President Trump???s Meeting In Brussels

With plenty of grist for the stock market mill ahead of Thursday’s opening bell, the biggest news story appears to be President Trump’s meeting in Brussels, Belgium with the North Atlantic Treaty Organization (NATO) today. The organization, steadfastly defended by previous U.S. President Obama — notably in response to Russia’s aggressions in the Ukraine a few years back — has been under relative fire since Trump rose to prominence on the campaign trail last year.

Trump back then had repeatedly said some form of the statement “NATO is obsolete.” Since taking the keys to the White House, he has changed his tune on this basic existential element: “It’s not obsolete anymore,” the President has said more recently. Secretary of Defense James Mattis, on the other hand, has indicated that the U.S. may “moderate its commitment to this alliance.” So some clarity from Trump today should help clear the air regarding the U.S./NATO relationship.

Before today’s opening bell, Initial Jobless Claims continued its trend of real strength indicated in the U.S. labor market: 234K new claims is up 1000 from the previous week, but asserts the fifth week in a row of sub-240K claims totals. This indicates exemplary performance for American jobs, in which continuing claims rose slightly week over week to 1.93 million, but still below the psychologically pleasing 2 million continuing claims number. These week-over-week numbers are up, meaning less strong, but well within the range of a continually solidifying jobs market.

This good news is somewhat offset this morning by a new read on the U.S. Trade Deficit, which has blossomed to nearly -$68 billion from the previous month’s revised number -$64+ billion. This is the second-worst total of the year, which indicates we may see Q2 growth have a bite taken out of it by a deepening deficit.

Yesterday, Fed minutes from the FOMC’s May meeting further indicate a June rate hike may be forthcoming. This is because discussions of the committee winding down its $4 trillion balance sheet, which it prefers has a higher interest rate before bringing forth. Thus, we are likely to see the third quarter-point raise in as many quarters, following a year before the previous raise and years of minimal interest rates while the U.S. economy recovered from the Great Recession.

Also, the Congressional Budget Office (CBO) has analyzed the new healthcare reform proposal called the American Health Care Act (AHCA). The CBO says 23 million fewer Americans would be covered over the next decade compared to the current Affordable Care Act (ACA, aka Obamacare). The new policy would replace ACA subsidies with tax cuts, which the CBO says would reduce $119 billion from the deficit over the next 10 years — less than the earlier CBO estimate of $150 billion and far, far below what the White House statement mentioned when the proposal first emerged: a $3.6 trillion reduction of the deficit.

The CBO assessment further articulated that the AHCA would bring high premiums to less-healthy Americans, resurrect pre-existing condition stipulations for certain states, and explained that roughly 1/6 of the U.S. would exist in regions where basic services would be priced out of the insurance market and no longer viable. All considered, this looks like some tough sledding ahead for Congress to pass a bill into law that looks to negatively affect such a large portion of representatives’ constituencies.

Finally, earnings season continues ahead of the bell today: Best Buy (NYSE:BBY) posted a big beat on the bottom line and also topped revenue estimates. 60 cents per share easily beat the 40 cents in the Zacks consensus. Ahares immediately shot up nearly 15% in pre-market trading. Guess? Inc. (NYSE:GES) , however, posted an earnings miss: 24 cents per share versus the 32 cents expected, with guidance lowered. And Hormel (NYSE:HRL) missed earnings estimates by a penny to 39 cents per share on lower-than-expected revenues.