Tuesday 8/6/19=DJIA -57 NASDAQ +17
Interest Rates Plunge!
Daily Wrap: The market was down 565 point at one time today. The continued plunge in interest rates around the world has the market afraid of a looming global recession. The market made a very nice rebound today, however. The Nasdaq even turned positive late in the day.
I sent out tweets on the following stocks today: SHOP, SEDG, MTCH, KL, IAC, PODD, AMZN, AKG, AEM, and AAN.
The stock futures were up in the wee hours of the morning…
- Markets are getting some more relief as the PBOC set the official midpoint reference for the yuan at 6.9996 on Wednesday, weaker than the 6.9683 set Tuesday but still stronger than the key 7 per dollar level.
- Dow and S&P 500 futures are up 0.2% on the news, while the Nasdaq points to a rise of 0.5%, as President Trump further dismissed fears of a protracted trade war with China.
- A downbeat session was seen in Asia overnight, although European gains were led by Germany, where the DAX climbed 1.3% boosted by a $3.9B chemical deal from Bayer and Lanxess.
Global markets had a good overnight session.
- Japan -0.33%.
- Hong Kong +0.08%.
- China -0.32%.
- India -0.96%.
- London +0.90%.
- Paris +1.26%.
- Frankfurt +1.28%.
Then things in the U.S. started to go south as interest rates continued to plung.
- Early strength in U.S. stock futures has turned to weakness, with the S&P 500 (NYSEARCA:SPY), Nasdaq 100 (NASDAQ:QQQ) and DJIA (NYSEARCA:DIA) all down about 0.5% just more than 60 minutes before the opening bell.
- That's been matched by a big dip in Europe, where the Stoxx 600 is now up just 0.6% vs. about a 1.5% gain not long ago.
- Money is quickly flowing into fixed-income, with the 10-year U.S. Treasury yield off another six basis points to 1.64%. TLT +1.3% premarket, TBT -2.7% Similar declines are being seen in European government paper. The 10-year German Bund yield is now -0.59%.
It would seem that are FED is way behind the curve when compared to interest rates around the world.
- The Reserve Bank of India cut interest rates for a fourth straight meeting in 2019, reducing the repo rate by 35 basis points to 5.40%, to expand its effort to boost an economy growing at its slowest pace in nearly five years.
- It also maintained its "accommodative" stance adding that addressing growth concerns by boosting aggregate demand was their highest priority now.
- New Zealand's central bank is the latest to reduce interest rates as the country faces sluggish growth conditions due to simmering trade tensions and a global economic slowdown.
- A 50 basis point cut to 1.50% caught markets off guard, prompting the Kiwi to plunge as much as 2.1% against the U.S. dollar, its lowest level since January 2016.
- Pointing to a fresh round of monetary easing by other major central banks, the RBNZ signaled further rate cuts could be possible.
Trump seems to be right on this issue.
- The president's chief trade advisor Peter Navarro calls on the Fed to bring "America in line with the rest of the world" by lowering interest rates as much as 100 basis points before year-end.
- Not so fast, says St. Louis Fed President Jim Bullard. Solidly dovish for at least the last year, Bullard now argues rates are "in the right bracket, and the central bank can't be expected to ease in response to each "tit-for-tat" in the trade war.
- Meanwhile, the usually hawkish Jan Hatzius at Goldman Sachs is pessimistic on any sort of trade deal with China before the 2020 presidential election. He sees another 75 basis points of Fed rate cuts this year.
Goldman sees 3 rate cuts this year. There are only three more meeting for the FED this year!
- The investment bank no longer expects a trade deal with China before next year's presidential election and says the Fed has become increasingly responsive to trade tensions, global growth concerns, and bond market shifts.
- Boosts expected total number of rate cuts this year to three from two previously, according to a revised outlook from economists led by Jan Hatzius at Goldman Sachs.
- "In light of growing trade policy risks, market expectations for much deeper rate cuts, and in increase in global risk related to the possibility of a no-deal Brexit, we now expect a third 25-basis-point rate cut in October, for a total of 75 basis points of cuts," the economists wrote in a note.
- The probablity of a 25-bp cut at the Fed's September meeting stands at 83.5%, according to the CME FedWatch Tool, which is based on trading of federal funds rate futures; that increased from 70.8% yesterday and 54.2% a week ago.
- The CME gauge puts the probability of another 25-bp cut in October at 63.8%, up from 29.0% a week ago.
This has global market spooked.
- The Brexit political standoff is deepening less than three months before the U.K. is due to leave the EU.
- Michael Gove, the minister in charge of planning for a no-deal departure, is blaming the bloc for "refusing to negotiate and failing to engage on a new agreement."
- It comes after the EU said U.K. demands to remove the Irish backstop from Theresa May's deal were unacceptable.
- Sterling -0.1% to $1.2153.
Crude continues to plummet.
- Oil prices slide alongside equities, extending recent heavy losses as deepening U.S.-China trade tensions weigh on the outlook for the global economy and energy demand; WTI -1.5% to $52.81/bbl, Brent -1.2% to $58.24/bbl.
- Brent in particular has taken a beating, plunging more than 10% over the past week after Pres. Trump said he would add 10% tariffs on another $300B in Chinese imports starting Sept. 1.
- "The most significant outcome of the ramp-up in tariff measures will be through increased economic and trade uncertainties, negatively impacting physical oil and gas demand and market sentiment," Fitch Solutions writes.
- At the same time, Middle East tensions remain high after Iran seized a number of tankers in recent weeks in the Strait of Hormuz.
- "There are concerns that an event could occur at any moment... the risk might be shifting to the upside in the near-term for oil contracts," says Michael McCarthy, chief market strategist at CMC Markets.
- Things may have calmed down in the equity markets for now, but precious metals continue their big charge.
- Gold (NYSEARCA:GLD) this morning is up another 1.4% to $1,505 per ounce - its highest since early 2013 (when it was on the way down from $1,800).
- Silver (NYSEARCA:SLV) is up 2.9% to $16.92 - its highest since late 2017.
- ETFs: GLD, SLV, IAU, AGQ, PSLV, PHYS, USLV, SIVR, SGOL, UGLD, ZSL, UGL, SLVO, DGP, GLL, GLDI, OUNZ, DSLV
Other recession indicators are showing up.
- Iron ore extends its brutal selloff as the U.S.-China trade war hurts investor appetite for raw materials, at the same time as concerns mount that Chinese demand will weaken as supplies rebound.
- The rapid retreat has driven futures and spot prices into bear-market territory; on the Singapore Exchange, ore for September sank as much as 7% to $86.68/ton, and most-active prices are set for a sixth straight daily decline, while futures on the Dalian Commodity Exchange fell as much as 5%.
- "Supply-and-demand drivers have been tilting to a bearish stance for weeks now... the fall was in the making and we only needed a trigger," Marex Spectron analyst Hui Heng Tan says, referring to the U.S-China trade conflict.
- The recent weakening of the yuan, which hurts the purchasing power of mills already facing weak margins, has sparked the decline, he adds.
Disney hurts the Dow.
- Walt Disney (NYSE:DIS): Q3 Non-GAAP EPS of $1.35 misses by $0.39; GAAP EPS of $0.79 misses by $0.66.
- Revenue of $20.24B (+32.9% Y/Y) misses by $1.16B.
- Shares -4.2%.
- Press Release
Match was one of the best stocks of the day.
- Match Group (NASDAQ:MTCH): Q2 GAAP EPS of $0.43 beats by $0.03.
- Revenue of $497.97M (+18.2% Y/Y) beats by $8.81M.
- Shares +17%.
PLNT sagged a bit.
- Planet Fitness (NYSE:PLNT) report comparable sales rose 8.8% in Q2 to trail the consensus expectation for a 10.2% gain.
- Adjusted EBITDA was up 31% to $76M during the quarter.
- Looking ahead, the company expects full-year revenue growth of +18% vs. +15% prior view. "We now expect to open between 250 and 260 new Planet Fitness locations system-wide in 2019, a record for our brand, up from our prior outlook of approximately 225," notes PLNT management.
Four interesting companies reporting tonight.
- Lyft (NASDAQ:LYFT) is scheduled to announce Q2 earnings results on Wednesday, August 7th, after market close.
- The consensus EPS Estimate is -$1.00 and the consensus Revenue Estimate is $809.64M
- Over the last 3 months, EPS estimates have seen 5 upward revisions and 4 downward. Revenue estimates have seen 13 upward revisions and 5 downward.
- Roku (NASDAQ:ROKU) is scheduled to announce Q2 earnings results on Wednesday, August 7th, after market close.
- The consensus EPS Estimate is -$0.21 and the consensus Revenue Estimate is $223.36M (+42.4% Y/Y).
- Over the last 1 year, ROKU has beaten EPS estimates 100% of the time and has beaten revenue estimates 100% of the time.
- Over the last 3 months, EPS estimates have seen 0 upward revisions and 8 downward. Revenue estimates have seen 7 upward revisions and 2 downward.
- Carvana (NYSE:CVNA) is scheduled to announce Q2 earnings results on Wednesday, August 7th, after market close.
- The consensus EPS Estimate is -$0.49 (-32.4% Y/Y) and the consensus Revenue Estimate is $914.5M (+92.4% Y/Y).
- Over the last 2 years, cvna has beaten EPS estimates 38% of the time and has beaten revenue estimates 63% of the time.
- MercadoLibre (NASDAQ:MELI) is scheduled to announce Q2 earnings results on Wednesday, August 7th, after market close.
- The consensus EPS Estimate is $0.32 (+228.0% Y/Y) and the consensus Revenue Estimate is $507.68M (+51.4% Y/Y).
- Over the last 2 years, meli has beaten EPS estimates 50% of the time and has beaten revenue estimates 88% of the time.
- Over the last 3 months, EPS estimates have seen 4 upward revisions and 2 downward. Revenue estimates have seen 10 upward revisions and 0 downward.