Cross-market divergence - described the alternating sector behavior I've addressed recently; and remains a rotational focus looking forward. But for the moment it also describes the pensive attitudes going into G20, with a series of varying prospects for U.S. dealing with various nations primarily relating to 'trade', but also involving military and monetary relationships.    

Since this remains a generally stagnant market; let's hit on the high and low points of several topics involved in a rotating cross-market 'holding action': 

Bits & Bytes:

• Boeing's latest challenge (revealed not by them, but by the FAA), tends to rekindle concerns of unbridled greed, coinciding with uncharacteristic incompetence (my view of Boeing's overwhelming proficiency for many decades); now overlaid with indecent haste to get the troubled 737 Max flying again (and may go 'beyond' 737 Max into the broader 737 fleet);

• 737 MAX won't fly until late this year (if ever, in the minds of some loyal customers, not just some pilots engaged in a 'Class Action' suit now); as airlines with forward-delivery options may revisit their willingness to take these aircraft, or possibly convert the options to differing Boeing aircraft (the late story Thursday of further delays won't help this picture);

• In upcoming campaigns, this 'might' become a 'corporate kingpin' sort of issue; if no Boeing staff is prosecuted for their monumental (a cover-up) decision to allow the MAX aerodynamic flaw to proceed to certification (a hardware 'center of gravity' issue I've described consistently, while it seems Boeing preferred to focus on software; not hardware aspects);

• This week the FAA is trying to get-ahead of the microprocessor issue to show they're not corrupt or culpable; regardless we would not be excited to trade Boeing stock in this environment; regardless of price action (and the acknowledgement late today by Boeing about timing affirms this);

• Multiple problems with 737 Max (software, sensors, training, completing testing via computer simulations rather than actually flying, blaming pilot error for the problems with the plane; then it takes FAA simulator pilots to reveal this latest microprocessor issue) shows Boeing became sloppy in designing and manufacturing (reminds of South Carolina 787 workers in-trouble for revealing production headaches there);

• Just being candid (as I loved Boeing since childhood), but CEO single minded focus of getting the plane to fly again rather while passing-off all questions about 'design' to 'software' excuses, is pathetic; it may linger; and now he loses face, having to acknowledge the additional delays; 

• Remember the financial crisis or 'Epic Debacle' I forecast back in 2007? Not one single banker, worker, CEO, none held to account. Instead Feds rewarded them, by bloating major banks sizes (interpret as one will);

• Because this is viewed by many as 'corporate immunity for kingpins', it's part of some politicians view of acceptance of corruption as 'normal'; it's not of course; and there is a need for bipartisan candor on this topic;

• China is being debated in every way; and of course there are pressures from all directions too; with preconceived notions of 'negotiating splits' in the 'team ranks', from Lighthizer to Trump; and we'll just have to see;

• Clearly the risk of a serious decline resulting from a collapse of talks has attention; however we continue to suspect something milder than that (a worst-case) scenario, evolves by the time talks wrap-up on Saturday; so we may get some relief with the parties moving forward in negotiating;

• Huawei 'might' even be reversed by an offer of inclusion 'if' monitoring concessions are provided (hard to say); although noted yesterday that a closer-than-previously-acknowledged Huawei-Beijing relationship exists (this was timely of course; and probably was already well-known);

• Incidentally, I just learned today Huawei's CEO will be the first 'keynote' speaker at IFA in Berlin (tech show months before CES in Vegas); and I plan to be present (hopefully Europe's heatwave will be long-gone and a better grasp of Chinese/American cooperation will be accomplished;

• Happened to notice (ahead of the Apple-Goldman Sachs Apple Card), a surprising tidbit about already-operating 'Apple Pay' (via the 'Wallet' in all iPhones etc.); the largest number of participating banks are in ... Russia; of course Ives resigning from Apple to start his own design firm is their bigger story; but lately he was mostly active lately designing their new 'offices' (Apple will be his 'first' and largest client fairly obviously);

• Stress 'might' come to G20 from another contested area.. Russia's deal with Turkey to supply air-defense systems; years after NATO stopped all deployments of Patriots to Turkey; after the coup trying to oust Erdogan;

• Speaking to his Turkish counterpart Hulusi Akar on the sidelines of the NATO gathering today, Acting Defense Secretary Esper, repeated US warnings that Turkey "will not be permitted" to have both the F-35 and Russian S-400;

• (Esper, formerly a Raytheon Executive, is not an issue at this point, but could have been if the Senate leaned favorably to last-ditch efforts by Ankara to persuade the US not to halt the F-35 deliveries to Turkey);

• Turkey has serious political issues; as Erdogan's Party lost an Election (a repeat one at that, since he challenged the first vote) in Istanbul; so that's more evidence of a serious split between 'East vs. West' Turkey;

• This is really in the background (though shouldn't be); as Putin-Trump (and Trump-Erdogan) get set to meet (Erdogan 'think's he can persuade Trump to cancel planned sanctions against Turkey); as nearby tensions percolate with Iran and the Persian Gulf region overall;

• Chancellor Merkel has arrived in Osaka despite her second episode in two weeks yesterday, of 'violent uncontrollable shaking'; there are many issues involving Germany as the economic heart of the EU; not least of is Russian jitters about Berlin supporting greater Eastern Europe NATO deployments.

Overall; the global economy remains in a 'slump' and efforts to emerge will help the USA too. Hence the quasi-isolationist approach at G20 (if applied) won't be received well, aside bilateral concessions that may be made. U.S. economic numbers continue deteriorating, and it would take some cohesive agreements internationally to assist dampening the contraction.

In sum: the myopic view of economics as relate to markets often suggests, historically inaccurately, that all it will take is a 'rate cut' by the Fed, and all is going to be hunky-dory.  

To the contrary; if all was or soon becomes 'better', as will of course focus on a China-U.S. agreement to 'progress' if not a formal deal; then there's a bit less need for a more dovish Fed, rather than the broad presumption of a July 'cut'. Hence ammunition 'for' a rate-cut to a degree hinges on progress being limited or inconclusive from G20, which is not the desired outcome.  

Regardless of another relief rally or not; the typical analyst debate about the achievement of something like Dow Industrials 30,000, is a bit ridiculous. Of course we could see such levels eventually; but there's nothing nearer-term that should embolden the market to leap so far ahead; even if we do a deal.  

Bottom line: continuation of supply-chain diversification is the expectation, for now; even if we get an 'agreement / understanding' to advance talks with the Chinese, which were abandoned with about 90% of what we wanted on the table (according to Sec'y. Mnuchin) at the time; and perhaps returning. A concern would be 'not' to impede the better relationship and growth with the emerging manufacturing / assembly centers such as Vietnam; because they are not even where China was 30 years ago.  

Overall, my contention has been that a bit of globalism is fine (anything in moderation); but excess is what for many year was allowed; hence bringing things to 'fair and balanced' applies more to China, by far, than it does to Vietnam. China wants 'lower' U.S. purchases, which might be deal-breaking if this becomes more than a pending thorny negotiating point issue.  

There is no change in our overview that 'thrusts' higher by the S&P 'for now' would be limited into early-mid July, with rolling-behavior thereafter, as I've outlined most likely (and clearly sensitive to various types of news).