S&P 500 E-Mini Futures Market News and Commentary
The S&P 500 Index ($SPX) on Friday closed down -75.84 (-2.59%), the Dow Jones Industrials Index ($DOWI) closed down -623.34 (-2.37%), and the Nasdaq 100 Index ($IUXX) closed down -242.44 (-3.15%). U.S. stock indexes plunged to 1-week lows Friday and closed sharply lower on escalation of U.S./China trade tensions. China's Ministry of Commerce on Friday said it will impose additional tariffs on $75 billion of U.S. goods in retaliation for U.S. tariffs on Chinese goods with some of the tariffs starting Sep 1 and the rest on Dec 15. Stock losses accelerated after President Trump said he will announce a response to the Chinese tariffs on Friday afternoon. The yuan fell to a new 11-1/4 year low Friday of 7.107 yuan/USD. After the close of trading Friday, President Trump said the U.S. will raise tariffs on $250 billion of Chinese goods already in effect to 30% from 25% on October 1, and tariffs on the remaining $300 billion of Chinese imports will be raised to 15% from 10% starting September 1. Friday's U.S. economic data was negative for stocks after Jul new home sales unexpectedly fell -12.8% to 635,000, weaker than expectations of +0.2% to 647,000. On the positive side for stocks was the dovish comments Friday from Fed Chair Powell who said the U.S. economy is in a favorable place but faces "significant risks" and "we will act as appropriate to sustain the expansion." Powell's comments bolstered speculation the Fed will cut interest rates again next month. Comments Friday from St. Louis Fed President Bullard were also supportive for stocks when he said, "we are willing to take all actions we need to continue the expansion" and that he expects a "robust debate" on a 50 bp rate cut by the Fed next month. The VIX S&P 500 Volatility Index ($VIX) on Friday jumped to a 1-week high of 21.07% and finished the day up +3.19 to 19.87%, moving further above Wednesday's 3-week low of 15.51%. The VIX is moderately below last Thursday's 2-week high of 24.10% and the early-Aug 7-1/2 month high of 24.81%. Big Picture U.S. Stock Market Factors: Bullish factors for the U.S. stock market include (1) low U.S. interest rates and expectations for four Fed interest rate cuts through the end of 2020, (2) expectations for an SPX earnings growth of +3% in 2019, although that is sharply lower than 2018's stellar +23% pace, and (3) general strength in earnings and buybacks from the 2018 tax cut. Bearish factors include (1) the Fed's go-slow approach to cutting interest rates, (2) US/Chinese trade and tech tensions, and (3) slower U.S. and global economic growth.