US Stock Market Overview – Stocks Close Mixed, Growth Outperforms

US Stocks were mixed on Monday despite a drubbing in Europe, following softer than expected composite PMI readings. The DAX and CAC both fell more than 1%, which initially weighed on US stocks. Cyclicals and technology shares were buoyed for most of the trading session and helped lead the Nasdaq higher. Most sectors were higher, with healthcare bucking the trend. St. Louis Fed President James Bullard was on the tape, describing his reasoning behind his Fed dissent. Stocks that have shown strength for most of the year, outperformed on Monday. Over the past 3-weeks, there has been a noticeable rotation out of growth and into value. The outperformance of growth on Monday could be a sign that this trend is slowing.

The Fed is Divided

The Fed is divided, with a voting member that is very dovish. St. Louis Federal Reserve Bank President Bullard explained his argument for why he dissented and wanted a larger rate cut than his colleagues. The Fed cut rates last Wednesday by 25-basis points.   Bullard’s view is that he feels like the US economy is already in a recession. Bullard’s view is sharply offset by Boston Fed President Eric Rosengren who said that his dissent was because he did not believe there was a need to adjust rates at all. Rosengren said he worried that lower rates will lead to higher inflation.

Germany is Contracting

Markit reported soft PMI data in Europe.  The PMI composite fell to 50.4 versus 52.0 expected, as manufacturing fell to 45.6 and services fell to 52.0.  Manufacturing is very depressed and could be the signal that the EU is headed toward a recession. Germany underperformed the broader EU with the composite falling to 49.1 versus 51.5 expected, as manufacturing fell to 41.4 and services fell to 52.5.  Recall, Germany reported a contraction in GDP in the Q2, and all signs point to a negative Q3 which would officially be considered a recession. France saw its composite fall to 51.3 versus 52.6 expected, as manufacturing fell to 50.3 and services fell to 51.6.

Lagarde Believe Trade is the Global Economies Largest Hurdle

Christin Lagarde, who will become ECB President on November 1, 2019 believes that the tariffs that the US and China have engaged in are set to reduce global GDP by 0.8% in 2020. Lagarde believes that trade will be the biggest hurdle for the global economy.