Friday 8/16/19=DJIA +306 NASDAQ +128
Friday was a huge rebound day in the market. It would seem that the market once again overreacted to the inversion of the yield curve on Wednesday.
Global indicator improves
Baltic Dry Index breaks over 2K
• The Baltic Dry Index of commodity shipping costs jumped 5.0% to 2,047 points to carve out a sixth straight daily gain.
• Capesize rates led the way with an increase of 6.0%, while Supramax rates were up 4.7%.
• Related stocks: Diana Shipping (NYSE:DSX), DryShips (NASDAQ:DRYS), Eagle Bulk Shipping (NASDAQ:EGLE), Navios Maritime Holdings (NYSE:NM), Navios Maritime Partners (NYSE:NMM), Globus Maritime Limited (NASDAQ:GLBS), Safe Bulkers (NYSE:SB), Scorpio Bulkers (NYSE:SALT), Star Bulk Carriers (NASDAQ:SBLK), Golden Ocean Group Limited (NASDAQ:GOGL), Tidewater (NYSE:TDW), Seanergy Maritime (NASDAQ:SHIP), Genco Shipping & Trading (NYSE:GNK).
Mortgage stay near record lows
• 30-year fixed-rate mortgage averages 3.60% for the week ending Aug. 15, unchanged from the prior week and down from 4.53% at this time last year, according to the Freddie Mac Primary Mortgage Market Survey.
• “The sound and fury of the financial markets continue to warn of an impending recession, however, the silver lining is mortgage demand reached a three-year high this week," said Freddie Mac Chief Economist Sam Khater.
• He also notes a spike in refinancing, "as homeowners currently have $2T in conventional mortgage loans that are in the money."
• 15-year FRM averages 3.07%, up from 3.05% in the prior week and down from 4.01% at this time a year ago.
• 5-year Treasury-indexed hybrid adjustable-rate mortgage averages 3.35%, down from 3.36% in the prior week and 3.87% at this time a year earlier.
First time ever!
Yield on 30-year Treasurys breaches 2%
• The yield on 30-year Treasurys has gone where no 30-year Treasury yield has gone before: below 2%.
• It dropped as much as three basis points in Thursday Asia trading.
• That follows up on a record low the day before, after a 15-basis-point drop.
• Still better than similar bonds elsewhere (Japan's 30-year government bond yield is at 0.155%, and 30-year German bunds at -0.201%).
Here is what Yellen thinks.
Stock market drop doesn't signal recession, Yellen says
• Former Fed Chair Janet Yellen doesn't see today's market decline or yield-curve inversion signaling an economic recession.
• "I think that the U.S. economy has enough strength to avoid that," she told Jon Hilsenrath on Fox Business Network. "But the odds have clearly risen and they are higher than I'm frankly comfortable with."
• And while the yield curve inversion has been "pretty good signal of recession" in the past, it may not be as good of a predictor this time, Yellen said.
• "There are a number of factors, other than market’s expectations about the future path of interest rates, that are pushing down long-term yields,” she said.
GE's Culp calls fraud report 'market manipulation' as shares plunge
• "GE will always take any allegation of financial misconduct seriously. But this is market manipulation, pure and simple," says General Electric (GE -11%) Chairman and CEO Lawrence Culp, as he sees shares of his company sink by the most in any trading session since the financial crisis.
• The fact that former Bernie Madoff whistleblower Harry Markopolos never talked to GE officials before publishing the report "goes to show that he is not interested in accurate financial analysis, but solely in generating downward volatility in GE stock so that he and his undisclosed hedge fund partner can personally profit," Culp tells CNBC.
• Markopolos accuses GE of issuing fraudulent financial statements to hide the extent of its accounting problems.
• Meanwhile, hedge fund manager Stanley Druckenmiller says he believes Culp and bought GE shares during today's plunge.
Buffett still buying Amazon
Berkshire raises its Amazon stake
• Warren Buffett’s Berkshire Hathaway increases its Amazon (NASDAQ:AMZN) stake by 11% in Q2.
• The now 537K share position is worth just shy of $1B at today's closing price.
• Buffett announced Berkshire's Amazon investment in May, but said he wasn't the person behind the purchase.
• "While we are impressed with [CAT's] progress, slowing global economic growth leaves the equity with a negative risk/reward trading above 10x our view of cycle peak earnings," Gupta writes.
• CAT's average Sell Side Rating is Hold, and both its Seeking Alpha Authors Rating and Quant Rating are Neutral.