Wednesday 8/21/19=DJIA +229 NASDAQ +65
Daily Wrap: The market got a lot of traction today but did sell off a bit into the close. Blowout earnings from Target and Lowe’s were to be the big catalysts today. Along with Home Depot’s blowout report yesterday, it is pretty clear that the U.S. consumer is still going strong.
One week ago today the DJIA was down 800 and it was trading as if the recession was here. It is very obvious that the American economy is not slipping into recession. My biggest winners were LOW, APPS, CVNA, and AYX.
Trading: I did quite a bit of buying of stocks that I already own today for new clients. Many of them have pulled back to very attractive levels recently.
Seeking Alpha, Stocktwits, Twitter: I was very active on social media today. I sent out tweets on the following stocks: AYX, ARWR, APPS, TTD, HUBS, PCTY, PODD, REPH, SHOP, V, LOW, TGT, HD. I also have a new article on CMG on Seeking Alpha.
Here was the mood of the market as we got ready for a new day of trading.
Futures rise ahead of central bank action
• This week's central bankfest is ready for kickoff, starting with minutes from the Fed's July 30-31 policy meeting, when officials voted to lower interest rates for the first time since 2008.
• Traders will look for signs of disagreement on the FOMC, and clues to what the central bank might do next.
• The event will be followed by tomorrow's ECB minutes and the Jackson Hole symposium on Friday, where the focus will turn to Fed Chair Jerome Powell's tone and signals of further easing.
• Ahead of the action, Dow futures are up by 173 points, while S&P 500 and Nasdaq futures are up 0.8% and 0.9%, respectively.
All Trump wants for Christmas in a 100 basis point rate cut.
Trump urges Fed to be 'proactive'
• President Trump says the Fed needs to be "proactive" with a "big" rate cut.
• Via Bloomberg.
• "They have to do a rate cut," he said. "I'd like to see a cut in the Fed rate because that should have happened a long time ago."
• Made comments while welcoming Romania's President Klaus Iohannis to the White House for energy and trade talks.
• Investors will be closely watching Fed Chair Jerome Powell for his tone when he gives the keynote speech at the Fed's annual economic symposium at Jackson Hole, WY, on Friday.
• Currently, traders put the probability of a 25-basis point cut in September at 95% and a 50-bp cut at 5%.
• Previously: Trump calls for 'at least' 100-basis point rate cut by Fed (Aug. 19)
The art of the deal?
Japan, U.S. rush talks for trade deal
• Top Japanese and American negotiators will meet in Washington over the next two days in a last-minute attempt to compromise on beef and car exports if they are to conclude a trade deal by September.
• The timeline is important in the context of the political calendar as President Trump is eager for a swift deal with tangible benefits to American farmers ahead of the U.S. presidential campaign in 2020.
• Japan also needs the final text of a deal by September in order to obtain parliamentary approval to put any trade pact into effect this year.
Tariffs not hurting Home Depot.
Home Depot talks tariffs
• Home Depot (HD +4.3%) says many of its suppliers are looking to avoid tariff costs by moving at least some of their production out of China.
• "I’m not aware of a single supplier who was not moving some form of manufacturing outside of China," updates Merchandising VP Ted Decker. "So we have suppliers moving production to Taiwan, to Vietnam, to Thailand, Indonesia and even back into the United States,' he added.
• Home Depot estimates tariffs on Chinese goods will have a "cost impact" on U.S. sales of about $2B or about $1B if suppliers are successful in moving their manufacturing to other parts of Asia.
• Previously: Home Depot EPS beats by $0.09, misses on revenue (Aug. 20)
More fiscal stimulus?
White House is looking at payroll, capital gains tax cuts, Trump says
• "We're always looking at capital gains tax, payroll tax," President Trump told reporters.
• via Bloomberg.
• Notes that payroll taxes "very much affects workers of our country."
• Also says that the administration has been talking about indexing.
• Comes after a White House official on Monday denied that the administration is considering trimming the payroll tax in an effort to prevent a potential economic downturn.
• Previously: White House eyes payroll tax cut to tackle slowing economy - Washington Post (Aug. 19)
A sign of a top in the Bond Market?
Goldman files to add six new bond ETFs
• Goldman Sachs (GS -0.4%) Asset Management files for six new bond exchange-traded funds, each seeking to track the performance of a corresponding FTSE Goldman Sachs index.
• The new ETFs are: Goldman Sachs Access U.S. Aggregate Bond ETF; Goldman Sachs Access China Bonds ETF; Goldman Sachs Access Investment Grade Corporate 1-5 Year Bond ETF; Goldman Sachs Access Investment Grade Corporate 10+ Year Bond ETF; and Goldman Sachs Access Total Bond Market ETF; Goldman Sachs Access U.S. Treasury Total Market Bond ETF.
Boeing stock getting ready to fly again?
Boeing hires temporary staff, targets 737 MAX flights resuming early Q4
• Boeing (NYSE:BA) says it is hiring hundreds of temporary workers to assist with aircraft maintenance and customer delivery preparations of parked 737 MAX jets at Grant County International Airport in Washington state.
• The hiring plans are the first publicly detailed steps Boeing has described in working to deliver hundreds of grounded planes to airlines all over the world.
• The company says it plans to move all the plane from Moses Lake in eastern Washington location where it runs test flights to facilities in the Seattle and Everett areas where its factories are located.
• Boeing reiterates it is working toward getting the 737 MAX flying again commercially in "early fourth quarter" after it wins approval of reprogrammed software for the stall-prevention system at the center of both crashes.
Here come the shorts!
GE stock drop attracting more short sellers, S3 Partners says
• Short sales in General Electric (NYSE:GE) have increased in the last week as the stock has fallen following the report by fraud investigator Harry Markopolos that questioned the company's accounting, financial analytics firm S3 Partners says.
• Short sales jumped 13.5% to $14.3M in the last week and 20.7% to $20.6M in the last month, S3's managing director of predictive analytics tells Reuters.
• The data also suggest more short-sellers have bet against GE's stock and that no major investor has covered its short position, S3 says.
• GE shares have slipped ~7% since Markopolos issued his report last Thursday, including a 3.3% drop in today's trade after Fitch Rating echoed some concerns raised by the report.
Barely hanging in there.
Netflix loses $300 handle on Apple TV+ news
• Netflix (NASDAQ:NFLX) falls on some selling pressure that appears to be related to news that Apple is rolling out its Apple TV+ service by November, the same month that Disney+ is anticipated to debut.
• Shares of Netflix are down 3.09% to $299.83 vs. the 52-week trading range of $231.23 to $386.80.
SHOP until you drop.
Shopify cracks top ten in Canada
• Shopify (NYSE:SHOP) is now the 10th largest publicly-traded company in Canada after an extended rally, notes The Globe and Mail in a positive article today.
• Yesterday, Guggenheim noted that Shopify's fulfillment network initiatives are landing high marks from merchants and vendors.
• Shopify is up another 1.34% in premarket U.S. trading to $380.00 to extend on its +170% YTD run that has given it a higher market cap than eBay.
I have been a bull on NOW for a long time.
ServiceNow +2.6% as Stifel turns bullish
• Stifel upgrades ServiceNow (NYSE:NOW) from Hold to Buy and raises the target from $290 to $320, a 25% upside.
• Last month, NOW reported Q2 beats with 36% Y/Y revenue growth.
• NOW shares are up 2.6% pre-market to $262. The company has a Buy average Sell Side rating.
It looks terminal to me. I have a small short position.
More layoffs at GameStop
• GameStop (NYSE:GME) has laid off more than 120 employees, according to Game Informer.
• The cuts impacted almost 14% of the associate base at the company's corporate headquarters in Grapevine, Texas.
• GameStop continues to face pressure to lower costs amid a declining sales trend.
• Shares of GameStop are up 1.75% in premarket trading to $3.48.
BLOWOUT EARNINGS???? What recession????
Target EPS beats by $0.20, beats on revenue
• Target (NYSE:TGT): Q2 Non-GAAP EPS of $1.82 beats by $0.20; GAAP EPS of $1.82 beats by $0.21.
• Revenue of $18.42B (+5.0% Y/Y) beats by $100M.
• Shares +4.16% PM.
Lowe's EPS beats by $0.15, beats on revenue
• Lowe's (NYSE:LOW): Q2 Non-GAAP EPS of $2.15 beats by $0.15; GAAP EPS of $2.14 beats by $0.12.
• Revenue of $20.99B (+0.5% Y/Y) beats by $30M.
• Shares +1.67% PM.
Lowe's rallies after earnings topper, reaffirmed FY2019 outlook
• Lowe's (NYSE:LOW) reports comparable-store sales rose 2.3% in Q2 vs. consensus of +1.8%.
• Comp for the U.S. home improvement business increased 3.2%.
• Gross margin rate fell 85 bps to 32.11%.
• SG&A expense rate improved 17 bps to 19.29%.
• Operating margin rate advanced 98 bps to to 11.34%.
• Merchandise inventory +15.5% to $13.73B.