Friday 7/12/19=DJIA +243 NASDAQ +48
I would have to say that once again, Fed Chairman, Jerome Powell was the main catalyst behind another record close in the market today.
This has been the pattern since Wednesday.
- Stocks start on a higher note, extending yesterday’s gains after Fed Chairman Powell signaled the likelihood of lower interest rates ahead; Dow +0.4%, S&P +0.3%, Nasdaq +0.2%.
- The release of consumer inflation data – total CPI for June rose 0.1% and core CPI gained 0.3% – briefly pulled futures from early highs as the results were seen by some as possibly dampening expectations for a 50-bp rate cut this month, but Powell has said the Fed would not be swayed by any single data point.
- European bourses have turned mostly higher, with France’s CAC +0.2%, Germany’s DAX +0.1% and U.K.’s FTSE -0.1%; in Asia, Japan’s Nikkei +0.5%, China’s Shanghai Composite +0.1%.
- In the U.S., Cigna (+14%) and CVS Health (+7%) lead the health care sector (+0.3%) higher after the Trump administration withdrew plans to eliminate rebates from government drug plans, a move that had the potential to disrupt the U.S. pharma industry.
- U.S. Treasury prices are slightly lower, nudging both the two-year and 10-year yields up 2 bps to 1.84% and 2.08%, respectively; U.S. Dollar Index -0.1% to 97.01.
- U.S. WTI crude oil +0.4% to $60.66/bbl on the back of rising Middle East
Here was the mood of the market before we began a new trading day.
- The Dow rallied 200 points on Thursday to close above 27,000 for the first time ever as Fed Chair Jerome Powell cemented his view that rates have room to go lower in the coming months.
- “We’re learning that interest rates – that the neutral interest rate – is lower than we had thought and I think we’re learning that the natural rate of unemployment is lower than we thought,” Powell said in the second day of semi-annual testimony on Capitol Hill. “So monetary policy hasn’t been as accommodative as we had thought.”
- Futures contracts tied to the DJIA are extending gains, up 89 points ahead of the open, while the S&P 500 and Nasdaq are ahead by 0.3%.
- Japan +0.20%.
- Hong Kong +0.14%.
- China +0.44%.
- India -0.28%.
- London +0.27%.
- Paris +0.51%.
- Frankfurt +0.12%.
Bad news for the Bond Market. PPI comes in a little hotter than expected.
- June Producer Price Index: +0.1% in-line with consensus, +0.1% prior.
- Core PPI +0.3% vs. +0.2% consensus, +0.2% prior.
- The hot core PPI print comes one day after core CPI also surprised to the
Bad news for the oil sector. I have no exposure
- Oil is headed for its biggest weekly gain in three as simmering Middle East tensions, shrinking U.S. crude inventories and Tropical Storm Barry in the Gulf of Mexico threaten the supply outlook.
- Despite the developments and recent rollover of an OPEC-led output cut, the IEA is forecasting another glut in 2020.
- “This surplus adds to the huge stock builds seen in the second half of 2018,” the agency declared, adding that “market tightness is not an issue for the time being” but predicted growth of 1.4M barrels per day next year (from 1.2M bpd in 2019).
It will be an uphill battle for Facebook.
- “I am not a fan of Bitcoin (BTC-USD) and other cryptocurrencies, which are not money, and whose value is highly volatile and based on thin air,” tweeted the president this evening.
- He also takes a slap at Facebook (NASDAQ:FB) and its Libra crypto offering, which he says “will have little standing or dependability.”
- If Facebook and others want to become banks, he adds, they can stand in line and get banking charters like all the rest. “We have only one real currency in the USA, and it is stronger than ever, both dependable and reliable.”
Another reason that I am not real fond of ETF’s.
- With recent high-profile examples of funds freezing withdrawals because too many customers are demanding their money back — i.e., Woodford, GAM Holding, H2O Asset Management — some are calling into question how wise it is to rely on exchange-traded funds to act as cash equivalents that can be sold off quickly to pay fleeing clients.
- The concern is that ETFs may not be that easy to convert to cash during a selloff. Any breakdown in the relationship between the prices of the funds and their securities, particularly in fixed income, could imperil owners, Bloomberg reports.
- The European Systemic Risk Board says that this price mismatch could increase systemic risk by destabilizing institutions that rely on ETFs for quick cash.
- Secondary trading ensures that there will always be a market, proponents say. If an ETF price falls below the value of its holdings, traders can step in to buy the ETF shares and trade them for the underlying securities. They sell the securities at the higher price, pocketing the difference, and bringing the price of the ETF closer in line to its value.
- When considering an ETF for liquidity management, an investor or portfolio manager needs to consider how actively traded that particular ETF is within its sector, according to Stephen Laipply, head of fixed-income strategy for BlackRock’s U.S. ETF business.
- While some banks have scaled back ETF trading after the financial crisis, electronic brokers have stepped in; but they might back out in a volatile market, resulting in funds trading at a discount.
- Boeing’s (NYSE:BA) 737 jet program manager, Eric Lindblad, will retire after less than a year on the job, consumed by the MAX grounding following two fatal crashes, the Seattle Times reports.
- Taking Lindblad’s place as leader of the 737 program and the Renton, Wash., factory will be Mark Jenks, who has been leading Boeing’s potential new mid-market airplane project.
- Lindblad, who has spent 34 years at Boeing, took over the Renton plant and the 737 program last August following a series of problems with the supply of engines and fuselages that had slowed jet deliveries.
Costco stock is breaking loose once again!
- Costco (NASDAQ:COST) is up 1.0% after reporting a 5.4% increase in comparable sales during June, including a 6.3% jump in the U.S. Those marks were right in line with expectations.
- E-commerce sales were 15.7% higher during the month, a deceleration from the +20% pace for the last six months.
- On Wall Street, Goldman Sachs reiterated its Buy rating on Costco today and Loop Capital became the first firm with a $300 or higher price target on the retailer.
Tax, tax, tax.
- Prime Minister Theresa May’s government has unveiled plans for a tax on global tech giants, in what could be one of her final pieces of legislation and a last-ditch bid to shape her legacy beyond Brexit.
- A 2% tax is planned on the revenues of search engines, social media platforms, and online market places that “derive value” from U.K. users.
- The levy would come into force in April 2020 and is expected to raise almost £1.5B in four years.
Nice yield, but no thanks! Not a Best Stock Now.
- Horizon Therapeutics (NASDAQ:HZNP) has priced its $600M 5.5% senior notes due 2027.
- Net proceeds will be used to redeem or prepay $625M of its outstanding debt, as well as to pay related premiums, fees and expenses.
I agree. Square had a very good week. I remain long.
- Square (NYSE:SQ) rises 1.1% in premarket trading after Citigroup analyst Peter Christianson reiterates his buy recommendation, citing increasing momentum and improvements to its seller platform.
- Points to platform development with net increase of 28 apps on its Seller App Marketplace, 32 new products and features, and 13 new third-party integrations.
- Though Square Card debit for business may eat into Seller Instant Deposit over time, Christianson sees the product eventually protecting Square from potential disruption in same-day funds products.
I sent out tweets today on the following stock that caught my eye.: LULU, ROST, COST, AZO, SQ, INTU and CHTR.