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The jobs report and congressional politics may matter more for markets than earnings in the week ahead – CNBC



A pedestrian wearing a face mask looks at a smartphone while passing in front of the New York Stock Exchange (NYSE) in New York, on Monday, July 20, 2020.

Michael Nagle | Bloomberg | Getty Images

The market could lose some of its exuberance in the week ahead as the calendar turns to August, and investors await Friday’s July employment report and keep their eyes on Washington.

The focus will also be squarely on politicians, as Congress struggles to find a middle ground on a new fiscal spending package and decide the fate of the $600 a week unemployment supplement that was set to expire July 31. Former vice president Joe Biden is also expected to name his running mate in the coming week.

The jobs data will be crucial, particularly since the number of people filing for unemployment benefits has been edging higher, instead of falling back, as expected. According to Refinitiv, about 1.36 million new jobs are expected, well below the 4.8 million added in June, and the unemployment rate is expected to fall to 10.7% from 11.1%.

Trading around the report could be volatile, since some economists expect more than 2 million jobs were added, and some even see flat or negative payrolls.

Stocks have done well for the month of July, with the S&P 500 finishing at 3,271, a gain of 5.5%. The Nasdaq has performed the best, rising 6.8% for the month to 10,745, after a 3.7% gain for the past week. 

“August has traditionally been a challenging month for investors,” said Sam Stovall, chief investment strategist at CFRA. The market is entering what historically has been the worst two months for stocks.

According to Stovall, the S&P 500 has been higher in August 53% of the time, and its average move is a gain of just 0.01%, going back to World War II. September is worse, down 0.51% on average, and up just 48% of the time.

In presidential election years, however the odds for August gains are better, as it rose 63% of the time and 73%, when the incumbent is up for re-election. 

There are also about one-fifth of the S&P 500 companies reporting earnings, but the big earnings show for markets was this past week when four of the five biggest tech giants all reported Thursday afternoon. Three of those stocks — Apple, Amazon and Facebook — surged, helping Nasdaq outperform Friday with a more than 1.5% gain.

Earnings scorecard

“We’re only a month into the reporting period, and things are going to become less and less important from an earnings perspective,” said Stovall. “I think investors are sort of disappointed in that the bar was set so low for second quarter earnings that expectations were that we were going to see a lot of companies beat, which we have. But we were also going to see a gradual uplift of earnings expectations for forward quarters. We’re not seeing that.”

Eighty-two percent of the companies reporting so far have beaten estimates, well above the average 65%, according to Refinitiv. The earnings decline is now looking closer to 33% from an initial 40%, and tech, which has been leading the market is one of the best performers. Profits for the sector now look to be up 1.4%, according to I/B/E/S data from Refinitiv.

Because the tech names have contributed so much to market gains, their earnings were an important test for the market, and they didn’t disappoint. But they didn’t manage to pull up the whole market very far on Friday. 

Among the names reporting in the coming week are a diverse group, including Disney, ViacomCBS, Bristol-Myers Squibb, Berkshire Hathaway, AIG, Clorox, and Wayfair, to name a few.

Politics now in play

“The earnings story is over. My call had been once we had gotten through the earnings season, we would be more vulnerable to a sustainable pullback,” said Barry Knapp, Ironside Macroeconomics managing partner and director of research.  “Obviously, it’s volatility season, but it’s also an election year. … We’re more vulnerable to that next week and earnings won’t hold us up.”

Knapp said if President Donald Trump and Republicans do not begin to perform better in the polls by Labor Day, the market is likely to focus on what a Democratic win would mean for taxes and regulation. That could be a negative for stocks.

“If he hasn’t made headway by then, it’s likely he’s done.That’s about the point when things become pretty set in stone. The market will presume that’s the case,” Knapp said.

The politics of the stimulus package could also reverberate through markets, until it looks like the Senate Republicans and House Democrats can find common ground.

The two sides look to be at a standoff, but an agreement is still expected in early August. The market is particularly watching to see what happens with the enhanced unemployment benefits. Republicans have proposed cutting it to $200, but Democrats support keeping it.

The economy

Cutting the size of the payments back might be good for the labor market and persuade more workers to return to work, some strategists say. However, there is also concern that the funding has helped stimulate the economy and keep the unemployed from defaulting on loans and payments. Consumer spending on goods in June was even higher than last year, and that was also seen as getting a lift from stimulus.

Besides the jobs report, there are other important data like ISM manufacturing on Monday. There are also monthly vehicle sales Monday, and ISM nonmanufacturing data Wednesday.

“I think the macro data is going to be fine next week,” said Knapp. “I’m not in the camp that thinks the payroll number is going to be negative.”

NatWest Markets economist Kevin Cummins is one of the economists who expects the jobs gains to be much smaller than the past two months. He expects the payrolls to come in at just 200,000. “You look at jobless claims, and you see a stalling out,” he said. “The Fed is right. There is significant downside risk to the economy.”

A trade to watch

Treasury yields, in the 2-year to 7-year range, fell to new lows in the past week. The 10-year yield, not yet at a record low, was also falling and was at 0.53% Friday. At the same time, the dollar was down more than 1% on the week and 4% for the month.

Gold was a beneficiary of the lower interest rates, weaker dollar trade, rising about 5% for the week and 10% for the month.

Strategist say investors are reacting to super-low interest rates, concerns about the economy, and the possibility that huge government spending will send inflation higher. 

Investors are also jumping into inflation-protected bonds. According to Refinitiv’s Lipper,  inflation-protected bond funds took in $271 million of net new money for the fund-flows week ended July 29, the sixth week of gains. About $1 billion went into the SPDR Gold Shares ETF, (GLD) in the last week, Lipper said.

During this time period, the Treasury Inflation-Protected Securities funds recorded their two best weekly net inflows ever with increases of $1.9 billion and $1.5 billion, respectively, for the fund-flows weeks of June 24 and July 1.

Lipper said investors started to put money into TIPS funds in the middle of the second quarter, and the flows have been . net positive in 11 out of 13 weeks since the beginning of May. This its second-worst quarterly net outflows ever as oil prices slumped in the first quarter.

“I think this is going to be a much more inflationary decade. It will start out slowly. [Fed Chairman Jerome] Powell is right that more forces are putting downward pressure on inflation at present. But the market looks past that,” said Knapp. “The big story in 2021 will be the recovery of inflation. You’re already seeing it in import prices.”

Week ahead calendar


Vehicle sales

Earnings:  AIG, Clorox, Cirrus Logic, KLA, Rambus, Virgin Galactica, Take-Two Interactive, Mosaic, Vornado, Eastman Chemical, Leggett and Platt, Hyatt Hotels, McKesson, Tyson Foods, Tenet Healthcare, Ingersoll-Rand, Marathon Petroleum, HSBC

 9:45 a.m. Manufacturing PMI

10:00 a.m. ISM Manufacturing

10:00 a.m. Construction spending

12:30 p.m. St. Louis Fed President James Bullard 

1:00 p.m.  Richmond Fed President Thomas Barkin

2:00 p.m. Chicago Fed President Charles Evans

2:00 p.m. Senior loan officer survey


Earnings: Walt Disney Co, Sony, Bayer, BP, Diageo, KKR, AMC Networks, Exelon, Incyte, Cyberark Software, Allegheny Tech, Vulcan Materials, Activision Blizzard, BioMarin Pharmaceutical, Boingo Wireless, Devon Energy, Ethan Allen, Western Union, Planet Fitness, Monster Beverage, Allstate, Pioneer Natural Resources, Owens-Illinois, Gartner

10:00 a.m. Factory orders


Earnings: Wayfair, New York Times, Sempra Energy, Square, Zynga, Fitbit, AmerisourceBergen, Capri Holdings, BorgWarner, Regeneron Pharmaceuticals, Humana, Allianz, Cedar Fair, Tanger Factory Outlet, Marathon Oil, Etsy, Olin, Iamgold, Noble Corp, Wendy’s, CF Industries, CenturyLink, Varian Medical, Copa Holdings, American Water Works

 8:15 a.m. ADP employment

8:30 a.m. International trade

9:45 a.m. Services PMI

10:00 a.m. ISM non-manufacturing

5:00 p.m. Cleveland Fed President Loretta Mester 


Earnings: Bristol-Myers Squibb, News Corp, ViacomCBS, Cardinal Health, Mylan,Mylan, Booking Holdings, Uber Technologies, First Solar, Zillow, Cushman and Wakefield, Datadog, Dropbox, Murphy Oil, Hilton Worldwide, Papa John’s, Zoetis, Sealed Air, Ball Corp, AXA, ING, Adidas, Siemens, Nintendo, Toyota

 8:30 a.m. Initial claims

10:00 a.m. Dallas Fed President Robert Kaplan


Earnings: Noble Energy, Virtu Financial, Berkshire Hathaway

8:30 a.m. Employment

10:00 a.m. Wholesale trade

3:00 p.m.m Consumer credit


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We need more liberty, less politics: Richard Boddie – OCRegister



Back in 1990 when I was running to become the 1992 nominee for president as the Libertarian Party candidate, and again when I actually ran for the Senate in California against Dianne Feinstein and John Seymour in 1992, and then against “DiFi” again and Michael Huffington in 1994, reporters would often ask me, “How many Libertarians are there”?

My late friend and mentor David Bergland, the 1984 Libertarian Party presidential candidate, used to often tell reporters, “Most Americans are libertarians. They’re just in the process of discovering it.”

I pray that he might have been right, and I have reasons to believe so.

I believe that many Americans just want to be left alone to live their own lives freely, and that most abide by a live-and-let-live philosophy in their daily lives. It’s clear to me that we would probably all be better off if we stopped using the state, or so-called government, as the vehicle by which we try to impose our values on others. Voluntary anything beats mandatory anything every time.

But current political frameworks and debates don’t actually lend themselves to maximizing personal freedom, or even freedom from politics.

My initial political beliefs came from my home, as is most people’s experience. My dad, a Negro church pastor (this was in the early 1940s and that’s what we were called and also called ourselves when not using the term “colored”) was a Democrat, mainly because of FDR’s influence on the Black communities nationwide with his New Deal. Thus, I too was a Democrat. Rev. Boddie (pronounced “body”) strongly opposed war and questioned any and all United States military intervention worldwide. I also do to this day, most likely as a result of dad’s pacifist influence.

As an adult, after college and law school, I observed that the vast majority of Black folks in my city, Rochester, New York, were Democrats, likely for much the same reason as most people: you inherit political perspectives from those around you.

In those days in the minds of most people, politically, there were only Republicans, Democrats and Communists.

The concept of liberal, conservative, or even independent had yet to surface as political divisions in the minds of the citizenry. And surely there were no color-coded red, blue or purple shortcuts until recent times. And as for that recent innovation, it’s obvious that somebody definitely got the red and blue colorings backward. Who ever heard of a blue progressive or socialist, or a red Republican? Come on. But I ramble.

Unfortunately for our nation, the word “libertarian” and understanding thereof appears to be much too late in coming, just now breaking through to the masses. Instead and as a result, most of our politics are dominated by factions committed to using government to achieve what should be achieved voluntarily or as close to the individual as possible.

Libertarianism as a political approach is much closer to the intuition most people have of live and let live, for it is based on the common belief and understanding that this nation was predicated on respect for the individual first and foremost.

We would probably all be better off if we stopped using the government as the vehicle through which we seek to solve every problem, from the personal to the cultural to the economic.

This current divisive culture war and craziness that we are experiencing could ultimately be better handled by individuals and communities, often voluntarily, instead of being botched up and exacerbated by politicians at all levels.

I believe that we wouldn’t have our lives dominated by headlines about Trump or Biden or whomever if we didn’t trust in government to do so much that it shouldn’t be doing. Isn’t it obvious to you yet where the actual obvious problem is here?  As the late American businessman and libertarian activist Robert LeFevre put it, “Government is a disease masquerading as its own cure.”

The late co-founder of the Libertarian Party, David Nolan, established that there are five basic elements that one must believe in if she or he professes to be a libertarian: 1. You own yourself; 2. A belief in the right of self-defense; 3. Opposition to “criminal possession” laws; 4. Opposition to taxes on productivity; and 5. Support for a sound money system. That’s basically it.

Or more concisely, by yours truly:  “Do all you agree to do, and do not encroach on other people or other people’s property.” Or, “Don’t hurt other people and don’t take their stuff.” Or, “Thou shalt not aggress.” And this especially goes for people calling themselves government, too.

These days so many decent American voters are clamoring for a third party. It is quite understandable considering all the bipartisan angst. But, for some strange reason, perhaps due to the Libertarian Party’s principled and consistent positions and belief that “thou shalt not aggress” or “live and let live.” and absent the traditional cut-throat and too often blind political tactics, few are aware of or making the switch to the only political party that could fix the mess.

The LP has been in existence for almost 50 years now, it is in all 50 states and has been for years, and has run presidential and congressional candidates since its inception, as well as state and local candidates. It’s interesting to note that very few Americans have been allowed to even consider that political party choice. What’s up with that?

Whether you vote for the LP or not, whether you call yourself a libertarian or not, wouldn’t our lives all be better if we were less bombarded with politics? The only way to get there is to stop playing the usual games, stop sticking to the usual scripts and stop putting so much power in the hands of politicians and the state.

Richard Boddie is a member of the Southern California News Group’s editorial board.

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Ukraine president says Kyiv staying out of U.S. internal politics, elections – Reuters



FILE PHOTO: Ukrainian President Volodymyr Zelenskiy gestures during an open-air news conference, one year after his inauguration, amid the outbreak of the coronavirus disease (COVID-19) in Kiev, Ukraine May 20, 2020. Sergey Dolzhenko/Pool via REUTERS

KYIV (Reuters) – Ukrainian President Volodymyr Zelenskiy said on Saturday that it was a matter of Ukraine’s national security to stay out of U.S. internal politics, particularly its election.

“#Ukraine did not and will not allow itself to interfere in the elections and thus harm our trusting and sincere partnership with the #USA,” he wrote on Twitter late on Saturday.

Zelenskiy, 42, was a comic actor when he won a landslide election last year. But the first year of his presidency was overshadowed by Ukraine’s unwitting involvement in events that led to the impeachment of Republican U.S. President Donald Trump. Trump had unsuccessfully pressed Ukraine to launch an investigation into his Democratic rival in the 2020 presidential race, former Vice President Joe Biden.

“Never, under any circumstances, it’s acceptable to meddle in another country’s sovereign elections,” Zelenskiy wrote.

Zelenskiy appealed to Ukrainian politicians to avoid any actions that could be linked to U.S. elections, nor allow themselves to try to solve any of their personal, political or business problems that way.

“Ukraine’s reputation is worth much more than the reputation of any of our politicians,” the president said.

Earlier this week, Zelenskiy told Reuters that he hoped U.S. support for Ukraine would remain strong regardless of who wins the American election.

Reporting by Natalia Zinets; editing by Jonathan Oatis

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Week In Politics: Congress Fails To Come To Agreement On New Coronavirus Relief Bill – NPR



As lawmakers fight over what to include in the next Coronavirus relief package, we look at the impact of delaying that aid. Also, do we know more about President Trump’s agenda for his second term?

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