Nasdaq - Mixed Friday Market

Nasdaq - The stock market was mixed on Friday as the Dow was down 9 basis points, the S&P 500 was up one basis point. The Nasdaq was up 0.26%, and the Russell 2000 was up 0.48%.

VIX was down 4.95%. As you would expect with that type of action, the dollar index rallied.

The dollar index was up 0.42% to $95.10. If the dollar index regains its momentum and pushes to new bull market highs, the S&P 500 won’t be able to increase much.

Also, if the dollar index closes the year at $97 or higher, I think it would be almost impossible for the S&P 500 to be up more than 10% for the year.

The Dow and the S&P 500 were up 2.1% and 3% this month, making their gains the highest in August since 2014.

Nasdaq was up 5.7% which was the best August gain since 2000. That’s interesting because the Nasdaq peaked in March 2000. That was a temporary rally in a bear market.

Apple played a big part in each indexes’ gain as it was up an astounding 12.97% in August. There is intense optimism about the new iPhones which will be announced early in September and released in the following weeks.

The worst sector was energy which was down 0.73%. And the best sectors were real estate and consumer discretionary which were up 0.42% and 0.37%.

Consumer discretionary sector was helped by Amazon which was up 0.52%. Energy was down because oil was down 45 cents to $69.80.

It ended the month up 1.5%. The CNN Fear and Greed index fell even though the VIX was down and stocks were up. It fell from 73 to 71 and still signals greed.

Nasdaq - Friday Treasury Update

The 2-year treasury yield was down 2 basis points to 2.63%; it is down from its recent peak of 2.68% which also tied the cycle peak. Generally, expectations for rate hikes are correlated with the 2-year yield. This means when expectations for hikes increase, the yield increases.

This was the case on Friday as the chance for 2 more hikes fell slightly from 72% to 71.2%. It’s still above the 70% market which is necessary for hikes to occur. The 10-year yield was up one basis point to 2.86%.

What this means is that the difference between the two yields increased to 23 basis points. It is still dangerously close to inverting if the Fed hikes in December.

Nasdaq - No Deal Between America and Canada Yet

President Trump set up an artificial deadline to get a trade deal with Canada done by Friday.

This is a negotiating tactic to get something done. It’s a risk if progress is made, but then a party is offended by not meeting the deadline. That isn’t the case with this deal. Progress was made and a new 90-day deadline was set without additional threatened tariffs.

90 days isn’t a made up deadline this time as there is a 90-day window where trade deals need to be reviewed before they are signed. The President wants them done as quickly as possible.

To be clear, Trump doesn’t want to agree on a deal with Canada within 90 days; he wants a deal signed by then.

The timeline is for the White House to provide the text of a deal to replace NAFTA in 30 days and for it to be signed 60 days after that. The goal is for the deal to be fast-tracked.

It is interesting to consider if Trump wants the deal before the new Congress is sworn in next year. It will be very close.

The Canadian minister of foreign affairs stated “We know that a win-win-win agreement is within reach. With goodwill and flexibility on all sides, I know we can get there."

Bulls should hope that if the Mexico deal goes ahead without the Canadian deal that Trump doesn’t implement tariffs on Canada to poison the well.

It probably won’t be a problem if the Canadian deal is done separately, but there are some legal concerns I won’t get into in this article.

Nasdaq - Global Performance Summary

The table below is an amazing summary of the action in global markets in the past week, month, and year to date.

Even though the India rupee has crashed to a record low versus the dollar, the Indian stock market has done well as it is up 13.47% year to date which is the best on this list.

India is a safe haven play with escalating trade tensions between China and America. It is also simply a strong economy contrary to the weakness in the emerging market cohort.

U.S. small caps have done well because the American economy is outperforming its advanced economy peers and some of the crashing emerging markets.

Fed rate hikes explain the rising dollar and the decline in emerging markets. European stocks have done poorly as its economy is weak and the ECB is pulling back from stimulus.

On a year to date basis, France is up 2%, Portugal is up 0.65%, and the U.K. is down 2.62%. Ireland is down 3.77%, Germany is down 4.01%, and Spain is down 6.38%.

Italy is down 6.91% and its bonds have recently been crashing. Greece is down 8.95%, and Turkey is down 19.71%.

Emerging market stocks are down 8.87% year to date. It’s difficult to recommend them because a few countries within that group are collapsing. Also, China is weakening rapidly.

I’m not sure if the dollar will keep increasing. The Fed should hike rates 2 more times this year which is bad for emerging markets.

Nasdaq - Conclusion

I still think a trade deal with Canada will act as a small upside catalyst for stocks.

That being said, the biggest trade partner with America, China, is going in the opposite direction as new tariffs are being considered.

We will see if the dominos fall with new trade deals after the one with Canada is agreed upon.