Should the Trump Train derail, it may not have many passengers left on the train. After losing most of his hand-picked corporate leaders, the president decided to disband two of his corporate councils. This is finally starting to worry those on Wall Street. If the president loses the confidence of corporate America, will Wall Street follow?
After seeing the market rebound early in the week, as the rhetoric from both Washington and North Korea subsided, we looked poised for another run of positive market performance and more records. Unfortunately, domestic turmoil has weighted on the markets. We are currently set to break a four-day winning streak in the Dow (^DJI, DIA), giving up all the gains made in those four days.
From Wall Street’s point of view, the president was elected on campaign promises of rolling back regulations, increasing infrastructure spending and cutting taxes — something we are still waiting on. There is still the possibility of tax cuts this year when Congress returns in early fall. It’s doubtful that with midterms coming, any man or woman in Congress would vote against tax cuts. Deregulation and infrastructure spending will probably have to wait until 2018.
To add to the woes of traders, earnings season, which has been very strong this quarter, is coming to a close. Earnings have been the main driver of this summer’s rally. Without it, you could see markets start to trade flat to down, as traders play it safe—not taking on any major positions heading into September, which tends to be a volatile trading month.
Today, we did continue to see strong earnings, as Walmart (WMT) came in with solid (but not great) numbers, beating on both the top and bottom lines. The retail giant (where 140 million Americans shop every week), significantly expanded its online business, which was up 60% for the quarter. In addition, same-store sales were up 1.7%. Nevertheless, shares are currently down over 2%. Alibaba (BABA) was able to nearly double its net profit to $2.1 billion (up 96% year over year). Government economic numbers were a mixed bag. US weekly jobless claims came in down -12,000 at 232,000, and factory output dropped -2.1% as auto production weakened.
Expect to see light volume and volatility as we head into the end of a slow summer week.