Markets continued to digest divergent economic and trade data, which is making it tough for investors to determine if a bottom is in place, or if there is more pain to come in 2019. Market futures plunged before the open on the first trading day of 2019 as manufacturing data out of China indicated the worst month for manufacturing in 19 months. The December data indicated China manufacturing actually contracted the last month of the year. This was followed by Redbook retail data in the U.S., which showed the strongest uptick in year-over-year spending in over 13 years. The weekly number for the week of December 29 showed a sizzling hot 9.3% increase in same store sales, far exceeding the 7.8% increase the prior week.
Add to that comments from President Trump that a deal could be done with China, combined with reported contradictory comments from his Trade Representative, Robert Lighthizer, that additional tariffs may be needed to bring China to the bargaining table. And, you had what has become the typical rollercoaster day with the markets plunging in the morning, only to recover to positive territory, and then finish the day nearly flat.
Earnings resume Thursday with numbers coming in from The Simply Good Foods Company (SMPL) and Landec Corporation (LNDC). Landec, a fresh foods focused company, recently acquired guacamole producer Yucatan Foods in early December. Analysts will be looking for an update on synergies with the new acquisition, and new earnings projections given a guacamole market in the U.S. growing at 20% per year. Simply Good Foods has been pouring money into building brand recognition recently. The stock was a winner for investors in 2018 rising from the mid-$14s to close the year around $19 per share.
It’s back to business as usual, apart from economic numbers not reported due to the partial government shutdown, on Thursday with the economic numbers coming fast and furious. Analysts will digest MBA mortgage applications data, the ISM Manufacturing Index, and a slew of jobs data. Set to be released is the Challenger Job-Cut Report, the ADP Employment Report, and jobless claims. The jobs numbers are expected to remain steady, with jobless claims holding at 217K from a prior 216K last week. Investors will be more focused on the drama playing out in Washington, as Democrats in the House are scheduled to present a budget which does not include funding for President Trump’s border wall.
Friday brings employment situation data as well as PMI numbers for the services industry. The unemployment rate is expected to hold steady at 3.7% with non-farm payroll numbers increasing 180K in December. The PMI services number is expected to drop over a point from November levels to 53.4. December has seen drops in both new orders and output numbers.
Cal-Maine Foods (CALM) and Lamb Weston Holdings (LW) will take to the earnings stage the final day of the first week of January. Lamb Weston, producer of frozen potatoes and other vegetables for retail and restaurants, was a buoy in the investing storm for investors in 2018. The company’s shares rose from the $56 level to finish near $73 on the year. Cal-Maine, the country’s largest egg producer, has been hampered recently by rising feed costs and a consumer turning to cage-free or other specialty eggs. A recent acquisition of Featherland Egg Farms will be on tap for discussion with analysts on Friday.