little to help investors who had flocked to the stock in recent months as a safe haven.
Tech behemoth Oracle (ORCL) and Red Hat (RHT) are scheduled to report earnings Monday. Analysts are expecting Oracle to report $.78 per share or 11.4% year-over-year earnings growth. The stock has traded flat for most of 2018, and investors don’t expect a big move from the company post-earnings given the recent market pressure on tech stocks. Red Hat is expected to show an earnings increase of 10% on revenue of $823 million.
Monday’s economic data will include the New York manufacturing survey and the housing market index. The prior reading on the housing index was 60. A continued deterioration in housing may spike the number lower, another potential negative for a shaky market. Tuesday analysts will examine Redbook retail data as we enter the final week before the Christmas holiday. Tuesday also marks the beginning of an FOMC meeting, at which most traders believe the Fed will raise rates by one-quarter percentage point. MBA mortgage applications and existing home sales data will be released Wednesday morning. The year-over-year change in home sales released in October showed a decline of 5.1%, putting the damage rising rates have had on housing on full display. Wednesday afternoon will bring the release of the Fed statement on interest rates and, the likely rate increase. The Fed announcement will be followed by a press conference by Chairman Powell at 2:30. Jobless claims, the Philadelphia Fed business outlook, leading indicators, and the EIA nat gas numbers will all be released on Thursday. Friday is a quadruple witching, which usually brings added volatility to the market. Economic data published on Friday includes durable goods numbers, GDP, corporate profits, personal income and outlays, consumer sentiment, and the Kansas City Fed manufacturing index.
Tuesday, investors will examine earnings from FedEx (FED) and Micron Technology (MU). The FedEx numbers are especially interesting to investors as they will serve as a pulse check on holiday spending. Paychex (PAYX) and General Mills will report quarterly earnings on Wednesday. Nike (NKE) and Walgreens Boots Alliance (WBA) are marked on the earnings calendar as reporting Thursday. Morgan Stanley recently came out with a note calling the sports company undervalued here and suggested buying Nike ahead of earnings. CarMax (KMX) is scheduled to close out the third week of December with earnings on Friday.
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