Tension-Filled Early September

With a nuclear missile game of chicken and a Category 5 hurricane barreling toward the East Coast, we begin this Labor Day-shortened trading week with myriad tensions on a global scale. We also see a return of Congress after summer recess with a debt-ceiling issue to somehow get beyond, as well as a proposed cancellation of another one of President Obama’s signature accomplishments — the “Dreamers” program, or DACA.

It would appear the escalation of ICBM threats of nuclear annihilation are pretty well tuned out by the market, pending further developments. For now, we see lots of sabre-rattling but not a lot of action; of course, when what’s at stake is tens of millions of lives on the Pacific Rim and in America, actually taking action brings with it a dread that no market would be able to ignore. Right now, indexes are down somewhat but nothing “earth shattering.”

Hurricane Irma’s 175 mph winds is now being called “extremely dangerous” as it enters the West Indies this week. Schools are closing, flights are being canceled and concerns of long-term power outages are following reports of approaching 20-plus-foot waves and double-digit inches of rainfall hitting islands in the Caribbean, including Puerto Rico and the U.S. Virgin Islands. From there, it’s a waiting game to see if Irma socks the Southeast coast of the continental U.S. — and if so, where? Currently Florida, Georgia and both North and South Carolina look to be the most likely to take a direct hit.

Apple (NASDAQ:AAPL) CEO Tim Cook joins roughly 300 leaders in a variety of domestic industries in penning an open letter to President Trump regarding the DACA program, which would keep some 800K people from being deported from the U.S. Reports are that Trump has already made his decision on this issue, and an announcement is expected to be forthcoming from Attorney General Jeff Sessions sometime today. DACA, or the “Dreamers” program, is a works program for children of undocumented citizens. Business leaders say ending the program would cost the U.S. economy more than $460 billion and close to $25 billion in Medicare and Social Security contributions.

Any Potential Good News?

Sure! Fed Governor Lael Brainard has called for a slowing of interest rate increases by the Fed, both in its September meeting and beyond, until inflation metrics finally reach the optimum 2% economists have been looking for. We’re still not there yet any way you slice the data, so Brainard urges caution in tightening monetary policy until new developments push inflation upward. This should help equities traders feel the slack a bit, near term, without feeling the heat of ratcheting interest rates. Currently the odds for a September hike are already almost non-existent, though they do get much bigger for the December meeting.

Also, Hewlett Packard Enterprises (NYSE:HPE) reports earnings results after the bell today, in an earnings season which is for most intents and purposes over with. The Zacks Rank #3 (Hold) stock has a good Zacks Style Score (Value-Growth-Momentum) of B. The Zacks consensus is looking for 26 cents per share on $7.57 billion for its fiscal Q3 2017, and the company is looking to bounce back from a negative earnings surprise last quarter. HPE split from Hewlett-Packard (HPQ) back in early November 2015.

Mark Vickery
Senior Editor

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