“I always define my risk, and I don’t have to worry about it.” – Tony Saliba

1. France ‘Yellow Vest’ Protests Flare Anew — as a series of national French debates on government policy ended last week, “Yellow Vest” protesters celebrated their 18th weekend with violence on the streets of Paris. More than 80 businesses on the Champs-Elysees were vandalized or torched, with an estimated 10,000 people participating in the demonstrations. The protests have shaved 0.2 percentage points off economic growth since they started, Finance Minister Bruno Le Maire said in late February.
2. Apple is Poised to Unveil its Long-Rumored TV Service — Apple is poised to unveil its long-rumored TV service, and ahead of the event, Netflix (NASDAQ:NFLX) confirmed it won’t be joining the company’s streaming offering. “While Apple (NASDAQ:AAPL) is a great company, we prefer to let our customers watch our content on our service,” CEO Reed Hastings told reporters at the company’s offices in Hollywood.
3. The U.S. Air Force Outlined a Five-Year Plan to Bring back Boeing’s F-15 Fighter — the U.S. Air Force has outlined a five-year plan that showed the extent of the Pentagon’s push to bring back Boeing’s (NYSE:BA) F-15 fighter in an upgraded version. The $7.8B investment would see a jump in eight of the planes next year to 18 each year through 2024. While Lockheed Martin’s (NYSE:LMT) F-35 would get $37.5B over the five years, the more advanced plane would still take a hit (48 F-35s are planned to be purchased each year from fiscal 2021-2023 instead of the 54 previously planned).
4. Britain Says EU Could Offer Brexit extension — the European Union decided to give the United Kingdom an extension on negotiating an exit from the EU – but it won’t be a long reprieve if UK Prime Minister Theresa May can’t get a win in Parliament. European Council President Donald Tusk said Article 50 would be extended to May 22 if Parliament can reach a withdrawal agreement next week; but failing that, the deadline is extended only to April 12.
5. FOMC Meeting Announcement — the Fed decided to hold interest rates steady, as expected, and indicated it would keep rates at current levels for the rest of 2019. The central bank currently holds its benchmark funds rate in a range of 2.25 percent to 2.5 percent. Speaking after the Fed’s decision, Powell said that weakening Chinese and European economies are acting as a deterrent to growth at home even as policymakers see the overall outlook in the U.S. as good. Fed Chairman Jerome Powell also announced that the central bank would end the so-called runoff of bonds from its balance sheet sooner than most expected. That caused the yield on the 10-year Treasury to tumble.

The week ahead — Economic data from Econoday.com:

“The key to trading success is emotional discipline. If intelligence were the key, there would be a lot more people making money trading… I know this will sound like a cliche, but the single most important reason that people lose money in the financial markets is that they don’t cut their losses short.” — Victor Sperandeo

1. Trump’s Budget Proposal Features $8.6B for Wall, Increased Defense Spending — the White House proposed a $4.7T fiscal 2020 budget that called for cutting regular non-defense discretionary spending by 9%, while increasing defense spending and including $8.6B for a border wall. Under the blueprint, the budget doesn’t balance in 10 years and shows a $202B deficit in 2029, assuming economic growth at an average of 3% for the decade. The proposal is likely to be dismissed by Congress and increases the threat of another government shutdown in the fall.
2. Boeing Grounds Global 737 MAX Fleet — Boeing has decided to temporarily suspend its entire fleet of 737 MAX planes “out of an abundance of caution and in order to reassure the flying public of the aircraft’s safety.” The FAA reversed course and grounded the jet after evidence emerged showing a flight that crashed in Ethiopia may have experienced the same problem as a plane that went down five months ago off Indonesia. Analysts say the initial impact of the grounded Boeing (NYSE:BA) jets will be contained, but may escalate if the fleet is not permitted to fly for a longer period.
3. UK Parliament Rejects a Second Brexit Referendum — U.K. lawmakers voted to delay Britain’s departure from the EU, sending Theresa May back to Brussels to request an extension. Her pact with the trading bloc is also expected to be voted on in the House of Commons for a third time next week, after being soundly rejected twice. Parliament further blocked a motion yesterday seeking a second Brexit referendum, though Labour leader Jeremy Corbyn said his team is still working on plans for another public vote.
4. AAII’s Weekly Survey of Individual Investors — in the latest Bullish sentiment, it shows another drop in bullish sentiment. This comes following the first weekly decline that equities have seen so far in 2019. The percentage of investors expressing optimism dropped to 32.42% from 37.39% last week. The week prior to that was a recent high, and the highest since early November, at 41.63%.

Conversely, bearish sentiment rose to its highest level since the final days of January coming in at 31.06% versus 26.75% last week. Bearish sentiment has come well off of its lows of 20% only a couple of weeks ago. Where it currently sits is much more in line with its historic average of 30.5%.

5. Tesla Announced Model Y Event — Completing the EV lineup that Elon Musk has dubbed “S3XY,” Tesla (NASDAQ:TSLA) took the wraps off its Model Y, with prices starting at $39,000. The crossover is larger than the entry-level Model 3 but smaller than the Model X, Tesla’s full-size SUV. With a 0-to-60 mph acceleration time of 3.5 seconds and a standard range of 230 miles, the first Model Ys are due for release in fall 2020.

The week ahead — Economic data from Econoday.com:

“If it stinks, doesn’t work, is incomprehensible and doesn’t make sense – it’s either economics or philosophy.” — . . . Raymond DeVoe

1. Moody’s Upgrade Greek Debt — Moody’s disclosed a two-notch upgrade (to B1 from B3) on the country’s sovereign debt rating. The nation’s reform program is now “firmly established and is likely to be sustained,” according to the agency, as “most of the fiscal improvement is due to structural measures.” Greek 10-year bond yields fell to their lowest level since early 2006, down 3.3 bps to 3.609%.
2. U.K. Crucial Votes Next Week — crucial votes are scheduled in the U.K. next week that will determine the immediate course of Brexit and the U.K.’s relationship with the EU. If lawmakers vote against Prime Minister Theresa May’s Brexit deal, they will then vote on leaving the 28-member bloc without a deal (hard Brexit). JPMorgan doubts May can achieve victory at this stage, predicting an extension of Article 50 by two or three months with May securing passage of the deal by early April. May and other Brexit officials are in Brussels in a last-ditch effort to score more concessions from European Union leaders before the key votes.
3. Huawei Sues U.S., Calling Equipment Ban Unconstitutional — Huawei has filed suit against the United States, claiming that a ban on government procurement from the world’s largest network equipment maker is unconstitutional. The part of the National Defense Authorization Act with the ban makes it a “bill of attainder,” Huawei says – an unconstitutional singling-out of a group or individual without due process. A court could invalidate just the section involving Huawei, but expect a national security defense to come up.
4. FDA OKs J&J’s Esketamine Nasal Spray for Depression — the FDA has approved the first drug to treat depression in decades, paving the way for Johnson & Johnson (NYSE:JNJ) to sell a nasal spray based on ketamine, which is often used as a party drug with the nickname “Special K”. Esketamine, which will be sold under the brand name Spravato, will be available for adults who have already tried at least two other antidepressant treatments. The fast-acting drug will cost between $590 and $885 (before discounts and rebates) depending on the dosage.
5. German Factory Orders Slump — German factory orders unexpectedly fell in January, adding to the evidence that Europe’s largest economy is continuing to lose momentum. Orders were down 2.6%, the most since June, defying expectations for a 0.5% gain. The Bundesbank’s latest assessment is that Germany is seeing a dent in momentum and that growth this year will be below potential (the economy barely avoided a recession at the end of 2018).
6. Trump Administration Exploring Price Disclosure Requirement for Hospitals and Doctors — the Trump administration is reaching out to the medical industry for feedback on requiring hospitals, doctors and other healthcare providers to publicly disclose the heretofore confidential prices they charge insurers for services. Needless to say, health insurers, hospitals and most doctors will most certainly push back on the proposal. The public comment period will close Friday, May 3.

The week ahead — Economic data from Econoday.com:

“He who knows when he can fight and when he cannot will be victorious.” – Sun Tzu

1. California Crackdown On Single-Use Plastics — California lawmakers have introduced legislation to phase out single-use non-recyclable plastic food containers and other packaging by 2030. If the legislation becomes law, some experts believe it could lead to other states taking similar steps. Last year, California became the first in the nation to restrict the use of plastic straws in restaurants, and the Golden State banned the use of single-use plastic bags at grocery stores in 2014.
2. Iranian Stocks Plunge on Foreign Minister Resignation — Iran’s stock market dropped around 2,000 points overnight following the surprise resignation of Foreign Minister Javad Zarif. President Hassan Rouhani hasn’t yet accepted Zarif’s resignation, but indications suggest he was undermined in his role. Zarif was the architect of the 2015 nuclear deal, which the U.S. pulled out of in May last year, leaving the pact on shaky ground.
3. China/US Trade Talks Shaky — statements from U.S. Trade Representative Robert Lighthizer are weighing on Chinese investor sentiment, with the Shanghai Composite falling 0.4% during the session. He said it was too early to predict an outcome in trade talks and the U.S. will need to maintain the threat of tariffs on Chinese goods for years, even if Washington and Beijing strike a deal. China’s manufacturing PMI for February also fell to 49.2, highlighting another contraction and deepening cracks in the country’s economy.
4. Vietnamese Carriers Sign Deals for 110 Boeing Jets — during President Trump’s visit to Hanoi, Vietnam’s Bamboo Airways and VietJet Aviation signed deals to buy 110 aircraft from Boeing (NYSE:BA) worth more than $15B as the fast-growing companies look to expand their operations. Earlier this month, the FAA said Vietnam complied with international aviation standards, allowing Vietnamese carriers to fly to the United States for the first time and codeshare with U.S. airlines.
5. Gap Spinning Off Old Navy — Gap (NYSE:GPS) announced restructuring plans which will include the spin-off of Old Navy. The company also plans the closing of about 230 Gap speciality stores over the next two years. The shutterings should hit annual sales by about $625M and result in pretax costs of $250M-$300M. Annualized pretax savings are seen at roughly $90M.

The week ahead — Economic data from Econoday.com: