S&P 500	Dow Jones	NASDAQ	Russell	Crude
-0.67%	-0.29%	-0.82%	-1.07%	-1.95%

Yesterday was an uninspiring session that couldn’t follow strong earnings from homebuilder Lennar; instead, it was anchored by the drop in crude oil and calls for black gold too soon to trade with a three-handle. 

As for equities, early indecision caused stocks to drift, but it appears the real selling began after that much-ballyhooed speech on tax reform from Speaker Paul Ryan that turned out to be a dud. Heck, at one point, I found myself longing for him to roll up his sleeves and to break out the white board.

There wasn’t anything new and pleas for “we” will get the agenda pushed through by early summer- sounded like the team captain giving a halftime locker-room speech to a team losing by three touchdowns. This team has President Trump, and it might be time to allow him to take the lead on passing the agenda.

Meanwhile, the world continues to turn and it often turns without American workers. Ford announced a  big news item yesterday. The company will keep its promise to President Trump by not moving the production of Focus to Mexico…instead, it’s going to China.  In fact, this will be the first time a car formerly manufactured in America will be imported from China.

Without a doubt, small cars are a low-margin business that automakers have to make a choice to shut down production or lay folks off, especially when you consider the huge margins in pickup trucks and SUVs. Ford says it will save $500 million with this move, but it’s unlikely to be well-received on Main Street or the Oval Office.

By the way, Tesla also announced it will start producing its cars in China, although for local consumption.

Although Mexico got the short end of the stick, 2017 has been a remarkable year for our southern neighbor. In fact, one could argue that Mexico has been North America’s Juggernaut.

In the first quarter of this year, Mexico’s economy grew faster, paced by stronger industrial production numbers, resulting in lower unemployment. The biggest shock is the Mexican stock market is up more than 20%, while the S&P 500 is up less than nine percent for the year.

North American Juggernaut	1Q17 GDP	Production	Unemployment
Mexico	2.8%	3.4%	3.6%
United States	2.0%	2.2%	4.3%

Perhaps Mexico’s good fortune will extend to the rest of the year if Wilbur Ross is correct, and if the North American Free Trade Agreement (NAFTA) negotiations slide into 2018. Ironically, the day after the Commerce Secretary made this revelation, Mexico’s market moved lower. Make no mistake; business is fine as usual. 

I would like to see the deal amended, but I want the administration to stop short of a trade war and border tax.  Yes, I know some think such a tax would spark a manufacturing revolution in America, but that’s wishful thinking, built on a lot of assumptions where even the best-case scenario happens over many years. 

I want Mexico to have a strong economy of course, but it can’t come at the expense of American workers.  A strong economy there means less illegal immigration here, and maybe we could get them to build the wall on their southern border, which would be a win-win for everyone.

After the Close

After the close, there were a slew of earnings announcements, and most knocked the cover off the ball: 

• FedEx (FDX) posted solid results and offered full-year earnings guidance that came in above consensus. The company intends to fend off Amazon (AMZN) with $5.9 billion in capital expenditures.
• Adobe (ADBE) posted record quarterly results, driven by its creative division in Digital Media. Operating margins expanded to 28.4 from 24.6, and its cash flow from operations surged to $374 million from $244 million.
• Red Hat Inc. (RHT)’s revenue increased 20% to $677 million, and guidance on earnings and revenue for the current quarter significantly rose above the Street.
• La-Z-Boy (LZB) posted earnings of $0.57. The Street was looking for $0.46. However, the nation’s largest furniture retailer could be reflecting the strong trend toward family creation and investing in our homes.

There were other reports, all of which were a good bit too strong. 

Today’s Session

I love the numbers from FedEx, but the stock is trading ower. Here’s the rub about great earnings and guidance – sometimes it justifies the rally that’s already happened – and this is why often people will see their positions dip on great news.  If you are a long term investor, it is these moments when you have to understand it is mostly emotional selling, a mix of profit-taking and the herd mentality.

By the same token, there are issues you should know and acknowledge them. 

Right now, the biggest issue for the market is simply digesting gains and looking for catalyst, particularly in light of string of data releases missing consensus.

On that note, the big story today is Car Max (KMX) which saw comp store sales +8.2%, used cars sales +8% and total sales up 14.1%. The auto surge was supposed to be crashing…instead maybe it’s only slightly moderating from a great run.

Also, people are spending money on experiences underscored again this morning with results from Winnebago (WGO).

This session  is a great backdrop for the market as the biggest news is all good news – if the buy on dips crowd still has nerve, they must step up to the plate. 

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