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Thursday, August 17th, 2017

We’ve spilled more than a few words this week on the disintegration of President Trump’s American Manufacturing Council, which has now disbanded along with the Strategy & Policy Forum. These agencies disbanding likely will have nothing in the immediate term to do with stock market activity, but what these developments have done is further articulate the level of disfunction occurring in the White House today. Without getting too political here, seeing a Republican president rejected by leaders in the business community hasn’t happened in so long it may as well be unprecedented.

Why this may prove crucial is in policy initiatives supposedly coming down the pike soon: corporate tax reform, infrastructure build-outs, etc. that were expected to enhance and improve the economy to the tune of 3 or 4% growth — remember? — and which helped bolster the markets in the last weeks of 2016 and for most of the current year. Months spent in vain trying to repeal and replace the Affordable Care Act (ACA) instead of jobs initiatives and repatriating American companies back within our borders tested the markets’ resolve in believing those tax cuts and infrastructure programs were just around the corner.

And then came President Trump’s comments on the tragic events in Charlottesville, VA last weekend. He’s now seen CEOs from Fortune 500 companies in a vast array of industries walk away from corporate involvement with federal government. Why this may be important is that Trump’s relationship with American captains of industry look to be frayed, and it is definitely in doubt whether this is a permanent condition for this president.

Real-Time Economic Data

Meanwhile, in the week-to-week economic metrics, things appear to continue swimmingly: 232K Initial Jobless Claims marks a fall of 12K claims from the previous week’s unrevised 244K. Continuing claims remained below the psychologically important 2 million figure. These figures are consistent with a continually robust U.S. labor market, where the only headwinds appear to be open jobs with fewer workers to satisfy the skill-sets.

The Philly Fed headline came in better than expected to 18.9 in August. Still a tad lower than 19.5 in July, but this is usually a volatile read, and two successive months with double-digit growth would tend to bolster economic strength, at least in the major American city of Philadelphia. And Industrial Production came out (a half-hour early) with in-line 0.2% growth.

The U.S.’s biggest of the big-box retailer, Walmart (WMT - Free Report) , reported Q2 earnings ahead of today’s opening bell. Results on the bottom line beat estimates by a penny to $1.08 per share on quarterly sales that outperformed the $122.71 billion expected to $123.36 billion. Yearly comps were up 1.8% in the quarter, and e-commerce merchandise volume grew an impressive 67%. The Zacks Rank #2 (Buy)-rated Walmart pushed EPS guidance to a range of $4.30-4.40 per share, whereas the consensus estimate had been $4.37.

Overall, the market has been able to look past the myriad turmoil besetting Washington DC over these past days and weeks. The Dow is down slightly this week, while the S&P 500 and Nasdaq are up a tad. But all three indexes are trading down in today’s pre-market. Most analysts here at Zacks DO NOT believe the bull market is over, but it’s clear we are currently on a bumpy path.

Mark Vickery
Senior Editor

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